1
EXHIBIT 4(A)
LOAN AGREEMENT
BETWEEN
COMERICA BANK-TEXAS
AND
PLYMOUTH COMMERCIAL MORTGAGE FUND
DATED
SEPTEMBER 27, 1996
2
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and delivered this 27th day of September,
1996, by and between PLYMOUTH COMMERCIAL MORTGAGE FUND, a Delaware business
trust, and COMERICA BANK-TEXAS, a state banking association.
WITNESSETH:
WHEREAS, the Borrower desires to borrow from the Bank from time to
time an amount not to exceed in the aggregate at any one time outstanding the
Commitment Amount for the working capital needs of the Borrower and to finance
a portion of the cost of borrower's acquiring loans and/or portfolios of loans;
and
WHEREAS, the Bank is willing to supply such financing subject to the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the Borrower and the Bank agree as follows:
DEFINITIONS
1.1. Defined Terms. As used herein, the following terms shall have
the following respective meanings:
"ACCOUNTS," "CHATTEL PAPER," DOCUMENTS," "EQUIPMENT," "FIXTURES,"
"GENERAL INTANGIBLES," "GOODS," "INSTRUMENTS" AND "INVENTORY" shall have the
meanings assigned to them in the UCC on the date of this Agreement.
"ACCOUNT DEBTOR" shall mean, collectively, the "maker" and each other
obligor, guarantor or other liable party, primarily, secondarily or otherwise,
under an Acquired Loan.
"ACQUIRED LOAN" shall mean each loan (a) which the Borrower has
acquired from SWF 1995 Limited Partnership and which has not been disposed of,
(b) which the Borrower has acquired from an unaffiliated Person on an arm's
length basis and which has not been disposed of by the Borrower or (c) which is
evidenced by an REO Note. Each Acquired Loan shall be evidenced by a
promissory note and, if secured, by appropriate security documents. All
references to Acquired Loans are deemed to include the right to enforce and
receive payment of the respective promissory notes and to enforce and realize
the benefits of the respective security documents.
"ACQUIRED LOAN BORROWING BASE AMOUNT" shall mean (1) for any Eligible
Acquired Loan which is not an REO Note, the lesser of (a) the Net Acquisition
Cost of such Eligible Acquired Loan or (b) the Fair Market Value of such
Eligible Acquired Loan minus all principal payments made by
3
the applicable Account Debtor on such Eligible Acquired Loan after the most
recent determination of Fair Market Value of such Eligible Acquired Loan,
multiplied by the Appropriate Conversion Factor for such Eligible Acquired
Loan, and (2) for any Eligible Acquired Loan which is an REO Note, the lesser
of (a) the Net Acquisition Cost of such Eligible Acquired Loan, (b) the face
principal amount of the REO Note comprising such Eligible Acquired Loan minus
all principal payments made by the REO Affiliate on the REO Note after the
execution date of the REO Note, or (c) the Fair Market Value of such Eligible
Acquired Loan minus all principal payments made by the REO Affiliate on the
Eligible Acquired Loan after the most recent determination of Fair Market Value
of such Eligible Acquired Loan, multiplied by the Appropriate Conversion Factor
for such Eligible Acquired Loan (calculated in accordance with the last
sentence of the definition of Appropriate Conversion Date).
"ACQUIRED LOAN DOCUMENTS" shall mean all promissory notes evidencing
Acquired Loans (including all REO Notes), all mortgages, deeds of trust and
other documents securing Acquired Loans (including all REO Security Documents)
and all loan agreements and other documents executed by Account Debtors in
connection with Acquired Loans or otherwise relating to the Acquired Loans.
"ACQUISITION COST" shall mean with respect to an Acquired Loan either
(a) the book value attributed to such Acquired Loan by SWF 1995 Limited
Partnership with respect to the initial Acquired Loans acquired by the Borrower
from SWF 1995 Limited Partnership on or about the first Disbursement Date or
(b) the actual cash price which the Borrower has paid or contractually
obligated itself to pay to the Person from whom the Borrower is acquiring or
has acquired such Acquired Loan with respect to all other Acquired Loans, plus
any accrued obligations relating to such Acquired Loan which the Borrower has
identified in its written bid worksheet applicable to such Acquired Loan and
which have been taken into account in calculating the purchase price of such
Acquired Loan, but excluding any legal, accounting, finder's, broker's, or
other's fees, any travel, due diligence and other "soft cost" type expenses
incurred by the Borrower with respect to such acquisition (or, if such
acquisition is effected on a pool or portfolio basis, the allocable portion of
such costs) and excluding any other costs associated with any such acquisition
paid by the Borrower including, but not limited to the costs (if any) of
recordation, title insurance endorsements, surveys, or environmental site
assessments. Without the written consent of the Bank, the Acquisition Cost of
any Acquired Loan may not exceed the unpaid principal balance of such Acquired
Loan.
"AFFILIATE" shall mean, when used with respect to any Person, any
other Person which, directly or indirectly, controls or is controlled by or is
under common control with such Person. For purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), with respect to any Person, shall mean
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract of otherwise.
"AGREEMENT" shall mean this Loan Agreement, as the same may be
amended, restated and modified from time to time.
2
4
"ALLONGE" shall mean an endorsement on a separate sheet of paper
accompanying a promissory note, specifically describing such note by Maker,
original payee and face principal amount, and signed by the Borrower, endorsing
the note to the Bank or in blank.
"APPROPRIATE CONVERSION FACTOR" of any Eligible Acquired Loan shall
mean the percentage set forth below corresponding to the time elapsed since
such Eligible Acquired Loan was acquired by the Borrower:
Up to but less than 6 months 60%
6 months or more but less than 9 months 48%
9 months or more but less than 12 months 45%
12 months or more but less than 15 months 42%
15 months or more but less than 18 months 32%
18 months or more but less than 21 months 24%
21 months or more but less than 24 months 18%
24 months or more 0%
For purposes of this definition, the date of acquisition of an Eligible
Acquired Loan which is an REO Note shall be deemed to be the date the original
Eligible Acquired Loan secured by the Underlying Real Estate was acquired by
the Borrower and not the date the REO Note which is secured by such Underlying
Real Estate is executed and delivered to the Bank.
"ASSET" shall mean each Acquired Loan, REO Note or other property
comprising an Asset Portfolio.
"ASSET FILE" shall mean all Acquired Loans and Acquired Loan Documents
assigned to the Bank as Collateral for the Loans, together with all other
documents relating to such Asset to be delivered to the Bank, any Servicer or
the Borrower.
"ASSET PORTFOLIO REPORT" shall mean a report in a form acceptable to
the Bank showing various information concerning each Asset Portfolio and each
Asset included therein as of the end of the week preceding delivery of such
report, including without limitation, weekly Gross Collections, the outstanding
balances of each Acquired Loan, the Fair Market Value of each Asset (to the
extent required under the terms of this Agreement), settlement information,
default status, and such other information as the Bank may otherwise request,
including any additional information in the asset status reports routinely
prepared by the Borrower related to such Assets.
"ASSET PORTFOLIOS" shall mean one or more pools or portfolios of
Acquired Loans comprised of:
(a) performing, nonperforming or under-performing
commercial loans, and/or
3
5
(b) real estate or other assets acquired in connection
with the foreclosure, restructure or settlement of
nonperforming or under-performing loans, together
with all documents, instruments, certificates and
other information related thereto.
"BANK" shall mean Comerica Bank-Texas, a state banking association.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended, or any successor act or code.
"BORROWER" shall mean Plymouth Commercial Mortgage Fund, a Delaware
business trust.
"BORROWING AUTHORIZATION" shall mean (i) with respect to a
corporation, a certificate of the Secretary or an Assistant Secretary of a
corporation as to the resolutions of the Board of Directors of such corporation
authorizing the execution, delivery and performance of the documents to be
executed by such corporation; the incumbency and signature of the officer of
such corporation executing such documents on behalf of such corporation, and
the Organizational Documents of such corporation and (ii) with respect to a
partnership, joint venture or other non-individual Person, such written
instruments as shall be required by the Bank authorizing the execution,
delivery and performance of the documents to be executed by such Person; the
incumbency and signature of the representative of such Person executing such
documents on behalf of such Person, and the Organizational Documents of such
Person.
"BORROWING BASE" shall mean, on any day, the aggregate of the Acquired
Loan Borrowing Base Amounts for all Eligible Acquired Loans. In the event that
the Borrower is purchasing Acquired Loans with the proceeds of an advance
hereunder, the Acquired Loan Borrowing Base shall also include the Acquired
Loan Borrowing Base Amounts for all such Acquired Loans being purchased with
the proceeds of such advance to the extent that such new Acquired Loans will
become Eligible Acquired Loans contemporaneously with such advance.
"BORROWING BASE CERTIFICATE" shall mean a certificate in the form of
Exhibit A to this Agreement, completed in all appropriate respects and executed
by the chief executive officer, chief financial officer, or treasurer of the
Borrower or by any other officer of the Borrower designated in writing by any
of the chief executive officer, chief financial officer or treasurer, such
designation to be acceptable to the Bank in its sole discretion, and setting
forth the Borrower's computation of the Borrowing Base as of the date of such
certificate, and attaching a schedule or schedules in a form acceptable to the
Bank detailing the Net Acquisition Cost, Fair Market Value (if available at
such time), Appropriate Conversion Factor and Acquired Loan Borrowing Base
Amount for each Eligible Acquired Loan included in the Borrowing Base.
"BUSINESS DAY" shall mean a day on which the Bank is open to carry on
its normal commercial lending business.
4
6
"CASH COLLATERAL ACCOUNT(S)" shall mean a segregated cash collateral
account or accounts maintained with the Bank and styled "Comerica Bank-Texas
Cash Collateral Account for the benefit of Plymouth Commercial Mortgage Fund"
which account shall be (a) subject to the provisions of this Agreement, and (b)
pledged and assigned to the Bank as additional security for the payment,
performance and observance of the Loans.
"COLLATERAL" shall mean (a) all property of any Obligor in the actual
or constructive possession of the Bank or any Affiliate of the Bank (or as to
which the Bank or any Affiliate of the Bank now or hereafter controls
possession by documents or otherwise), (b) all amounts in any deposit or other
account of any Obligor with the Bank or any Affiliate of the Bank, including
without limitation the Escrow Account (to the extent of the Borrower's right,
title and interest therein) and the Cash Collateral Accounts, (c) all of the
Borrower's Accounts, Chattel Paper, Documents, Equipment, Fixtures, General
Intangibles, Goods, Instruments, and Inventory, and (d) all other property
subject to any Security Documents, including without limitation, all Acquired
Loan Documents and accounts and proceeds thereof, wherever located and whether
now owned or hereafter acquired, together with all replacements thereof,
substitutions therefor, accessions thereto, and all proceeds and products
thereof, and all additional property (real or personal) of the Borrower which
is now or hereafter subject to a security interest, mortgage, lien, claim, or
other encumbrance granted by the Borrower to, or in favor of, the Bank.
"COLLATERAL ASSIGNMENT" shall mean one or more security agreements,
assignment of notes and liens, pledge agreements or other similarly named
documents executed by the Borrower in favor of the Bank, as security for the
Loans, each of which Collateral Assignment is intended to cover all of the
Acquired Loans, all REO Notes and all renewals, modifications, amendments,
supplements and restatements thereof, which collateral assignment shall be in
the form and substance acceptable to the Bank and which Collateral Assignments
shall be duly signed and notarized in accordance with applicable state law and
in proper form for recording, in order to confirm and perfect the Bank's Liens
in the Collateral.
"COMMITMENT AMOUNT" shall mean, as of any applicable date of
determination, $1,800,000, or such other amount as may hereafter be established
pursuant to Section 2.2.3. hereof, not to exceed $10,000,000; provided,
however, that if the Borrower reduces the Commitment Amount from time to time
under Section 2.2.4. of this Agreement, the Commitment Amount shall be deemed
to be such lesser amount; and provided, further, that if the original term of
this Agreement is extended beyond the date two (2) years from the date of this
Agreement, then the Commitment Amount during any such extended period shall be
such amount as the parties then agree.
"CONTRACT RATE" shall mean, as of any date of determination, the
annual rate of interest which, pursuant to Section 2.4.1. of this Agreement
would be applicable to the Note if the annual rate of interest were determined
without the Maximum Legal Rate limitation.
"CUSTODIAL AGREEMENT" shall mean a Custodial Agreement, in form and
substance acceptable to the Bank, by and between the Bank and the Borrower, as
such Custodial Agreement
5
7
may be amended or supplemented from time to time, together with any replacement
or substitution therefor.
"DEBT" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP.
"DEFAULT" shall mean a condition or event which, with the giving of
notice or the passage of time, or both, would become an Event of Default.
"DISBURSEMENT DATE" shall mean each date upon which the Bank makes a
loan to the Borrower under Section 2.1 of this Agreement.
"DOLLARS" or "$" shall mean United States Dollars.
"DUE DILIGENCE REPORTS" shall mean the various written reports,
information and other materials that the Borrower prepared or assembled
containing descriptions and evaluations of the Acquired Loans and Mortgaged
Properties included in a particular Asset Portfolio, and the Borrower's
assessments and projections regarding same, or other information regarding such
Assets, including copies of purchase agreements, copies of any appraisals or
environmental site assessments, and the due diligence reports for each such
Asset Portfolio summarizing the Borrower's due diligence regarding such Assets
and the Mortgaged Properties.
"EBITDA" shall mean, as of the date of determination, Net Income
before interest, income tax, depreciation and amortization expense.
"ELIGIBLE ACQUIRED LOANS" shall mean, as of the date of determination,
the Acquired Loans of the Borrower which satisfy the following criteria for
inclusion in the Borrowing Base:
(a) With the exception of REO Notes and the Acquired
Loans acquired by the Borrower contemporaneously with the execution of this
Agreement from SWF 1995 Limited Partnership, each such Acquired Loan was
acquired by the Borrower from an unaffiliated third party in an arm's length
transaction.
(b) Each such Acquired Loan is evidenced by a promissory
note enforceable against the Account Debtor with respect thereto in accordance
with its terms.
(c) Except within the dollar amount limitations provided
in the last paragraph of this definition and as disclosed on the schedule
attached to the Borrowing Base Certificate, each such Acquired Loan is a
commercial or business purpose loan and is not for personal, family, household,
consumer, or agricultural purposes.
6
8
(d) Each such Acquired Loan, to the extent that it has
been characterized by the Borrower as a secured loan, is secured by a valid and
perfected first priority lien, mortgage, or other security instrument, subject
only to Permitted Prior Liens. To the extent that an Acquired Loan is excluded
from the Borrowing Base for the reason that it is subject to Liens other than
Permitted Prior Liens which the Borrower discovers after the acquisition date
of such Acquired Loan, such Acquired Loan will be considered an Eligible
Acquired Loan, to the extent all other criteria are satisfied, at such time as
the Borrower recalculates the Fair Market Value of such Acquired Loan to take
into effect the existence of such Lien.
(e) Each Acquired Loan complies in all material respects
with all laws, rules, regulations or other policies applicable to it or
applicable to any person owing, holding, or having an interest in it.
(f) Each such Acquired Loan represents a legally valid
and enforceable claim which is due and owing to the Borrower by the applicable
Account Debtor and for such amount as is represented by the Borrower to the
Bank on such Borrowing Base Certificate.
(g) The unpaid balance of such Acquired Loan as
represented by the Borrower to the Bank on such Borrowing Base Certificate is
not subject to any valid defense, counterclaim, setoff, credit, allowance or
adjustment by the applicable Account Debtor.
(h) The Borrower has granted to the Bank a perfected
security interest in each Acquired Loan (as an item of the Collateral) prior in
right to all other Persons, and such Acquired Loan has not been sold,
transferred or otherwise pledged or assigned by the Borrower to any person,
other than the Bank.
(i) The Account Debtor on each such Acquired Loan is not:
(i) an affiliate of the Borrower (other than the
REO Affiliate),
(ii) the United States of America or any
department, agency or instrumentality
thereof,
(iii) a citizen or resident of any jurisdiction
other than one of the United States.
(k) The Borrower has obtained, reviewed and approved, in
accordance with Standard Industry Practices, all due diligence information with
respect to such Acquired Loans, including without limitation Environmental Site
Assessments for the Underlying Real Estate which secures such Acquired Loan, a
Title Policy for such Acquired Loan, and all Acquired Loan Documents, and all
such items are in the form and contain the provisions required under Standard
Industry Practices.
7
9
(l) The representations and warranties contained in
Section 8 with respect to all Underlying Real Estate and REO Property securing
the Acquired Loans are true and correct; provided, that if the Borrower has
disclosed to the Bank in writing the particular representations or warranties
with respect to such property which are not true and correct and the Bank has
not disapproved such Acquired Loan from inclusion in the Borrowing Base after
review of such information, such Acquired Loan shall be treated as having
satisfied this condition.
In the event that any of the foregoing are not true and correct as to
any Acquired Loan, or in the event that the Bank determines in its sole and
absolute discretion, for any or no reason, to exclude any Acquired Loan from
classification as an Eligible Acquired Loan (notwithstanding that such Acquired
Loan satisfies the criteria set forth above), such Acquired Loan shall be
excluded from the Borrowing Base and the Borrower shall immediately pay to the
Bank, as a prepayment on the Loans, any mandatory prepayment required under
Section 2.8 as a result of the exclusion of such Acquired Loan from the
Borrowing Base.
In addition to the foregoing, the Eligible Acquired Loans included in
the Borrowing Base shall also be subject to the following limitations: (i) in
the event that the lesser of the Fair Market Value or Acquisition Cost of all
Eligible Acquired Loans to any one Account Debtor exceeds $1,500,000, the
amount in excess of $1,500,000 shall not constitute Eligible Acquired Loans;
and (ii) in the event that the sum (as calculated on the basis of the lesser of
Fair Market Value or Acquisition Cost) of (A) Eligible Acquired Loans which
constitute "Consumer Credit" under 12 C.F.R. Section 226 (Regulation Z of the
Board of Governors of the Federal Reserve System) and (B) unsecured Eligible
Acquired Loans, exceeds ten percent (10%) of the total Eligible Acquired Loans,
the amount in excess of such ten percent (10%) shall not constitute Eligible
Acquired Loans.
Nothing contained in this definition is intended to limit the Bank's
Collateral for the Loans, it being understood and agreed that the Collateral
for the Loans includes, among other property, all Acquired Loans regardless of
whether such Acquired Loans constitute Eligible Acquired Loans.
"ENVIRONMENTAL LAWS" shall mean all requirements imposed by any
applicable law (including The Resource Conservation and Recovery Act and The
Comprehensive Environmental Response, Compensation, and Liability Act), rule,
regulation or order of any governmental authority in effect at the applicable
time which relate to (i) noise; (ii) pollution, protection or clean-up of the
air, surface water, ground water or land; (iii) solid, gaseous or liquid waste
gener ation, recycling, reclamation, treatment, storage, disposal or
transportation; (iv) exposure to Hazardous Substances; (v) the safety or health
of employees or (vi) regulation of the manufacture, processing, distribution in
commerce, use, discharge, release, threatened release, emission or storage of
Hazardous Substances.
"ENVIRONMENTAL SITE ASSESSMENT" shall mean an environmental site
assessment report conforming to standards reasonably acceptable to the Bank
(herein called the "ACCEPTABLE STANDARDS"), which is in all respects otherwise
satisfactory to the Bank and which has been prepared by a qualified
environmental firm reasonably satisfactory to the Bank (a) indicating that, on
the basis of an investigation conducted in accordance with the Acceptable
Standards, (i) the firm found no
8
10
Hazardous Substances present on or in the property that is the subject of its
report at levels that require reporting or remediation, or both, pursuant to
any Environmental Laws that are applicable to such property ("PROHIBITED
HAZARDOUS SUBSTANCES"), (ii) it did not learn of any conditions on or in the
land adjacent to the property that is the subject of its report that would
cause it to believe that there might be Prohibited Hazardous Substances present
on or in the property that is the subject of its report, and (iii) no notice of
violation of any of the Environmental Laws, or other claim or order issued
pursuant to any of the Environmental Laws, has been duly filed against such
property by any governmental authority; or (b) if any Prohibited Hazardous
Substance is present on such property or if any such notice of violation, claim
or order has been filed, providing evidence satisfactory to the Bank as to the
extent and nature of the environmental problem caused thereby and the likely
costs and duration of any recommended remediation.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code.
"ESCROW ACCOUNT" shall mean a non-interest bearing account established
by the Borrower with the Bank into which the Escrow Payments are to be
deposited.
"ESCROW PAYMENTS" shall mean all payments made by Account Debtors
(including REO Escrow Payments) for a specified purpose (such as real estate
tax payments, insurance payments, etc.) other than payments of principal,
interest, fees and other amounts owed to the Borrower with respect to the
Acquired Loans and all net insurance and condemnation proceeds received by the
Borrower which are not available to be applied to the outstanding balance under
the Acquired Loans in questions but rather are to be used for purposes of
repairing or rebuilding the real property in question.
"EVENT OF DEFAULT" shall mean any of those conditions or events listed
in Section 9.1. of this Agreement.
"FAIR MARKET VALUE" shall mean, as to any particular Asset, the fair
market value of such asset, as determined in accordance with GAAP.
"FINANCIAL STATEMENTS" shall mean all those balance sheets, earnings
statements and other financial data (whether of the Borrower, any other
Obligor, the Investment Adviser or any Servicer) which have been furnished to
the Bank for the purpose of, or in connection with, this Agreement and the
transactions contemplated hereby.
"FINANCING STATEMENTS" shall mean UCC financing statements describing
the Bank as secured party and the Borrower as debtor covering the Collateral
and otherwise in such form, for filing in such jurisdictions and with such
filing offices as the Bank shall reasonably deem necessary or advisable.
9
11
"GAAP" shall mean, as to a particular Person, such accounting practice
as, in the opinion of the independent certified public accountants of
recognized national standing regularly retained by such Person and acceptable
to the Bank, conforms at the time to generally accepted accounting principles,
consistently applied. GAAP shall mean those principles and practices (a) which
are recognized as such by the Financial Accounting Standards Board, (b) which
are applied for all periods after the date hereof in a manner consistent with
the manner in which such principles and practices were applied to the most
recent audited financial statements of the relevant Person furnished to the
Bank, and (c) which are consistently applied for all periods after the date
hereof so as to reflect properly the financial condition, and results of
operations and changes in financial position, of such Person. If any change in
any accounting principle or practice is required by the Financial Accounting
Standards Board in order for such principle or practice to continue as a GAAP
or practice, all reports and financial statements required hereunder may be
prepared in accordance with such change only after written notice of such
change is given to the Bank.
"GROSS COLLECTIONS" an amount equal to any and all cash proceeds
received by each Obligor or any Servicer with respect to the Borrower's or such
other Obligor's ownership, management and/or disposition of any and all Assets
in any Asset Portfolio, including, without limitation, (i) all interest,
principal, and other payments on Acquired Loans from any source, (ii) all Net
Operating Income from REO Properties, (iii) loan settlement payments, any
restructure or commitment or other loan fees, payments on any judgments or
settlement of litigation with respect to Acquired Loans, (iv) net sales
proceeds from the sale of REO Properties, Acquired Loans, Mortgaged Property
and other items of Collateral, (v) income from any Mortgaged Property, (vi) all
insurance proceeds and condemnation proceeds, (vii) all payments received by
the Borrower from any seller of an Asset Portfolio pursuant to the applicable
sale agreement, including all proceeds of Assets "put back" to such seller, and
(viii) all interest, dividends and other earnings directly or indirectly paid
to the Borrower or any other Obligor on funds, accounts and investments of the
Borrower or such Obligor, but excluding any escrow deposits paid to the
Borrower or such Obligor for tax or insurance escrows under the Acquired Loans
which are deposited in the Escrow Account.
"GUARANTOR" shall mean each Subsidiary and REO Affiliate, jointly and
severally, whether one or more.
"GUARANTY" shall mean one or more guaranty agreements, executed by
each Guarantor in favor of the Bank, as the same may be amended, supplemented,
or restated.
"HAZARDOUS SUBSTANCE" shall mean any substance, product, waste,
pollutant, material, chemical, contaminant, constituent, or other material
which is or becomes listed, regulated, or addressed under any Environmental
Law, including, without limitation, asbestos, petroleum, and polychlorinated
biphenyls.
"INDEBTEDNESS" shall mean all loans, advances and indebtedness of the
Borrower to the Bank under this Agreement, and all other indebtedness,
obligations and liabilities whatsoever of the Borrower to the Bank, whether
matured or unmatured, liquidated or unliquidated, direct or indirect,
10
12
absolute or contingent, joint or several, due or to become due, now existing or
hereafter arising pursuant to the Loan Documents.
"INTEREST RATE ANNEX" shall mean Annex I, as it may from time to time
be amended, modified, restated or supplemented.
"INVESTMENT ADVISER" shall mean Emerald Advisers, Inc., a Delaware
corporation.
"LIEN" shall mean any mortgage, pledge, charge, encumbrance, security
interest, collateral assignment or other lien or restriction of any kind,
whether based on common law, constitutional provision, statute or contract, and
shall include reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other title exceptions.
"LOAN DOCUMENTS" shall mean any and all papers now or hereafter
governing, evidencing, guaranteeing or securing or otherwise relating to all or
any part of the Indebtedness, including, without limitation, the Note, this
Agreement, the Security Documents, all instruments, certificates and agreements
now or hereafter executed or delivered to the Bank pursuant to any of the
foregoing or in connection with the Loans or any commitment regarding the Loans
and all amendments, modifications, renewals, extensions, increases and
rearrangements of, and substitutions for, any of the foregoing.
"LOANS" shall mean advances made by the Bank to the Borrower under
Section 2.1 of this Agreement.
"LOCKBOX" shall mean a Post Office Box specified in the Lockbox
Agreement established by the Borrower with the Bank for receipt of all payments
relating to an Asset Portfolio.
"LOCKBOX AGREEMENT" shall mean collectively, any and all agreements
between the Borrower and the Bank establishing a Lockbox, as the same may be
amended, restated, replaced, substituted for or supplemented from time to time.
"MAXIMUM AVAILABLE AMOUNT" shall mean, on any day, the lesser of (1)
the Commitment Amount (as it may be increased) or (2) the Borrowing Base.
"MAXIMUM LEGAL RATE" shall have the meaning set forth in Section 2.5
of this Agreement.
"MORTGAGE" shall mean any deed of trust or mortgage, (duly
acknowledged and in recordable form) covering a Mortgaged Property executed by
the Borrower or an REO Affiliate, as appropriate, granted to the Bank to secure
repayment of the Loans substantially in the form approved by the Bank, and all
renewals, extensions, modifications, amendments, or supplements thereto, and
all mortgages or deeds of trust given in renewal, extension, modification,
restatement or replacement thereof.
11
13
"MORTGAGED PROPERTY OR MORTGAGED PROPERTIES" shall mean any and all
lots or parcels of land which the Borrower or any REO Affiliate owns on the
date of this Agreement or which it may hereafter acquire as part of an Asset
Portfolio or any Underlying Real Estate which the Borrower or any REO Affiliate
may hereafter own as a result of a foreclosure or deed-in-lieu of foreclosure
or otherwise, and improvements, fixtures and personal property located thereon
and all other property referenced in and subject to the Mortgages. The
Mortgaged Property is intended to include all of the above-described real
property whether or not a Mortgage is actually granted or filed.
"NET ACQUISITION COST" shall mean, for any Acquired Loan, the
Acquisition Cost of such Acquired Loan minus all principal payments made by the
applicable Account Debtor on such Acquired Loan after the date of the
Borrower's acquisition of such Acquired Loan. The Net Acquisition Cost of any
REO Note comprising an Acquired Loan shall be the Net Acquisition Cost, on the
date of the applicable foreclosure, of the Acquired Loan which was originally
secured by the Underlying Real Estate which secures the REO Note, minus all
principal payments made by the REO Affiliate on such REO Note after such
foreclosure date.
"NET INCOME" shall mean the net income (or loss) of a Person for any
period determined in accordance with the federal income tax basis of accounting
but excluding in any event: (a) any gains or losses on the sale or other
disposition, not in the ordinary course of business, of investments or fixed or
capital assets, and any taxes on the excluded gains and any tax deductions or
credits on account of any excluded losses; and (b) in the case of the Borrower,
net earnings of any Person in which the Borrower has an ownership interest,
unless such net earnings shall have actually been received by the Borrower in
the form of cash distributions.
"NET OPERATING INCOME" shall mean, with respect to each REO Property,
for each calendar month, the excess of (a) all of the Borrower's or the REO
Affiliate's cash receipts related to such REO Property (including all rents and
other revenues but excluding security deposits) over (b) all reasonable and
customary expenses actually paid during such period which, in accordance with
the federal income tax basis of accounting, would be classified as operating
expenses for a property similar to such REO Property (including utility-related
expenses, taxes, insurance expenses, repair and maintenance expenses and
janitorial and property-management fees actually paid by the Borrower or the
REO Affiliate to an unrelated third party) plus all reasonable and customary
capital expenditures actually paid during such period for capital improvements
made in accordance with Standard Industry Practices and not reasonably
disapproved by the Bank.
"NOTE" shall mean a promissory note conforming to Section 2.3.1 of
this Agreement and in the form of Exhibit B to this Agreement, and any and all
renewals, extensions, modifications, rearrangements and/or replacements
thereof.
"OBLIGORS" shall mean the Borrower, all of its Subsidiaries, all REO
Affiliates, and any other Person now or hereafter primarily or secondarily
liable on the Loans to the Borrower under this Agreement, and "OBLIGOR" shall
mean any one of them.
12
14
"ORGANIZATIONAL DOCUMENTS" shall mean, with respect to a corporation,
the certificate of incorporation, articles of incorporation and bylaws of such
corporation; with respect to a partnership, the partnership agreement
establishing such partnership; with respect to a joint venture, the joint
venture agreement establishing such joint venture, and with respect to a trust,
the instrument establishing such trust; in each case including any and all
modifications thereof as of the date of the Loan Document referring to such
Organizational Document and any and all future modifications thereof which are
consented to by the Bank.
"PAST DUE RATE" shall mean on any day the lesser of (a) Prime Rate (as
defined in the Interest Rate Annex) for such day plus five percent (5%) per
annum and (b) the Maximum Legal Rate on such day.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
person succeeding to the present powers and functions of the Pension Benefit
Guaranty Corporation.
"PERMITTED LIENS" shall mean:
a. Liens and encumbrances in favor of the Bank;
b. Liens for taxes, assessments or other governmental
charges incurred in the ordinary course of business and not yet past due or
being contested in good faith by appropriate proceedings and, if requested by
the Bank, bonded in a manner satisfactory to the Bank;
c. Liens not delinquent created by statute in connection
with worker's compensation, unemployment insurance, social security and similar
statutory obligations; and
d. Permitted Prior Liens.
"PERMITTED PRIOR LIENS" shall mean Liens upon any REO Property,
Mortgaged Property or Underlying Real Estate existing on the date the Acquired
Loan secured by such property was originally acquired by the Borrower, only to
the extent that such prior Liens are disclosed by the Borrower to the Bank in
an Asset Portfolio Report submitted at the time of the acquisition of such
Acquired Loan. In the event any Liens are discovered by the Borrower after the
acquisition date of any Acquired Loan, such Acquired Loan shall be excluded
from the Borrowing Base in accordance with the requirements of the definition
of Eligible Acquired Loans. Upon the recalculation of Fair Market Value of
such Acquired Loan and its reinclusion in the Borrowing Base, such Lien shall
thereafter be a Permitted Prior Lien for purposes of this Agreement.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated association, joint stock company,
government, municipality, political subdivision or agency or other entity.
13
15
"PLEDGE OF ACCOUNTS" shall mean one or more security agreements,
collateral assignments, pledge agreements or other similarly named documents in
form and substance acceptable to the Bank, executed by the Borrower in favor of
the Bank, evidencing a first priority security interest in and collateral
assignment of all deposit or other accounts of the Borrower with the Bank
including without limitation the Escrow Account and the Cash Collateral
Accounts.
"PROJECTED GROSS COLLECTIONS" shall mean the Gross Collections which
the Borrower and any Servicer reasonably expect to receive from an Asset
Portfolio which has been determined in a manner consistent with the Borrower's
and any such Servicer's past practices taking into consideration the Borrower's
and any such Servicer's historical performance in collecting assets similar to
the Collateral.
"PROTECTIVE ADVANCE" shall mean a payment of expenses by the Borrower
or any Servicer which in the reasonable determination of the Borrower or any
such Servicer shall be necessary to maintain the value of any asset securing
payment of an Acquired Loan (such expenses shall include without limitation, ad
valorem taxes, environmental assessments or inspections, environmental
remediation expenses, insurance expenses, security, deferred maintenance,
litigation expenses and expenses to enforce remedies).
"REO AFFILIATE" shall mean (a) Plymouth REO, Inc., a Delaware
corporation, and/or (b) any other entity that is controlled, directly or
indirectly, by the Borrower and owns or acquires title to any real property
securing an Acquired Loan.
"REO NOTE" shall mean, as to each REO Property, a demand promissory
note to be delivered by the REO Affiliate which owns the REO Property in
question to the Borrower that shall (a) be in a principal amount no greater
than the Fair Market Value of the REO Property at the time of foreclosure, (b)
require principal and interest payments due thereunder to be paid not less
frequently than the last day of each Interest Period (as defined in the
Interest Rate Annex), (c) require principal and interest payments to be in an
amount equal to all Net Operating Income received by such REO Affiliate with
respect to the underlying REO Property each calendar month, (d) provide that an
Event of Default shall constitute an event of default thereunder permitting the
acceleration of all amounts owing thereunder and (e) in all other respects be
in form and substance satisfactory to the Bank.
"REO PROPERTY" shall mean any and all real property (together with any
fixtures appurtenant thereto and any improvements thereon) or interest in real
property now or hereafter owned by any REO Affiliate including (a) as of the
effective date of any Loan, the real property specifically described on a
Schedule attached to the related Borrowing Request and (b) in general, any real
property that has been, or shall be, (i) foreclosed upon by a seller, the
Borrower or any REO Affiliate or (ii) conveyed to any REO Affiliate by a deed
in lieu of foreclosure, all of which shall be deemed to constitute proceeds of
the Collateral.
14
16
"REO PROPERTY MORTGAGE" shall mean a Mortgage, in form and substance
acceptable to the Bank, pursuant to which a REO Affiliate shall grant to the
Borrower a first-priority lien on and security interest in the REO Property,
subject only to Permitted Prior Liens.
"REO SECURITY DOCUMENTS" shall mean those certain mortgages or deeds
of trust, assignments of leases and rents, security agreements, and appropriate
UCC financing statements, all in form and substance satisfactory to the Bank,
as required by the Bank, for each REO Property, to be executed by each REO
Affiliate in favor of the Borrower and pursuant to the terms of which, as
security for the applicable REO Note (and, at the Bank's option, the Note),
there shall be (a) granted and conveyed to the Borrower Liens upon each REO
Property (including, all personal property associated therewith) owned by such
REO Affiliate from time to time as is described therein and (b) assigned to the
Borrower all leases and rents with respect thereto; as the same may be amended,
renewed, modified, extended or restated from time to time with the prior
written consent of the Bank.
"SECURITY DOCUMENTS" shall mean (a) the Collateral Assignments, (b)
the Pledge of Accounts, (c) the Financing Statements, (d) the Lockbox Agreement
and any and all other documentation reasonably required by the Bank to
establish a Lockbox with the Bank any and all other security agreements,
assignments, collateral assignments pledges, mortgages, deeds of trust and
guaranties from time to time securing the Indebtedness or any thereof, (e) one
or more other security agreements pursuant to which the Borrower grants to the
Bank a first priority security interest in any of the Collateral and (f) any
and all renewals, extensions, amendments, modifications, replacements,
supplements, substitutions and rearrangements thereof, thereto or therefor.
"SERVICER" shall mean any Person retained by the Borrower with the
written approval of the Bank or any replacement therefor designated pursuant to
the terms of any Servicing Agreement and approved in writing by the Bank.
Initially, there shall be no separate Servicer for the Acquired Loans and the
Borrower shall perform all functions normally performed, in accordance with
Standard Industry Practices, by a servicer of the Acquired Loans.
"SERVICING AGREEMENT" shall mean any Servicing Agreement, approved in
writing by the Bank, entered into by the Borrower and any Servicer with respect
to servicing the Collateral, together with all amendments and modifications
thereto, all of the Borrower's rights thereunder having been collaterally
assigned to the Bank under the Security Documents.
"STANDARD INDUSTRY PRACTICES" shall mean such due diligence,
collateral control and collection procedures that are customarily followed by
Persons actively engaged in the business of acquiring distressed assets in a
bulk transaction and managing and disposing of such assets, provided such due
diligence and collateral control and collection procedures shall be at least as
rigorous as the Borrower and the REO Affiliate apply in managing and disposing
of their assets.
"SUBSIDIARIES" shall mean any corporation (whether now existing or
hereafter organized or acquired) of which more than fifty percent (50%) of the
outstanding voting securities shall, as of any
15
17
applicable date of determination, be owned directly, or indirectly through one
or more intermediaries, by the Borrower.
"SUBORDINATED DEBT" shall mean the revolving line of credit in the
principal amount of $250,000 from Southwest Federated Holding Company, Inc. to
the Borrower, and all renewals, extensions and modifications, but not
increases, of such line of credit.
"SUBORDINATION AGREEMENT" shall mean that certain Subordination
Agreement dated on or about the date hereof by and among the Borrower, the Bank
and Southwest Federated Holding Company, Inc., pursuant to which payment of the
Subordinated Debt, and any Liens therefor, has been subordinated to the Loans
and the Liens therefor.
"TANGIBLE EFFECTIVE NET WORTH" shall mean, as of any applicable date
of determination, Tangible Net Worth plus Subordinated Debt.
"TANGIBLE NET WORTH" shall mean, as of any applicable date of
determination, the excess of (a) the net book value of all assets of a Person
(other than patents, patent rights, trademarks, trade names, franchises,
copyrights, licenses, goodwill and similar intangible assets) after all
appropriate deductions in accordance with the federal income tax basis of
accounting (including, without limitation, reserves for doubtful receivables,
obsolescence, depreciation and amortization), over (b) all Debt of such Person.
"TELEPHONE NOTICE AUTHORIZATION" shall mean a letter in the form and
content of Exhibit "D" to this Agreement authorizing telephone notice of
borrowing and establishing a codeword system of identification in connection
therewith.
"TERMINATION DATE" shall mean the earlier of (a) the date two (2)
years from the date of this Agreement; (b) the date on which the Bank's
commitment to make Loans is terminated by the Bank pursuant to Section 9.2; (c)
the date on which the Bank's commitment to make Loans is terminated by the
Borrower pursuant to Section 2.2.4.; provided, however, that if the original
term of this Agreement is extended pursuant to Section 2.12. hereof beyond the
date two (2) years from the date of this Agreement, then the Termination Date
shall be such date as the parties then agree in writing.
"TITLE COMPANY" shall mean a title company or title companies selected
by the Borrower and not disapproved by the Bank, that issues all or any part of
a Title Policy.
"TITLE POLICY" shall mean a Mortgagee or Loan Policy of Title
Insurance issued and underwritten by a Title Company for the benefit of (a) the
Bank covering that portion of the Mortgaged Property therein described and
insuring the lien of the Mortgage which covers such portion of the Mortgaged
Property, or (b) the Borrower insuring a lien on Underlying Real Estate
securing an Acquired Loan.
16
18
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of Texas and as amended from time to time.
"UNDERLYING REAL ESTATE" shall mean the real property, together with
all improvements thereon, which secures any of the Acquired Loans, or any one
of such parcels of real property.
1.2. Accounting Terms. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP, except as
otherwise specifically noted.
1.3. Singular and Plural. Where the context herein requires, the
singular number shall be deemed to include the plural, and vice versa.
SECTION 2. LOANS, INTEREST AND FEES.
2.1. Revolving Loan. Subject to the terms and conditions of this
Agreement and the other Loan Documents, the Bank agrees to make loans to the
Borrower on a revolving basis of such amount as the Borrower shall request
pursuant to Section 2.2. of this Agreement at any time from the date of this
Agreement until the Termination Date, up to an aggregate principal amount
outstanding at any time not to exceed the Maximum Available Amount, with the
Borrower having the right to borrow, repay and reborrow amounts hereunder,
provided that each Disbursement Date under this Agreement must be a Business
Day and provided that the principal amount of each Loan must be in the minimum
amount of $5,000.
2.2. Borrowing Procedures.
2.2.1. Notice. The Borrower shall give the Bank notice of
the Borrower's desire for a Loan by 2:00 p.m. (Austin, Texas time) on the day
of the requested Loan, otherwise the following Business Day shall be the
Disbursement Date. Such notice shall specify the proposed Disbursement Date
and the principal amount of the proposed Loan. Prior to such telephone notice,
the Borrower shall have executed and delivered to the Bank a Telephone Notice
Authorization.
2.2.2. Bank Obligations. The Bank agrees to make the Loan
on the Disbursement Date as set forth in a notice to the Bank from the Borrower
conforming to the requirements of Section 2.2.1 by crediting the Borrower's
general deposit account with the Bank in the amount of such Loan, provided,
however, that the Bank shall not be so obligated if:
(1) Any of the conditions precedent set forth in
Section 4. of this Agreement shall not have been satisfied or waived by the
Bank in accordance with Section 10.3. of this Agreement; or
(2) Such proposed Loan would cause the aggregate
unpaid principal amount of the Loans outstanding under this Agreement to exceed
the lesser of the Commitment Amount or the Borrowing Base, on the Disbursement
Date.
17
19
2.2.3. Increase of Commitment Amount. Initially, the
Commitment Amount shall be equal to $1,800,000. Provided that it is in
compliance with all provisions of this Agreement and no Default or Event of
Default shall then exist, at any time prior to February 14, 1997 (but at no
time thereafter) the Borrower may unilaterally exercise the right to require
that the Commitment Amount be increased as follows:
(1) the Borrower must have actually received
additional paid-in equity capital for which it has issued beneficial ownership
interests, such equity capital to be over and above the equity capital
reflected on the Borrower's books and records in the most current Financial
Statements delivered to the Bank by the Borrower on or about the effective date
of this Agreement.
(2) the Borrower shall provide the Bank with a
written notice setting forth (i) the increase in the Borrower's paid-in equity
capital, (ii) the amount to which the Borrower desires to have the Commitment
Amount increased, which increase shall in no event be greater than the amount
of the increase in the Borrower's paid-in equity capital, and (iii) a current
Financial Statement reflecting the total amount of paid-in equity capital.
As long as by February 14, 1997, the written notification required above has
been received by the Bank and all other conditions to the increase have been
satisfied, as reasonably determined by the Bank, the Commitment Amount will be
increased effective five (5) Business Days after the receipt by the Bank of the
notice and supporting information required above.
In no event will the Commitment Amount be greater than $10,000,000 at any time.
2.2.4. Termination or Reduction in Commitment by Borrower.
The Borrower, at any time and from time to time (except as may hereinafter be
provided), upon at least five Business Days' prior written notice received by
the Bank, may permanently terminate the Bank's commitment to make Loans under
this Agreement or permanently reduce the Commitment Amount by an integral
multiple of $100,000. On the effective date of such termination or reduction,
the Borrower shall pay to the Bank, in the case of a termination, the aggregate
unpaid principal amount of all Loans, or, in the case of a reduction, the
amount, if any, by which the aggregate unpaid principal amount of all Loans
exceeds the then reduced Commitment Amount, together in either case with all
interest accrued and unpaid on the principal amounts so prepaid. The notice
shall specify the Termination Date or the reduced Commitment Amount and the
effective date of the reduction, as the case may be. The Borrower may not
revoke any such notice of termination or reduction without the prior written
consent of the Bank.
2.3. Note.
2.3.1. Revolving Note. The Loans shall be evidenced by the
Note, executed by the Borrower, dated the date of this Agreement, payable to
the Bank on the Termination Date (unless sooner accelerated pursuant to the
terms of this Agreement), in the principal amount of $10,000,000.
Notwithstanding that the full amount of the Note is $10,000,000, the Bank shall
in no event be
18
20
obligated to make any advance if after such advance the aggregate principal
amount of all Loans then outstanding would exceed the Commitment Amount at such
time. The date and amount of each Loan made by the Bank and of each repayment
of principal thereon received by the Bank shall be recorded by the Bank in its
records or, at the option of the Bank, on a schedule attached to the Note. The
aggregate unpaid principal amount so recorded by the Bank shall constitute the
best evidence of the principal amount owing and unpaid on the Note, provided,
however, that the failure by the Bank to so record any such amount or any error
in so recording any such amount (whether on the schedule attached to the Note
or otherwise) shall not limit or otherwise affect the obligations of the
Borrower under this Agreement or the Note to repay the principal amount of all
the Loans together with all interest accrued or accruing thereon.
2.4. Interest; Payments.
2.4.1. Interest. Subject to the provisions of Section 2.5.
below, the Note shall bear interest on the outstanding principal balance from
time to time outstanding at the rate or rates provided for in the Interest Rate
Annex.
2.4.2. Payments.
(a) Accrued and unpaid interest on the unpaid
principal balance of the Note shall be due and payable on the Interest Payment
Dates (as defined in the Interest Rate Annex) and the principal of the Note
shall be due and payable in full on the Termination Date; provided, that the
Borrower shall also make the principal prepayments on the Note provided under
Section 6.16.2.
(b) Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be paid by the
Borrower to the Bank hereunder, under the Note and the other Loan Documents
shall be made in Dollars, in immediately available funds.
(c) If the due date of any payment hereunder or
under the Note falls on a day which is not a Business Day, the due date for
such payments (except as otherwise provided in the Interest Rate Annex) shall
be extended to the next succeeding Business Day and interest shall be payable
for the period of such extension.
2.5. Maximum Rate. The following provisions shall control this
Agreement and the Note:
(a) No agreements, conditions, provision or stipulations
contained in this Agreement, the Note, any of the other Loan Documents or in
any other agreement between the Borrower and the Bank, or the occurrence of an
Event of Default, or the exercise by the Bank of the right to accelerate the
payment of the maturity of principal and interest, or to exercise any option
whatsoever contained in this Agreement or any other agreement between the
Borrower and the Bank, or the arising of any contingency whatsoever, shall
entitle the Bank to collect, in any event, interest exceeding the maximum rate
of nonusurious interest allowed from time to time by applicable state or
federal laws as now or as may hereinafter be in effect (the "MAXIMUM LEGAL
RATE") and in no
19
21
event shall the Borrower be obligated to pay interest exceeding such Maximum
Legal Rate, and all agreements, conditions or stipulations, if any, which may
in any event or contingency whatsoever operate to bind, obligate or compel any
Obligor to pay a rate of interest exceeding the Maximum Legal Rate shall be
without binding force or effect, at law or in equity, to the extent only of the
excess of interest over such Maximum Legal Rate. In the event any interest is
charged in excess of the Maximum Legal Rate (the "EXCESS"), the Borrower
acknowledges and stipulates that any such charge shall be the result of an
accidental and bona fide error, and such Excess shall be, first, applied to
reduce the principal of any obligations due, and, second, returned to the
Borrower, it being the intention of the parties hereto not to enter at any time
into an usurious or otherwise illegal relationship. The parties hereto
recognize that with fluctuations in the Prime Rate from time to time announced
by the Bank and other fluctuations in the Contract Rate such an unintentional
result could inadvertently occur. By the execution of this Agreement, the
Borrower covenants that the credit or return of any Excess shall constitute the
acceptance by the Borrower of such Excess, and the Borrower shall not seek or
pursue any other remedy, legal or equitable, against the Bank based, in whole
or in part, upon the charging or receiving of any interest in excess of the
Maximum Legal Rate. For the purpose of determining whether or not any Excess
has been contracted for, charged or received by the Bank, all interest at any
time contracted for, charged or received by the Bank in connection with the
Borrower's obligations shall be amortized, prorated, allocated and spread in
equal parts during the entire term of this Agreement. If at any time the rate
of interest payable hereunder with respect to the Note shall be computed for
the Note on the basis of the Maximum Legal Rate, any subsequent reduction in
the Contract Rate shall not reduce such interest thereafter payable hereunder
with respect to the Note below the amount computed on the basis of the Maximum
Legal Rate until the aggregate amount of such interest accrued and payable
under this Agreement equals the total amount of interest which would have
accrued if such interest had been at all times computed solely on the basis of
the Contract Rate for the Note.
(b) Unless preempted by federal law, the rate of interest from
time to time in effect hereunder shall not exceed the "INDICATED RATE CEILING"
from time to time in effect under Chapter 1 of the Texas Credit Code (Vernon's
Texas Civil Statutes), Section (a)(1), art. 5069-1.04, as amended.
(c) The provisions of this Section shall be deemed to be
incorporated into every document or communication relating to the Indebtedness
which sets forth or prescribes any account, right or claims or alleged account,
right or claim of the Bank with respect to the Borrower (or any other Obligor
in respect of the Indebtedness), whether or not any provisions of this Section
is referred to therein. All such documents and communications and all figures
set forth therein shall, for the sole purpose of computing the extent of the
obligations asserted by the Bank thereunder, be automatically recomputed by the
Borrower or any other Obligor, and by any court considering the same, to give
effect to the adjustments or credits required by this Section.
(d) If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this Agreement
than is presently allowed by applicable state or federal law, then the
limitation of interest hereunder shall be increased to the maximum rate of
interest allowed by applicable state or federal law, as amended, which increase
shall be effective hereunder
20
22
on the effective date of such amendment, and all interest charges owing to the
Bank by reason thereof shall be payable upon demand.
(e) The provisions of Chapter 15 of the Texas Credit Code
(Vernon's Texas Civil Statutes), art. 5069-15, as amended, are specifically
declared by the parties hereto not to be applicable to this Agreement or any of
the other agreements executed in connection herewith or therewith or to the
transactions contemplated hereby or thereby.
2.6. Fees.
2.6.1. Preparation Fees. Upon demand of the Bank from time
to time, the Borrower shall pay to the Bank the amount of the expenses
(including reasonable attorney's fees and disbursements) incurred by the Bank
from time to time in connection with the preparation of this Agreement and the
other Loan Documents and/or the making (or preparation for the making) of
advances hereunder.
2.6.2. Commitment Fee. The Borrower agrees (subject to
Section 2.5 hereof) to pay to the Bank in arrears a commitment fee for the
period from and including the date of this Agreement to the Termination Date
equal to three-fourths of one percent (0.750%) per annum on the average daily
difference between the Commitment Amount (as it may be increased or decreased
from time to time) and the aggregate unpaid principal balance of the Loans.
Such commitment fee shall be payable quarterly on the first Business Day of
January, April, July and October during the term hereof, and on the Termination
Date, for the period ending such dates.
2.7. Basis of Computation. The amount of all accrued interest and
fees hereunder and under the Note shall be computed for the actual number of
days elapsed in a year consisting of 360 days, unless the Maximum Legal Rate
would thereby be exceeded, in which event, to the extent necessary to avoid
exceeding the Maximum Legal Rate, interest shall be computed on the basis of
the actual number of days elapsed in the applicable calendar year in which
accrued.
2.8. Mandatory Prepayments. The Borrower shall pay to the Bank the
amount, if any, by which the aggregate unpaid principal amount of all Loans
from time to time exceeds the lesser of the Commitment Amount or the Borrowing
Base, together with all interest accrued and unpaid on the amount of such
excess. Such prepayment shall be immediately due and owing without notice or
demand upon the occurrence of any such excess, and, at the option of the Bank,
any mandatory prepayment made under this Section 2.8 will reduce the Commitment
Amount. It is specifically noted that the prepayment of any outstanding
amounts or tranches subject to fixed rate financing by the Bank, including but
not limited to Eurodollar Borrowings (as defined in the Interest Rate Annex),
may result in the incurring by the Borrower of prepayment penalties and/or
other costs. The fact that a mandatory prepayment is effected with respect to
any fixed rate or Eurodollar Borrowings shall not operate to relieve the
Borrower of its obligations to pay such penalties and/or costs (if any).
21
23
2.9. Basis of Payments; Application. All sums payable by the
Borrower to the Bank under this Agreement or the other Loan Documents shall be
paid directly to the Bank at its principal office in Dollars in immediately
available funds, without setoff, deduction or counterclaim. In its sole
discretion, the Bank may charge any and all deposit or other accounts
(including without limitation, an account evidenced by a certificate of
deposit) of the Borrower with the Bank for all or part of the Indebtedness then
due; provided, however, that this authorization shall not affect the Borrower's
obligation to pay, when due, any Indebtedness whether or not account balances
are sufficient to pay amounts dues. All payments and prepayments shall be
applied first to interest, the balance to principal. Except as provided in the
Interest Rate Annex or the Note, the Note may be prepaid in whole or in part
without the payment of any premium or fee.
2.10. Receipt of Payments. Any payment of the Indebtedness made by
mail will be deemed tendered and received only upon actual receipt by the Bank
at the address designated for such payment, whether or not the Bank has
authorized payment by mail or any other manner, and shall not be deemed to have
been made in a timely manner unless received on the date due for such payment,
time being of the essence. The Borrower expressly assumes all risks of loss or
liability resulting from non-delivery or delay of delivery of any item of
payment transmitted by mail or in any other manner. Acceptance by the Bank of
any payment in an amount less than the amount then due shall be deemed an
acceptance on account only, and the failure to pay the entire amount then due
shall be and continue to be an Event of Default, and at any time thereafter and
until the entire amount then due has been paid, the Bank shall be entitled to
exercise any and all rights conferred upon it herein upon the occurrence of an
Event of Default. The Borrower waives the right to direct the application of
any and all payments at any time or times hereafter received by the Bank from
or on behalf of the Borrower. The Borrower expressly agrees that to the extent
that the Bank receives any payment or benefit and such payment or benefit, or
any part thereof, is subsequently invalidated, declared to be fraudulent or
preferential, set aside or is required to be repaid to a trustee, receiver, or
any other party under any bankruptcy act, state or federal law, common law or
equitable cause, then to the extent of such payment or benefit, the
Indebtedness or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if such payment or benefit had not been
made and, further, any such repayment by the Bank, to the extent that the Bank
did not directly receive a corresponding cash payment, shall be added to and be
additional Indebtedness payable upon demand by the Bank.
2.11. Recordation by the Bank of Amounts Due. The date and amount
of each Loan made by the Bank and of each repayment of principal and interest
thereon received by the Bank shall be recorded by the Bank in its records. The
aggregate unpaid amount so recorded by the Bank shall constitute the best
evidence of the amount owing and unpaid on the Indebtedness; provided, however,
that the failure by bank so to record any such amount or any error in so
recording any such amount shall neither increase nor limit the Borrower's
obligations under this Agreement or the Note to repay the principal amount of
all the Loans together with all interest accrued or accruing thereon.
2.12 Term of Agreement. Subject to the Bank's and the Borrower's
rights to terminate this Agreement earlier as set forth herein, the Bank's
commitment to make Loans shall be for an original period extending from the
initial Disbursement Date through the date two (2) years from the date of
22
24
this Agreement. If, after the Bank's receipt and review of all financial
statements required to be delivered to the Bank under this Agreement at such
time, the Bank desires to extend its commitment to make Loans hereunder for an
additional period of time, the Bank will notify the Borrower of the terms upon
which the Bank would be willing to do so. Notwithstanding any such notice or
any negotiations between the parties with respect to the terms of any proposed
extension, the Bank shall not be deemed to have committed to any extension or
renewal term until actual approval thereof by the Bank's loan committee.
Failing such loan committee approval, this Agreement and the Bank's commitment
to make Loans hereunder shall terminate as aforesaid not later than the date
two (2) years from the date of this Agreement. Subsequent renewal periods, if
any, shall be negotiated from time to time in a like manner.
SECTION 3. SECURITY.
To secure full and timely performance of the Borrower's covenants set
out in this Agreement and to secure the repayment of the Note and all other
Indebtedness whatsoever of the Borrower to the Bank, the Borrower agrees to
grant and assign a lien upon and security interest in the Collateral pursuant
to the Security Documents and other instruments and agreements satisfactory to
the Bank, and agrees to cause each Guarantor, whether now or hereafter in
existence, to execute and deliver a Guaranty to the Bank.
SECTION 4. CONDITIONS PRECEDENT TO OBLIGATIONS OF BANK.
4.1. Conditions to First Disbursement. The obligations of the Bank
under this Agreement are subject to the occurrence, prior to or on the
Disbursement Date first occurring, of each of the following conditions, any or
all of which may be waived in whole or in part by the Bank in writing:
4.1.1. Documents Executed and Filed. The Borrower shall
have executed (or caused to be executed) and delivered to the Bank, and, as
appropriate, there shall have been filed with such filing offices as the Bank
shall deem appropriate, the following, all in form satisfactory to the Bank:
(a) The Note;
(b) The Financing Statements;
(c) An initial Borrowing Base Certificate;
(d) The Guaranty;
(e) The other Security Documents;
(f) The Subordination Agreement;
(g) The Telephone Notice Authorization; and
23
25
(h) Such other documents and instruments as the
Bank shall reasonably require.
4.1.2. Borrowing Authorizations. The Borrower shall have
furnished to the Bank a copy of resolutions of the Borrowing Authorization for
the Board of Directors of any Obligor which is a corporation authorizing the
execution, delivery and performance of this Agreement, the borrowing hereunder,
the Note and the other Loan Documents, which shall have been certified by the
Secretary or Assistant Secretary of each Obligor as of the Disbursement Date
first occurring.
4.1.3. Certified Organizational Documents. The Borrower
shall have furnished to the Bank a copy of the Organizational Documents of each
of the Obligors and the Investment Adviser.
4.1.4. Certificates of Existence, Good Standing and
Qualification. The Borrower shall have furnished to the Bank a certificate of
existence and, if available, good standing with respect to each Obligor and the
Investment Adviser for the respective state of incorporation or formation,
which shall have been certified by the state agencies issuing the same as of a
date reasonably near the Disbursement Date first occurring.
4.1.5. Audits. The Bank shall have received a report of an
independent collateral field examiner (which may be, or be affiliated with, the
Bank) with respect to the Acquired Loans of the Borrower in existence on the
Disbursement Date first occurring, prepared at the sole cost and expense of the
Borrower, with all matters disclosed therein being satisfactory to the Bank in
its discretion.
4.1.6. UCC Lien Searches. The Bank shall have received UCC
record and copy searches evidencing the appropriate filing and recording of the
Financing Statements and disclosing no notice of any liens or encumbrances
filed against any of the Collateral in any relevant jurisdiction other than as
relate to Permitted Liens.
4.1.7. Hazard Insurance. The Borrower shall have furnished
to the Bank, in form, content and amounts and with companies satisfactory to
the Bank in accordance with Section 6.5. hereof, evidence of hazard insurance
policies naming the Bank as "loss/payee" and "Mortgagee" under a standard
mortgage clause, and relating to the assets and properties (including, but not
limited to, the Collateral) of the Borrower.
4.1.8. Approval of Bank Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental thereto and all other related legal matters
shall have been satisfactory to and approved by Liddell, Sapp, Zivley, Hill &
XxXxxx, L.L.P., legal counsel for the Bank or other counsel retained by the
Bank from time to time, and said counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as they shall have reasonably requested.
24
26
4.1.9. Financial Statements. The Borrower shall have
furnished to the Bank current Financial Statements on the Borrower and the
Investment Adviser, a current Borrowing Base Certificate and Asset Portfolio
Report and all other reports and certificates required under Section 6.1.
4.1.10. Collateral. With respect to each Acquired Loan in
existence on the Disbursement Date first occurring, the Bank shall have
received (i) the originally executed REO Notes and promissory notes evidencing
each of the Account Debtor's obligations to repay the Acquired Loans, endorsed
in blank by Allonge, or on the face of the notes themselves, as such notes may
have been amended, supplemented or otherwise modified as of the date of
delivery, (ii) originals of the fully executed Collateral Assignments of the
Acquired Loan Documents, and (iii) full and complete copies, certified by the
Borrower as being true and correct copies thereof, of the fully executed
Acquired Loan Documents (other than the promissory notes originals of which are
required as provided above) related to such Acquired Loans, with the originals
of the Acquired Loan Documents to be delivered within thirty (30) days of the
first Disbursement Date.
4.1.11. Diligence Reports. If requested by the Bank, with
respect to each Acquired Loan included in existence on the Disbursement Date
first occurring, the Bank shall have received copies of the Due Diligence
Reports and any additional information, report or documentation that may be
reasonably requested by the Bank or its counsel.
4.1.12. Purchase Documentation. With respect to each
Acquired Loan in existence on the Disbursement Date first occurring, the Bank
shall have received certified copies of all documentation related to the
Borrower's acquisition of the Asset Portfolio thereto (including the applicable
sale agreement, any assignments to the Borrower related thereto and the related
closing statement) and the REO Affiliate's acquisition of title to REO Property
together with evidence that all such documents (including the applicable sale
agreement) have been duly authorized, executed and delivered by the parties
thereto.
4.1.13. Opinion of Counsel. The Bank shall have received the
favorable, written opinions of (i) Xxxxxxx X. Xxxxxxx, Xx. and Xxxxxxxxxx,
Xxxxxx & Xxxxxxx, counsel to the Borrower, each REO Affiliate and the
Investments Adviser regarding the Borrower, each REO Affiliate, the Investment
Adviser, the Loan Documents, and the transactions contemplated by the Loan
Documents; (ii) counsel satisfactory to the Bank qualified in such
jurisdictions as the Bank deems appropriate to the effect that the Bank's
security interest in the Acquired Loans is perfected by possession of the notes
held by the Bank and that the recording of an assignment of mortgage is not
necessary to perfect such security interest; and (iii) such other opinions as
the Bank may reasonable request.
4.1.14. Other Information and Documentation. The Bank shall
have received such other information, certificates, executed documents, and
reference and background checks, including without limitation reference and
background checks on Xxxxxx Xxxxxxxx and Xxx Xxxxxxxxxxx and reference check on
Xxxxxx-Xxxxx Co., as it shall have requested and all such information, etc.,
must
25
27
be prepared by a Person acceptable to the Bank at the borrower's sole cost and
expense, and must be acceptable to the Bank in its sole and absolute
discretion.
4.1.15. Payment of Existing Debt. The Borrower shall have
furnished to the Bank, in form and content satisfactory to the Bank, evidence
that Bank One-Texas, N.A. and all other Persons have terminated all security
interests in or collateral assignments of all of the Collateral.
4.2. Conditions to All Disbursements and Issuances. The obligation
of the Bank to make any Loan on any Disbursement Date, including, but not
limited to, the Disbursement Date first occurring, are subject to the
occurrence, prior to or on the Disbursement Date related to such Loan, of each
of the following conditions, any or all of which may be waived in whole or in
part by the Bank in writing:
4.2.1. Certificate. If such Loan is to made after the date
hereof and is not being made pursuant to an automated advance and repayment
mechanism provided to the Borrower by the Bank, the Bank shall have received a
certificate substantially in the form of Exhibit C attached hereto and
incorporated herein by reference for all purposes, executed by the chief
executive or chief financial officer of the Borrower, certified as of such
Disbursement Date, and confirming that, as of such Disbursement Date:
(a) No Default or Event of Default has occurred
and is continuing; and
(b) The warranties and representations set forth
in Section 5. of this Agreement are true and correct in all material respects
on and as of such Disbursement Date.
4.2.2. Bank Satisfaction. The Bank shall not know or have
any reasonable reason to believe that, as of such Disbursement Date:
(a) Any Default or Event of Default has occurred
and is continuing;
(b) Any warranty or representation set forth in
Section 5. of this Agreement shall not be true and correct in all material
respects; or
(c) Any provision of law, any order of any court
or other agency of government or any regulation, rule or interpretation thereof
has had a material adverse effect on the validity or enforceability of any Loan
Document.
4.2.3. Requirements for New Acquired Loans. Prior to making
any advance hereunder after the first Disbursement Date, if such advance is for
the purpose of acquiring any Acquired Loans after the first Disbursement Date
and the following conditions have not previously been satisfied with respect to
such new Acquired Loans or if such advance will be secured by Acquired Loans
acquired after the first Disbursement Date and the following conditions have
not previously been satisfied with respect to such new Acquired Loans, the
following conditions shall
26
28
have been, in the Bank's opinion, satisfied in full, any and all of which may
be waived in whole or in part by the Bank in writing:
(a) The Borrower shall have executed (or caused to be
executed) and delivered to the Bank, and, as appropriate, there shall have been
filed with such filing offices as the Bank shall deem appropriate, a
"Supplement" (as defined in the Collateral Assignment) covering such new
Acquired Loans;
(b) With respect to each new Acquired Loan, the Bank
shall have received either (i) the originally executed REO Notes and promissory
notes evidencing each of the Account Debtor's obligations to repay the Acquired
Loans, endorsed in blank by Allonge, or on the face of the notes themselves, as
such notes may have been amended, supplemented or otherwise modified as of the
date of delivery, or (ii) confirmation from the Borrower and the seller of such
Acquired Loans, by written facsimile transmission, that the Borrower has paid
in full all amounts required to be paid for the purchase of the Acquired Loans
other than the amounts to be paid with the Loan proceeds requested by the
Borrower in connection with such acquisition and either (A) written
confirmation from the Borrower, by facsimile transmission, that the Borrower is
in possession of all such notes, properly endorsed as required above, and that
the Borrower will deliver such notes to the Bank within two (2) Business Days
of the date of the disbursement of Loan proceeds by the Bank in connection
therewith or (B) a fully executed Possession Letter, in the form of Exhibit E
attached hereto, pursuant to which the seller of such notes has agreed to
deliver such notes, properly endorsed as required above, to the Bank within ten
(10) Business Days of the date of the disbursement of Loan proceeds by the Bank
in connection therewith. In the event that the procedure outlined in clause
(ii) of this subsection is applicable and such notes are not delivered to the
Bank within the 2-day or 10-day period, as the case may be, such Acquired Loans
shall immediately cease to be Eligible Acquired Loans and the Borrower shall
pay to the Bank upon demand any mandatory prepayment required under Section 2.8
of this Agreement on account of the exclusion of such Acquired Loans from the
Borrowing Base.
(c) With respect to each new Acquired Loan, the Bank
shall have received confirmation from the Borrower that copies, certified by
the Borrower as being true and correct, of all other fully executed Acquired
Loan Documents, other than the original promissory notes to be delivered to the
Bank in accordance with the preceding subsection, related to such new Acquired
Loans will be delivered to the Bank within two (2) Business Days of the
Borrower's acquisition thereof (it being understood and agreed that the
Borrower shall deliver the originals of the other fully executed Acquired Loan
Documents to the Bank within thirty (30) days of the purchase by the Borrower
of such Acquired Loans). If such Acquired Loan Documents are not delivered to
the Bank within the applicable time period described above, such Acquired Loans
shall immediately cease to be Eligible Acquired Loans and the Borrower shall
pay to the Bank upon demand any mandatory prepayment required under Section 2.8
of this Agreement on account of the exclusion of such Acquired Loans from the
Borrowing Base.
27
29
(d) If requested by the Bank, with respect to each
new Acquired Loan, the Bank shall have received copies of the Due Diligence
Reports and any additional information, report or documentation that may be
reasonably requested by the Bank or its counsel.
(e) With respect to each new Acquired Loan, the Bank
shall have received confirmation from the Borrower that certified copies of all
documentation related to the Borrower's acquisition of such Acquired Loans
(including the applicable sale agreement, any assignments to the Borrower
related thereto and the related closing statement) and the REO Affiliate's
acquisition of title to any REO Property together with evidence that all such
documents (including the applicable sale agreement) have been duly authorized,
executed and delivered by the parties thereto, will be delivered to the Bank
within two (2) Business Days of the Borrower's acquisition thereof. If such
items are not delivered to the Bank within such 2-day period, such Acquired
Loans shall immediately cease to be Eligible Acquired Loans and the Borrower
shall pay to the Bank upon demand any mandatory prepayment required under
Section 2.8 of this Agreement on account of the exclusion of such Acquired
Loans from the Borrowing Base.
(f) With respect to each new Acquired Loan secured by
Underlying Real Estate located in jurisdictions in which the Bank has not
previously received such an opinion under this Agreement, the Bank shall have
received (i) the favorable, written opinions of counsel satisfactory to the
Bank qualified in such jurisdictions as the Bank deems appropriate to the
effect that the Bank's security interest in such Acquired Loans is perfected by
possession of the notes held by the Bank and that the recording of an
assignment of mortgage is not necessary to perfect such security interest; and
(ii) such other opinions as the Bank may reasonable request.
(g) With respect to each new Acquired Loans, the Bank
shall have received such other information, certificates, and executed
documents as it shall have reasonably requested in a timely manner and all such
information, etc., must be prepared by a Person acceptable to the Bank at the
Borrower's sole cost and expense, and must be acceptable to the Bank in its
sole and absolute discretion.
(h) With respect to each new Acquired Loans, the Bank
shall have received confirmation from the Borrower that within two (2) Business
Days of the acquisition date thereof the Borrower shall furnish to the Bank, in
form and content satisfactory to the Bank, evidence that all Persons, other
than the Bank, have terminated or released, as the case may be, all Liens
affecting such Acquired Loans. If such evidence is not furnished to the Bank
within such 2-day period, such Acquired Loans shall immediately cease to be
Eligible Acquired Loans and the Borrower shall pay to the Bank upon demand any
mandatory prepayment required under Section 2.8 of this Agreement on account of
the exclusion of such Acquired Loans from the Borrowing Base.
4.2.4. Approval of Bank Counsel. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated
by this Agreement or incidental thereto and all other related legal matters
shall have been satisfactory to and approved by legal
28
30
counsel for the Bank, and said counsel shall have been furnished with such
certified copies of actions and proceedings and such other instruments and
documents as they shall have reasonably requested.
SECTION 5. WARRANTIES AND REPRESENTATIONS.
The Borrower represents and warrants to the Bank that:
5.1. Existence and Power. The Borrower is a Delaware business
trust duly organized, validly existing and in good standing under the laws of
the State of Delaware; each of the Subsidiaries, the REO Affiliate, the
Investment Adviser and any Servicer is a corporation duly organized, validly
existing and in good standing under the law of the state of its incorporation,
and, to the extent required by applicable law, qualified to do business in the
State of Texas. Each of the Obligors, the Investment Adviser, and any Servicer
has the power and authority to own their respective properties and assets and
to carry out their respective business as now being conducted and are qualified
to do business and in good standing in every jurisdiction where such
qualification is necessary. The Borrower has the co-requisite power and
authority to execute and perform this Agreement, to borrow money in accordance
with its terms, to execute and deliver the Note and other Loan Documents, to
grant to the Bank liens and security interest in the Collateral as hereby
contemplated and to do any and all other things required of it hereunder, and
each of the other Obligors, the Investment Adviser, and any Servicer has the
requisite power and authority to enter into the transactions which each has
entered into, and perform the respective obligations.
5.2. Authorization and Approvals. The execution, delivery and
performance of this Agreement, the borrowings hereunder, the execution and
delivery of the Note and other Loan Documents to which any of the Obligors is a
party and the execution and delivery of any other documents related hereto to
which any of the Obligors, the Investment Adviser or any Servicer is a party
have been duly authorized by all requisite organizational action, do not
require registration with or consent or approval of, or other action by, any
federal, state or other governmental authority or regulatory body, or, if such
registration, consent or approval is required, the same has been obtained and
disclosed in writing to the Bank or will be completed or obtained concurrently
with the execution and delivery of this Agreement, will not violate any
provision of law, any order of any court or other agency of government, the
Organizational Documents of any such Person, any provision of any indenture,
agreement or other instrument to which any of such Person is a party, or by
which it or any of its properties or assets are bound, will not be in conflict
with, result in a breach of or constitute (with or without notice or passage of
time) a default under any such indenture, agreement or other instrument, and
will not result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the properties or assets of
any of the Obligors other than in favor of the Bank and as contemplated hereby.
5.3. Valid and Binding Agreement. This Agreement is, and the Note,
the Security Documents, all other Loan Documents to which any of the Obligors
is a party and all other documents related hereto to which any of the Obligors,
the Investment Adviser or any Servicer is a party, will be, when delivered,
valid and binding obligations of such Person, enforceable in accordance
29
31
with their respective terms except for laws and equitable principles affecting
the enforcement of creditors' rights generally.
5.4. Actions, Suits or Proceedings. Except as disclosed on
Schedule 5.4, there are no actions, suits or proceedings, at law or in equity,
and no proceedings before any arbitrator or by or before any governmental
commission, board, bureau or other administrative agency, pending, or, to the
best knowledge of the Borrower, threatened against or affecting any Obligor,
the Investment Adviser, any Servicer or any properties or rights of any such
Person which, if adversely determined, could materially impair the right of any
such Person to carry on business substantially as now conducted or could have a
material adverse effect upon the financial condition of any such Person.
5.5. Subsidiaries and REO Affiliates. The Borrower has no
Subsidiaries. The only REO Affiliate is Plymouth REO, Inc., a Delaware
corporation.
5.6. No Liens, Pledges, Mortgages or Security Interests. Except
for Permitted Liens, none of the assets and properties of the Obligors, the
Investment Adviser or any Servicer, including, without limitation, the
Collateral, is subject to any mortgage, pledge, lien, security interest or
other encumbrance of any kind or character.
5.7. Accounting Principles. The Financial Statements have been
prepared in accordance with GAAP and fully and fairly present the financial
condition of each Obligor as of the dates, and the results of their operations
for the periods, for which the same are furnished to the Bank. To the best of
the Borrower's knowledge and belief, no Obligor, Investment Adviser or Servicer
has any material contingent obligations, liabilities for taxes, long-term
leases or unusual forward or long-term commitments not disclosed by, or
reserved against in, the Financial Statements. Notwithstanding the foregoing,
it is understood that the monthly financial statements of the Borrower required
under Section 6.1.3. will be prepared on a tax basis as opposed to GAAP.
5.8. Financial Condition. Each of the Obligors, the Investment
Adviser and any Servicer is solvent, able to pay its debts as they mature, has
capital sufficient to carry on its business and has assets the fair market
value of which exceed its liabilities, and none will be rendered insolvent,
undercapitalized or unable to pay maturing debts by the execution or
performance of this Agreement or the other documents contemplated hereby.
There has been no material adverse change in the business, properties (on a
company-wide basis) or condition (financial or otherwise) of any Obligor, the
Investment Adviser or any Servicer since the date of the latest of the
Financial Statements.
5.9. No Adverse Changes. There has been no material adverse change
in the business, properties (on a company-wide basis) or condition (financial
or otherwise) of any of the Obligors since the date of the latest of the
Financial Statements.
5.10. Conditions Precedent. As of each Disbursement Date, all
conditions precedent referred to in Section 4. hereof required to be satisfied
shall have been satisfied (or waived in writing by the Bank).
30
32
5.11. Taxes. Each of the Obligors, the Investment Adviser and any
Servicer has filed by the due date therefor all federal, state and local tax
returns and other reports they are required by law to file and which are
material to the conduct of their respective businesses, have paid or caused to
be paid all taxes, assessments and other governmental charges that are shown to
be due and payable under such returns, and have made adequate provision for the
payment of such taxes, assessments or other governmental charges which have
accrued but are not yet payable. The Borrower has no knowledge of any
deficiency or assessment in a material amount in connection with any taxes,
assessments or other governmental charges not adequately disclosed in the
Financial Statements of any such Person.
5.12. Compliance with Laws. Except as disclosed on Schedule 5.12
and otherwise permitted under this Agreement, each of the Obligors, the
Investment Adviser, and any Servicer has complied with all applicable laws, to
the extent that failure to comply would materially interfere with the conduct
of the business of any such Person. The Borrower has timely made all filings
and made all disclosures required to be made pursuant to federal securities
laws and the securities laws of each state to whose laws the Borrower is
subject.
5.13. Indebtedness. Except as permitted by Sections 7.4., 7.5. and
7.6. of this Agreement, and as otherwise disclosed on Schedule 5.13, none of
the Obligors, the Investment Adviser or any Servicer has any indebtedness for
money borrowed and no direct or indirect obligations under any leases (whether
or not required to be capitalized under GAAP) or any agreements of guarantee or
surety except for the endorsement of negotiable instruments in the ordinary
course of business for deposit or collection.
5.14. Material Agreements. Except as disclosed on Schedule 5.14,
none of the Obligors, the Investment Adviser or any Servicer has any material
leases, contracts or commitments of any kind (including, without limitation,
employment agreements, collective bargaining agreements, powers of attorney,
distribution contracts, patent or trademark licenses, contracts for future
purchase or delivery of goods or rendering of services, bonus, pension and
retirement plans, or accrued vacation pay, insurance and welfare agreements);
to the best knowledge of the Borrower, all parties to such agreements
(including, without limitation, the Obligors, the Investment Adviser or any
Servicer) have complied with the provisions of such leases, contracts or
commitments; and to the best knowledge of the Borrower, no party to such
agreements (including, without limitation, the Obligors, the Investment Adviser
or the Servicer) is in default thereunder, nor has there occurred any event
which with notice or the passage of time, or both, would constitute such a
default.
5.15. Margin Stock. No Obligor is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose
of purchasing or carrying any "MARGIN STOCK" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, and no part of the
proceeds of any Loan will be used, directly or indirectly, to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock or for any other purpose which might violate the
provisions of Regulation G, T, U or X of the said Board of Governors. The
Borrower does not own any margin stock.
31
33
5.16. Pension Funding. No Obligor has incurred any material
accumulated funding deficiency within the meaning of ERISA and has not incurred
any material liability to the PBGC in connection with any employee benefit plan
established or maintained by such Obligor and no reportable event or prohibited
transaction, as defined in ERISA, has occurred with respect to such plans.
5.17. Misrepresentation. Except as disclosed in the letter from
Xxxxxxxxxx, Xxxxxx & Xxxxxxx to the Securities and Exchange Commission,
attached as Scheduled 5.17, no warranty or representation by any Obligor, the
Investment Adviser or any Servicer contained herein or in any certificate or
other document furnished by such Person pursuant hereto contains any untrue
statement of material fact or omits to state a material fact necessary to make
such warranty or representation not misleading in light of the circumstances
under which it was made. There is no fact which the Borrower has not disclosed
to the Bank in writing which materially and adversely affects nor, so far as
the Borrower can now foresee, is likely to prove to affect materially and
adversely the business, operations, properties, prospects, profits or condition
(financial or otherwise) of any of the Obligors, the Investment Adviser or any
Servicer or ability of such Person to perform their respective obligations
under the Loan Documents or the other documents related thereto.
5.18. Borrowing Base Components. As to each Acquired Loan
represented by the Borrower to be an "ELIGIBLE ACQUIRED LOAN" on a Borrowing
Base Certificate, as of the date of each such Borrowing Base Certificate, each
such Acquired Loan constitutes an Eligible Acquired Loan.
5.19. Assumed Names; Other Names. The Borrower has not changed its
name during the last five (5) years.
5.20. No Conflicting Agreements. None of the Obligors, the
Investment Adviser or any Servicer is in default under any shareholder
agreement, preferred stock agreement or any other agreement to which it is a
party or by which it or any of its property is bound, the effect of which might
have a material adverse effect on the business or operations of such Person.
No provision of the Organizational Documents or preferred stock, if any, of any
such Person, and no provision of any existing mortgage, indenture, note,
contract, agreement, statute (including, without limitation any applicable
usury or similar law), rule, regulation, judgment, decree or order binding on
any such Person or affecting its property conflicts with, or requires any
consent under, or would in any way prevent the execution, delivery or carrying
out of the terms of, this Agreement and the documents contemplated hereby, and
the taking of any such action will not constitute a default under, or result in
the creation or imposition of, or obligation to create any lien upon the
property of any such Person pursuant to the terms of any such mortgage,
indenture, note, contract or agreement.
5.21. Representations and Warranties with Respect to Investment
Adviser. Notwithstanding anything to the contrary contained herein, the
representations and warranties contained in this Agreement and the other Loan
Documents with respect to the Investment Adviser shall be deemed made only on
the date of this Agreement. No reaffirmation of any of the representations and
warranties required under this Agreement or the other Loan Documents shall be a
reaffirmation of
32
34
the representations and warranties with respect to the Investment Adviser
unless such reaffirmations specifically recite otherwise by reference to the
Investment Adviser. Nothing contained herein shall limit the reaffirmation of
such representations and warranties with respect to any other Person.
SECTION 6. AFFIRMATIVE COVENANTS.
From the date hereof until the principal of and interest on the Note
and other Indebtedness is paid in full, and the ability, if any, of the
Borrower to obtain Loans hereunder has irrevocably terminated, the Borrower
covenants and agrees that it will (or will cause each other Obligor to):
6.1. Financial and Other Information.
6.1.1. Annual Financial Reports.
(a) Furnish to the Bank in form satisfactory to
the Bank not later than ninety (90) days after the close of each fiscal year of
the Borrower beginning with its fiscal year ending June 30, 1997, on a
consolidated and consolidating basis, a balance sheet of the Borrower at the
close of each such fiscal year, statements of income and statements of cash
flows of the Borrower for each such fiscal year, and such other comments and
financial details as are usually included in similar reports. Such reports
shall be prepared in accordance with GAAP by independent certified public
accountants of recognized standing selected by the Borrower and acceptable to
the Bank and shall contain unqualified opinions that the financial statements
present fairly the Borrower's financial position and results of operations in
all material respects.
(b) Furnish to the Bank in form satisfactory to
the Bank not later than ninety (90) days after the close of the Investment
Adviser's fiscal year beginning with its 1996 fiscal year, a balance sheet of
the Investment Adviser as at the close of each such fiscal year, and statements
of income and statements of cash flows for the Investment Adviser for each such
fiscal year, all on a consolidated basis. These statements shall be prepared
on substantially the same accounting basis as the statements required in
Section 6.1.1.(a) of this Agreement and shall be in such detail as the Bank may
reasonably require, and the accuracy of the statements shall be certified by
the chief executive or financial officer of the Investment Adviser.
6.1.2. Quarterly GAAP Financial Statements. Furnish to the
Bank not later than thirty (30) days after the end of each quarter of each
fiscal year of the Borrower, beginning with December 31, 1996, financial
statements containing the balance sheet of the Borrower up to the end of such
period, all on a consolidated basis, and containing a schedule itemizing the
Fair Market Value of each Acquired Loan as of the end of such quarter. These
statements shall be prepared on substantially the same basis as the statements
required in Section 6.1.1.(a) of this Agreement and shall be in such detail as
the Bank may reasonably require, and the accuracy of the statements shall be
certified by the chief executive or financial officer of the Borrower.
33
35
6.1.3. Monthly Tax Basis Financial Statements. Furnish to
the Bank not later than twenty (20) days after the close of each month of each
fiscal year of the Borrower, beginning with the month in which the Borrower
commences operations, financial statements containing the balance sheet of the
Borrower as of the end of each such period, statements of income and statements
of cash flows of the Borrower up to the end of such period, all on a
consolidated basis. These statements shall be prepared in accordance with the
federal income tax basis of accounting and shall be in such detail as the Bank
may reasonably require, and the accuracy of the statements shall be certified
by the chief executive or financial officer of the Borrower.
6.1.4. No Default Certificate. Together with each delivery
of the financial statements required by Sections 6.1.1.,6.1.2. and 6.1.3. of
this Agreement, furnish to the Bank a compliance certificate substantially in
the form of Exhibit C attached hereto and incorporated herein by reference for
all purposes, duly executed by its chief executive or financial officer
stating, among other things, that no Event of Default or Default has occurred,
or if any such Event of Default or Default exists, stating the nature thereof,
the period of existence thereof and what action the Borrower propose to take
with respect thereto accompanied by such supporting calculations contained in
such certificate as the Bank may request.
6.1.5. Borrowing Base Certificate and Asset Portfolio
Reports. Furnish to the Bank on the first Business Day of each week during the
term hereof, a Borrowing Base Certificate as of the last Business Day of the
preceding week, confirming that the aggregate unpaid principal balance of all
the Loans does not exceed the Maximum Available Amount as then in effect (or if
such is not the case, accompanied by a prepayment of the Note in accordance
with Section 2.8. of this Agreement), and contemporaneously with such Borrowing
Base Certificate, an Asset Portfolio Report as of the last Business Day of the
preceding week. Within ten (10) days of each month end, furnish to the Bank a
monthly Borrowing Base Certificate as of the end of such month and Asset
Portfolio Report for such preceding month, but otherwise in the form required
by the previous sentence. If requested by the Bank, each Borrowing Base
Certificate shall be accompanied by a listing of all Acquired Loans which do
not constitute Eligible Acquired Loans and the reasons for the exclusion from
classification as an Eligible Acquired Loan.
6.1.6. Adverse Events. Promptly inform the Bank of the
occurrence of any Event of Default or Default, or of any occurrence which has
or could reasonably be expected to have a materially adverse effect upon any
Obligor's, the Investment Adviser's or the Servicer's business, properties,
financial condition or ability to comply with any obligations hereunder or
related hereto.
6.1.7. Shareholder Reports. Promptly furnish to the Bank
upon becoming available a copy of all financial statements, reports, notices,
proxy statements and other communications sent by any Obligor, the Investment
Adviser or any Servicer to their respective stockholders, and all regular and
periodic reports filed by any such Person with any securities exchange, the
Securities and Exchange Commission, or other governmental authority.
34
36
6.1.8. Management Letters. Furnish to the Bank, promptly
upon receipt thereof, copies of all management letters and other reports of
substance submitted to any Obligor, the Investment Adviser or any Servicer by
independent certified public accountants in connection with any annual or
interim audit of the books of such Person.
6.1.9. Tax Returns. Within ten (10) days of the filing of
each tax return of each Obligor with the United States Internal Revenue
Service, furnish to the Bank each Obligor's federal tax return.
6.1.10. Governmental Reports. Within ten (10) days of the
filing thereof by any Obligor with any governmental authority, including
without limitation the Securities and Exchange Commission, furnish to the Bank
copies of each filing. The Borrower shall promptly deliver to the Bank copies
of any correspondence, filings or other documentation furnished to or received
from any governmental authority relating to the Borrower's status as a Business
Development Company.
6.1.11. Other Information as Requested. Promptly furnish
(or cause to be furnished) to the Bank such other information regarding the
operations, business affairs and financial condition of the Obligors, the
Investment Adviser, any Servicer or any Collateral for the Loans as the Bank
may reasonably request from time to time and permit the Bank, its employees,
attorneys and agents, to inspect all of the books, records and properties of
the Obligors at any reasonable time.
6.2. Collateral Audits. Permit the Bank to conduct audits of the
Collateral as often as the Bank, in its credit judgment, deems such audits to
be necessary. Upon the Bank's request, except as provided below, the Borrower
shall reimburse the Bank for the reasonable costs and expenses expended by the
Bank in connection with such audits. Without limiting the Bank's right to
conduct more frequent audits, the Bank acknowledges that it currently intends
to conduct four such audits in each twelve (12) month period. Notwithstanding
the foregoing or anything to the contrary contained herein, as long as no
Default or Event of Default shall then exist, the Borrower shall not be
obligated to reimburse the Bank for the cost of more than six (6) such audits
in any 12-month period.
6.3. Appraisals and Reports to be Provided. The Bank (by its
officers, employees, directors or agents) at any time and from time to time,
and at the Borrower's sole cost and expense (to the extent not prohibited by
applicable law), may contract for the services of an appraiser approved by the
Bank in its sole discretion to perform a written appraisal of any of the
Mortgaged Property, REO Property or Underlying Real Estate (herein called the
"Property" for purposes of this paragraph). Any such appraisal may be
performed at any time or times upon reasonable notice to the Borrower, as long
as it does not unreasonably interfere with the Borrower's, the applicable REO
Affiliate's or other party in possession of the Property's use of the Property.
Specifically, any such appraiser is authorized to enter upon, and the Borrower
shall use its best efforts to cause such appraiser to have access to, the
Property as may be necessary in the opinion of such appraiser to perform its
professional services. The Borrower will also furnish or cause to be furnished
to such appraiser such historical and operational information regarding the
Property as may be reasonably requested by such appraiser and as may be in the
possession or control of the Borrower to facilitate
35
37
preparation of an appraisal and will make available for meetings with such
appraiser appropriate personnel having knowledge of such matters. The Borrower
will permit, or use its best efforts to cause to be permitted, the Bank and its
agents, independent contractors, representatives, employees and officers at all
reasonable times to go upon, examine, inspect and remain on the Property for
any lawful purpose and will furnish to the Bank on request all pertinent
information in regard to the development, operation, use and status of the
Property which is in the Borrower's possession or control. In addition to the
foregoing, promptly upon the Bank's request, the Borrower agrees, at the
Borrower's sole cost and expense (to the extent not prohibited by applicable
law):
(a) to cause an inspection and written appraisal of any
of the Property (or such parts of it as are designated in the Bank's request)
to be made by a qualified appraiser approved by the Bank; and
(b) to cause to be conducted or prepared any other
written report, Environmental Site Assessment, summary, opinion, inspection,
review, survey, audit or other professional service relating to any of the
Property or any operations in connection with it (all as designated in the
Bank's request), including any accounting, architectural, consulting,
engineering, design, legal, management, pest control, surveying, toxic or
hazardous materials survey, inspection, removal or cleanup work, title
abstracting or other technical, managerial or professional service relating to
the Property or its operations.
Without limiting the Bank's rights to require more frequent appraisals and/or
Environmental Site Assessments, the Bank acknowledges that it currently intends
to require such items if in its reasonable determination such items are
necessary to confirm the Borrower's valuation of such Property or the existence
or nonexistence of Hazardous Substances on or about such Property.
6.4. Business Development Company. The Borrower will, at its sole
costs and expense and so long as this Agreement remains in effect, take all
steps necessary to retain its status as a "registered investment company" as
defined in Section 851(a) of the Internal Revenue Code and its implementing
regulations and revenue rulings, and as a "business development company" under
the Investment Company Act of 1940, as amended, and its implementing
regulations, including, but not limited to maintaining its status as a Delaware
business trust under the laws of the State of Delaware.
6.5. Insurance. Keep its (and cause the Subsidiaries and the REO
Affiliates to keep their respective) insurable properties (including, but not
limited to, the Collateral) adequately insured and maintain insurance against
fire and other risks customarily insured against by companies engaged in the
same or a similar business to that of the Borrower, the Subsidiaries or the REO
Affiliates, whichever is applicable, necessary worker's compensation insurance,
public liability and product liability insurance, and such other insurance as
may be required by law or as may be reasonably required in writing by the Bank,
all of which insurance shall be in such amounts, containing such terms, in such
form, for such purposes and written by such companies as may be satisfactory to
the Bank. All such policies shall contain a provision whereby they may not be
canceled except upon thirty days' prior written notice to the Bank. The
Borrower will deliver to the Bank, at the Bank's
36
38
request, evidence satisfactory to the Bank that such insurance has been so
procured, including satisfactory loss payable endorsements naming the Bank as
loss/payee and additional insured and mortgagee under a standard mortgagee
clause and as its interest may appear. The Borrower (a) shall promptly notify
the Bank if it has knowledge of the failure of any Account Debtor under an
Acquired Loan to maintain the insurance required under such Acquired Loan and
(b) if requested by the Bank, make a Protective Advance to procure the required
coverage. If the Borrower fails to maintain or cause to be maintained
satisfactory insurance as herein provided, the Bank shall have the option to do
so, and the Borrower agrees to repay the Bank, with interest at the Past Due
Rate, all amounts so expended by the Bank. The Borrower hereby appoints the
Bank as the Borrower's attorney-in-fact, which appointment is coupled with an
interest and irrevocable, to endorse any check or draft payable to the Borrower
in connection with returned or unearned premiums on said insurance or the
proceeds of said insurance, and any amount so collected may be applied toward
satisfaction of the Indebtedness, provided, however, that the Bank shall not be
required hereunder so to act. The Borrower shall furnish the Bank the
insurance required under this Section 6.5 with respect to Acquired Loans in
existence on the date hereof on or prior to the first Disbursement Date. The
Borrower shall furnish such insurance with respect to Acquired Loans acquired
after the date of this Agreement within 30 days of the acquisition of such new
Acquired Loans. Notwithstanding anything to the contrary contained in this
Agreement, (a) the Borrower shall not be obligated to deliver such insurance to
the Bank with respect to an Acquired Loan (other than an Acquired Loan which is
also an Eligible Acquired Loan) with a Fair Market Value of $25,000 or less,
and (b) the Borrower shall not be obligated to deliver such insurance to the
Bank with respect to an Eligible Acquired Loan with a Fair Market Value of
$1,000 or less; provided, that the aggregate Fair Market Value of all Acquired
Loans (including Eligible Acquired Loans) for which such insurance is not
delivered to the Bank shall not exceed $250,000 at any one time. The
provisions of this Section are in addition to and cumulative of the insurance
provisions set forth in the other Loan Documents.
6.6. Taxes. Pay promptly and within the time that they can be paid
without interest or penalty all taxes, assessments and similar imposts and
charges of every kind and nature lawfully levied, assessed or imposed upon the
Borrower, the Subsidiaries, the REO Affiliates and their respective property,
except to the extent being contested in good faith and, if requested by the
Bank, bonded in a manner satisfactory to the Bank or for which the Borrower has
made reserve by depositing amounts satisfactory to the Bank in the Escrow
Account. If the Borrower shall fail to pay or cause to be paid such taxes and
assessments by their due date, the Bank shall have the option to do so, and the
Borrower agrees to repay the Bank, with interest at the Past Due Rate, all
amounts so expended by the Bank.
6.7. Maintain Corporation and Business. Do or cause to be done all
things necessary to preserve and keep in full force and effect the Borrower's,
the Subsidiaries', the REO Affiliates', and any Servicer's existence, rights
and franchises, if any, and comply with all applicable laws; continue to
conduct and operate their respective businesses substantially as conducted and
operated during the present and preceding calendar year at all times maintain,
preserve and protect all franchises and trade names and preserve all the
remainder of their respective property used or useful in the conduct of their
respective business and keep the same in good repair, working order and
condition; and from
37
39
time to time make, or cause to be made, all needed and proper repairs,
renewals, replacements, betterments and improvements thereto so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times. This is in addition to and not in replacement of or by
way of modification to the Borrower's covenant in Section 6.4. hereof to
maintain its status as status as business development corporation.
6.8. Maintain Tangible Net Worth. At all times maintain, on a
consolidated statement basis, Tangible Net Worth (as determined on the federal
income tax basis of accounting) of at least $1,400,000. From and after the
effective date of any successful offering of any beneficial interests in the
Borrower occurring after the first Disbursement Date, the minimum Tangible Net
Worth requirements of this Section shall be increased by an amount equal to 85%
of the paid-in equity capital (net of all reasonable expenses associated with
such equity offering) received by the Borrower in connection with such
offering.
6.9. Maintain Debt Ratio. Maintain the ratio of its (a) Debt minus
accrued dividends payable and Subordinated Debt to (b) Tangible Effective Net
Worth (on a consolidated and consolidating basis if the Borrower then has any
Subsidiaries) of not less than 1.15 to 1.00 at all times (as determined on the
federal income tax basis of accounting).
6.10. Maintain Interest Coverage Ratio. Beginning December 31, 1997
and at all times thereafter, maintain the ratio of its (a) EBITDA for the
12-month period preceding the date of determination to (b) accrued interest on
its Debt for such period (on a consolidated and consolidating basis if the
Borrower then has any Subsidiaries) of not less than 3.00 to 1.00, (as
determined on the federal income tax basis of accounting).
6.11. Maintain Net Income. Maintain Net Income (on a consolidated
and consolidating basis if the Borrower then has any Subsidiaries) of not less
than the following (as determined on the federal income tax basis of
accounting):
(a) -$50,000 for the quarter period ending December 31, 1996
(excluding up to $250,000 of costs associated with equity offerings in
the Borrower occurring prior to such date);
(b) -$100,000 for each quarter period of the Borrower's fiscal
year other than the quarter period ending December 31, 1996;
(c) -$200,000 for any fiscal year.
6.12. Liquidity Maintenance Provision. For twelve (12) months after
the effective date of the first successful offering of beneficial interests in
the Borrower occurring after the first Disbursement Date, maintain unencumbered
(except for Liens in favor of the Bank) short term assets in the form of (i)
readily available cash in Dollars, (ii) certificates of deposit with maturities
of one year or less of United States commercial banks with capital, surplus and
undivided profits in excess
38
40
of $100,000,000, (iii) direct obligations of the United States Government
maturing within one year from the date of acquisition thereof, or (iv) other
short term securities acceptable to the Bank in its sole discretion, in an
amount not less than $150,000 (excluding any such assets evidenced by amounts
in the Escrow Account).
6.13. ERISA. At all times meet and cause each of the other Obligors
and any Servicer to meet the minimum funding requirements of ERISA with respect
to such Person's employee benefit plans subject to ERISA; promptly after the
Borrower knows or has reason to know of the occurrence of any event, which
would constitute a reportable event or prohibited transaction under ERISA, or
that the PBGC or the Borrower, any other Obligor or any Servicer has instituted
or will institute proceedings to terminate an employee pension plan, deliver to
the Bank a certificate of the chief financial officer of such Person setting
forth details as to such event or proceedings and the action which such Person
proposes to take with respect thereto, together with a copy of any notice of
such event which may be required to be filed with the PBGC; and furnish to the
Bank (or cause the plan administrator to furnish the Bank) a copy of the annual
return (including all schedules and attachments) for each plan covered by
ERISA, and filed with the Internal Revenue Service by any such Person not later
than ten (10) days after such report has been so filed.
6.14. Compliance with Legal Requirements; Governmental Notices. The
Borrower will conduct, and will cause each of the Obligors and any Servicer to
conduct, its business, and will maintain its property, and cause each such
Person to maintain their respective properties, in full compliance with all
applicable legal requirements. The Borrower will fully comply with and
punctually perform, and cause each of the Obligors and any Servicer to fully
comply with and punctually perform, all of the covenants, agreements and
obligations imposed on any of them or their respective property. The Borrower
will furnish to the bank copies of notices and reports received or sent by any
of the Obligors, the Investment Adviser and any Servicer to or from each
governmental authority within three (3) days of the receipt or giving thereof.
6.15. Use of Loan Proceeds. Use the proceeds of any Loan for the
purpose set forth in the recitals to this Agreement.
6.16. Lockbox Deposits; Distributions of Gross Collections.
6.16.1 Cash Collateral Accounts. All Gross Collections
shall be directed to and deposited into the Cash Collateral Accounts and shall
be accounted for and tracked on an Acquired Loan basis. Any payments or other
proceeds of Collateral received by the Borrower shall be deemed received by the
Borrower in trust and shall be forthwith deposited by the Borrower, immediately
upon receipt, into the Cash Collateral Accounts in the form received, duly
endorsed by the Borrower for deposit into the Cash Collateral Accounts.
6.16.2 Distributions of Gross Collections. On each Business
Day, the Gross Collections will be withdrawn from the Cash Collateral Accounts
and applied in the following priorities:
39
41
i. First, to the payment to the Bank of all accrued and unpaid
interest on the Loans then due and payable;
ii. Second, to the payment of any fees and expenses then due and
payable to the Bank under this Agreement or any of the other
Loan Documents;
iii. Third, to the Bank, to be applied as principal prepayments on
any Base Rate Borrowings (as defined in the Interest Rate
Annex);
iv. Fourth, to the Bank, to be applied as principal prepayments on
any Eurodollar Borrowings (as defined in the Interest Rate
Annex) having an Interest Period which ends on such date; and
v. Fifth, the balance to the Borrower, by depositing such amounts
in the Borrower's operating account.
To the extent that any such Gross Collections constitute Escrow Payments made
with respect to any of the Acquired Loans, the Borrower, upon obtaining
knowledge that such amounts have been paid to the Cash Collateral Account,
shall deposit an amount equal to the Escrow Payments in the Escrow Account,
either by requesting a Loan under this Agreement or by using other funds
available to the Borrower.
Notwithstanding any of the foregoing, if any Default or Event of Default shall
have occurred and be continuing, all Gross Collections shall be distributed and
applied as the Bank shall direct in its sole discretion, and the Bank shall be
entitled to withdraw and apply all Gross Collections and all amounts on deposit
with the Bank to pay down amounts outstanding hereunder and under the Loans, in
such order and manner of application as the Bank may elect in its discretion.
6.17. Notice of Events. Notify the Bank immediately upon acquiring
knowledge of the occurrence of, or if any of the Obligors, the Investment
Adviser or any Servicer causes or intends to cause, as the case may be: (1)
the institution of any lawsuit or administrative proceeding affecting any such
Person involving monetary claims in excess of $100,000 or the institution of
any lawsuit or administrative proceeding affecting such Person, the adverse
determination under which could have a material adverse effect on the business,
condition (financial or otherwise), operations, property or prospects of such
Person or on its ability to perform any of its obligations under any Loan
Document or other document related hereto to which it is a party; (2) any
material adverse change, either in any case or in the aggregate, in the assets,
liabilities, business, condition (financial or otherwise), operations, property
or prospects of any such Person on a consolidated basis; (3) any Event of
Default or any Default, together with a detailed statement by an appropri ate
officer or other responsible party acceptable to the Bank one behalf of the
Borrower of the steps being taken to cure the effect of such Event of Default
or Default; (4) the occurrence of a default or event of default by any of the
Obligors, or any Servicer under any agreement or series of related agreements
to which it is a party where such default could result in monetary damages in
excess of $100,000, and (5) any
40
42
change in the accuracy of the representations and warranties in any material
respects of any Person, other than the Bank, in this Agreement, any other Loan
Document or any other agreement related hereto. The Borrower will notify the
Bank in writing within thirty (30) days prior to the date that any of the
Obligors, the Investment Adviser, or any Servicer changes its name or the
location of its chief executive office or principal place of business or the
place where it keeps its books and records. Any notice of a name change
delivered to the Bank shall be accompanied by such certificates of governmental
authorities as the Bank may require substantiating such name change.
6.18. Custodial Agreement. The Bank requires that the promissory
notes and security agreements relating to the Acquired Loans be kept by a
custodian acceptable to it. The Borrower has requested and the Bank has agreed
that the Bank will serve as custodian. The Bank and the Borrower will enter
into a Custodial Agreement, in form and substance satisfactory to each of them,
setting forth the rights and duties of the parties with respect to the Acquired
Loans and the Bank's compensation for serving as custodian. Without limiting
the generality of the foregoing, nothing herein shall be deemed to make the
Bank a Servicer with respect to any Acquired Loan.
6.19. Budgets. The Borrower will deliver to the Bank, within ninety
(90) days of the acquisition of any new Asset Portfolio purchased after the
date of this Agreement, as part of an Asset Portfolio Report, a budget for each
Asset comprising such Asset Portfolio, reflecting the Projected Gross
Collections for each such Asset and an operating reserve for each Asset
Portfolio. The Bank shall have the right to review and approve each such
budget.
6.20. Collection Efforts. The Borrower will exercise, and will
cause any Servicer to exercise, collection efforts with respect to the Acquired
Loans as is consistent with sound business practice. The Borrower will at all
times comply with Standard Industry Practices and the Borrower's past
procedures related to due diligence, collateral control, collection and
reporting procedures with respect to all Acquired Loans. The Borrower's books,
records and files related to the Acquired Loans (including, without limitation,
the Due Diligence Reports) shall at all times be maintained at the Borrower's
offices set forth elsewhere in this Agreement. The Borrower shall maintain all
files related to the Acquired Loans in a reasonably prudent manner.
6.21. Grant of Specific Liens. The Borrower will, at any time
Underlying Real Estate is foreclosed upon by the Borrower, at the request of
the Bank, grant to the Bank a Lien upon such Underlying Real Estate, and if the
foreclosed Underlying Real Estate of the note secured by the Underlying Real
Estate being foreclosed upon has been conveyed to an REO Affiliate, the
Borrower will obtain an REO Note following the assignment to the REO Affiliate,
and will ensure the REO Affiliate grants (a) to the Bank, if requested by the
Bank, a Lien securing its Guaranty obligations, subject only to Permitted Prior
Liens and the Lien in favor of the Borrower securing the REO Note, and (b) to
the Borrower a Lien securing the REO Note, subject only to Permitted Prior
Liens, in such Underlying Real Estate, following the foreclosure. The Borrower
shall cause all such documentation required to effectuate the provisions of
this Section to be recorded in all appropriate jurisdictions at the Borrower's
sole cost and expense.
41
43
6.22. Lien on REO Properties. Except as disclosed on Schedule 6.22
attached hereto, each REO Property shall be owned by an REO Affiliate, it being
understood that except as noted on Schedule 6.22 the Borrower shall not take
title to any REO Property. Immediately upon the acquisition of title to an REO
Property by an REO Affiliate, the Borrower (a) will cause such REO Affiliate to
execute and deliver to the Borrower an REO Note (which shall be endorsed by the
Borrower to the Bank, and delivered to the Bank), security instruments granting
to the Bank, if requested by the Bank, a Lien on such REO Property, subject
only to Permitted Prior Liens and the Lien in favor of the Borrower securing
the REO Note, and REO Security Documents granting to the Borrower a Lien on
such REO Property, subject only to Permitted Prior Liens, and (b) will execute
and deliver to the Bank a Collateral Assignment which shall be in form and
substance satisfactory to the Bank, pursuant to which the Borrower shall
collaterally assign to the Bank, as security for the Loans, all of the
Borrower's rights under such REO Note and REO Security Documents. In order to
facilitate foreclosure of the Underlying Real Estate serving as Acquired Loan,
the Borrower may transfer such Acquired Loan to an REO Affiliate prior to the
time that the REO Affiliate takes title to the REO Property; provided, however,
that as a condition to such transfer, the Borrower must cause the REO Affiliate
to (a) execute and deliver to the Borrower an REO Note (which shall be endorsed
by the Borrower to the Bank, and delivered to the Bank) in an amount no greater
than the Fair Market Value of the Acquired Loan transferred to the REO
Affiliate, with such payment terms as are acceptable to the Bank in its
discretion, and (b) execute such security instruments as the Bank may require
in connection therewith. The Borrower (at its own expense) shall record such
security instruments, REO Security Documents and any related assignment(s) of
lien with such filing offices as may be required by the Bank to perfect and
record the Borrower's and the Bank's respective interests in such REO Property.
At the Bank's request, prior to the taking of title to any REO Property by an
REO Affiliate, the Borrower shall provide the Bank with an Environmental Site
Assessment with respect to such REO Property or an update of the Environmental
Site Assessment which was delivered to the Bank in connection with the closing
of the Loan (if any), and the Bank shall have ten (10) Business Days to
disapprove or object to such Environmental Site Assessment (in which event the
REO Note shall be excluded from the Borrowing Base). In addition, for any REO
Property, the Borrower shall take all such actions as are requested by the Bank
to ensure that the Collateral and the Bank's interest therein complies with all
legal requirements applicable to the Bank, including without limitation the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, as
amended.
SECTION 7. NEGATIVE COVENANTS.
From the date hereof until the principal of and interest on the Note
and other Indebtedness is paid in full, the Borrower covenants and agrees that
it will not and will not permit any other Obligor, or any Servicer to:
7.1. Stock Issuance. Except for the warrants listed on Schedule
7.1, issue any additional beneficial ownership interests, or any warrant, right
or option relating thereto or any security convertible into any of the
foregoing; provided, that as long as either Xxxxxx Xxxxxxxx or Xxx Xxxxxxxxxxx
is continuing to serve in a position of management with the Borrower in
substantially the
42
44
capacity and with substantially the same powers of the date hereof, the
Borrower shall be entitled to issue additional beneficial ownership interests
for cash.
7.2. Stock Acquisition. Purchase, redeem, retire or otherwise
acquire any of the shares of its capital stock, or make any commitment to do so
without the written consent of the Bank.
7.3. Liens and Encumbrances. Create, incur, assume or suffer to
exist any mortgage, pledge, encumbrance, security interest, lien or charge of
any kind (including any charge upon property purchased or acquired under a
conditional sales or other title-retaining agreement or lease required to be
capitalized under GAAP) upon any of its property or assets, whether now owned
or hereafter acquired, other than Permitted Liens.
7.4. Indebtedness. Unless consented to by the Bank in writing,
incur, create, assume or permit to exist any Debt or liability on account of
deposits or advances or any Debt or liability for borrowed money, or any other
Debt or liability evidenced by notes, bonds, debentures or similar obligations,
or any other indebtedness whatsoever, except for (a) the Indebtedness; (b) the
indebtedness of the REO Affiliates to the Borrower under the REO Notes; (c)
indebtedness secured by any Permitted Liens (provided that the stated principal
balance thereof shall not be increased); (d) the Subordinated Debt (provided
that the stated principal balance thereof shall not be increased); and (e)
trade indebtedness, accrued dividends payable and other normal and customary
accruals incurred and paid in the ordinary course of business.
7.5. Extension of Credit. Make loans, advances or extensions of
credit to any Person except for the acquisition of Acquired Loans and the
renewal, extension, rearrangement and reorganization of the Acquired Loans
pursuant to Standard Industry Practices and normal, customary and reasonable
travel expenses and other similar prepaid expenses incurred in the ordinary
course of business.
7.6. Guarantee Obligations. Guarantee or otherwise, directly or
indirectly, in any way be or become responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of any other Person,
agreement for the furnishing of funds to any other person through the
furnishing of goods, supplies or services, by way of stock purchase, capital
contribution, advance or loan, for the purpose of paying or discharging (or
causing the payment or discharge of) the indebtedness of any other person, or
otherwise, except for the endorsement of negotiable instruments by the Borrower
in the ordinary course of business for deposit or collection.
7.7. Subordinate Indebtedness. Subordinate any indebtedness due to
it from a Person to indebtedness of other creditors of such Person.
7.8. Property Transfer, Merger and Formation of Subsidiaries.
Sell, lease, transfer or otherwise dispose of all or, except as to the sale of
Acquired Loans and REO Property in the ordinary course of business and in
accordance with the terms of this Agreement, any material part of its
properties and assets (whether in one transaction or in a series of
transactions), change its name,
43
45
consolidate with or merge into any other corporation, permit another
corporation to merge into it, acquire all or substantially all the properties
or assets of any other Person, enter into any reorganization or
recapitalization or reclassify its capital stock, enter into any sale-leaseback
transaction, or form, acquire or permit to exist any Subsidiary without the
express written consent of the Bank given in its sole and absolute discretion.
Nothing contained in this Agreement or any of the other Loan Documents
(including, without limitation, the references to Subsidiaries or consolidated
and consolidating financial statements) shall be deemed or construed as a
consent to the Borrower's creation or acquisition of any Subsidiary. Should
the Bank in its sole and absolute discretion consent to the creation or
acquisition of any Subsidiary, then a Subsidiary wholly owned by the Borrower
may be merged into, or consolidated with, the Borrower or another Subsidiary
wholly owned by the Borrower, and such Subsidiary may sell, lease or transfer
all or a substantial part of its assets to the Borrower or another Subsidiary
wholly owned by the Borrower, and the Borrower or such Subsidiary may acquire
all or substantially all of the properties and assets of the Subsidiary so to
be merged into, or consolidated with, it or so to be sold, leased or
transferred to it.
7.9. Acquire Securities. Except for the purchase of Acquired Loans
in accordance with the terms of this Agreement, purchase or hold beneficially
any stock or other securities of, or make any investment or acquire any
interest whatsoever in, any other Person except for certificates of deposit
with maturities of one year or less of United States commercial banks with
capital, surplus and undivided profits in excess of $100,000,000, U.S.
Government or agency issued or guaranteed securities backed by the full faith
and credit of the United States, and other securities acceptable to the Bank.
7.10. Acquire Fixed Assets. Acquire or expend for, or commit itself
to acquire or expend for, fixed assets by lease, purchase or otherwise in an
aggregate amount that exceeds $50,000.00 in any fiscal year, except for the
acquisition of REO Property.
7.11. Pension Plans. Allow any fact, condition or event to occur or
exist with respect to an employee pension or profit sharing plan which might
constitute grounds for termination of any such plan or for the appointment by a
United States District Court of a trustee to administer any such plan, or
permit any such plan to be the subject of termination proceedings (whether
voluntary or involuntary) from which termination proceedings there may result a
liability of any of the Obligors or any Servicer to the PBGC which in the
opinion of the Bank, will have a materially adverse effect upon the operations,
business, property, assets, financial condition or credit of such Person.
7.12. Misrepresentation. Furnish (or permit any other Obligor, the
Investment Adviser or any Servicer to furnish) the Bank with any certificate or
other document that contains any untrue statement of a material fact or omits
to state a material fact necessary to make such certificate or document not
misleading in light of the circumstances under which it was furnished.
7.13. Margin Stock. Apply any of the proceeds of the Note to the
purchase of carrying of any "MARGIN STOCK" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, or any regulations,
interpretations or rulings thereunder.
44
46
7.14. Compliance with Environmental Laws. Use (or permit any tenant
to use) any of its respective properties or assets for the handling,
processing, storage, transportation, or disposal of any Hazardous Substance
except in all respects in compliance with Environmental Laws, generate any
Hazardous Substance except in all respects in compliance with Environmental
Laws, conduct any activity which is likely to cause a release of any Hazardous
Substance, or otherwise conduct any activity or use any of its respective
properties or assets in any manner that is likely to violate any Environmental
Law.
7.15. Dividends. Except for dividends paid by the Borrower which it
is allowed to make under applicable law and still retain its status as a
"Business Development Company," declare or pay any dividend (other than
dividends payable solely in shares of its capital stock) (or permit any other
Obligor to do so) on, or make any other distribution with respect to (whether
by reduction of capital or otherwise), any shares of its capital stock except
dividends from a Subsidiary to the Borrower.
7.16. Disposition of Acquired Loans or REO Properties. Dispose of,
or permit any Servicer to dispose of, an Acquired Loan or otherwise settle the
amount owed on any Acquired Loan, or permit any REO Affiliate to dispose of any
REO Property, except in accordance with Standard Industry Practices.
7.17. Certain Payments. Make any payment under the Servicing
Agreement or any agreement with the Investment Adviser at any time any Event of
Default exists hereunder or if such payment would cause an Event of Default
hereunder.
7.18. Subsidiaries and REO Affiliates. Form or create any
Subsidiaries, other than the REO Affiliate, without the prior written consent
of the Bank.
7.19. Modification of Key Agreements. Without the Bank's prior
written approval, modify, amend, or increase any payments under any Servicing
Agreement or any agreement between the Borrower and the Investment Adviser.
SECTION 8. PROVISIONS REGARDING ENVIRONMENTAL LAWS.
8.1 Covenants Regarding Environmental Compliance. The Borrower
hereby covenants and agrees with the Bank as follows:
8.1.1. Hazardous Substance Use, Manufacture. The Borrower
shall not use, generate, manufacture, produce, store, release, discharge, or
dispose of, or permit to be used, generated, manufactured, produced, stored,
released, discharged or disposed of, on, under, or about any of the Mortgaged
Property or transport to or from, or permit to be transported to or from, any
of the Mortgaged Property any Hazardous Substance, or allow any other person or
entity to do so on any of the Mortgaged Property, except in strict compliance
with all applicable laws (including all applicable Environmental Laws), except
in accordance with Standard Industry Practices as disclosed to the Bank in
writing.
45
47
8.1.2. Compliance with Environmental Laws. The Borrower
shall keep and maintain, and cause to be kept or maintained, the Mortgaged
Property in compliance with, and shall not cause or permit the Mortgaged
Property to be in violation of, any applicable Environmental Law, except in
accordance with Standard Industry Practices as disclosed to the Bank in
writing.
8.1.3. Notices. The Borrower shall give prompt written
notice to the Bank of:
(a) any proceeding or written inquiry by any
governmental authority with respect to the presence of any Hazardous Substance
on any of the Mortgaged Property or the migration thereof from or to other
property;
(b) all written claims made or threatened by any
third party against any Obligor or any of the Mortgaged Property relating to
any loss or injury resulting from any Hazardous Substance;
(c) the Borrower's discovery of any occurrence of
condition on any real property adjoining or in the vicinity of any of the
Mortgaged Property that would reasonably be expected to cause any of the
Mortgaged Property or any part thereof to be subject to any material
restrictions on the ownership, occupancy, transferability or use of any of the
Mortgaged Property under any applicable Environmental Law, or to be otherwise
subject to any material restrictions on the ownership, occupancy,
transferability or use of any of the Mortgaged Property under any applicable
Environmental Law;
(d) any written notice of violation or complaint
from a governmental authority and relating to an applicable Environmental Law;
(e) any written notices or report any Obligor,
the Investment Adviser or any Servicer provides to a governmental authority
relating to instances of non-compliance with an applicable Environmental Law;
and
(f) any written application any Obligor, the
Investment Adviser or any Servicer provides to a governmental authority to
obtain or amend a permit or approval relating to the generation, storage,
treatment, or disposal of a Hazardous Substance or air contaminant.
8.1.4. Delivery of Premises to the Bank. In the event any
Mortgage is foreclosed or the applicable Obligor tenders a deed in lieu of
foreclosure with respect to any Mortgaged Property, the Mortgaged Property
shall be delivered to the Bank free of any and all Hazardous Substances (except
to the extent previously disclosed to the Bank in writing) so that the
condition of such Mortgaged Property shall not be a violation of any
Environmental Laws (except to the extent previously disclosed to the Bank in
writing, but in any event in accordance with Standard Industry Practices).
46
48
8.1.5. Indemnity. The Borrower shall defend, indemnify and
hold harmless the Bank, its employees, agents, officers, directors, successors
and assigns from and against any and all claims, demands, penalties, fines,
liabilities, settlements, damages, costs or expenses of whatever kind or
nature, including, without limitation, attorney's and consultant's fees (said
attorneys and consultants to be selected by the Bank), investigation and
laboratory fees, environmental studies required by the Bank (whether prior to
foreclosure or otherwise), court costs and litigation expenses, any of which
arise out of or are related to: (a) the use, generation, manufacture,
production, storage, presence, disposal, release or threatened release of any
Hazardous Substance on, from or affecting any of the Mortgaged Property or the
soil, water, vegetation, buildings, personal property, persons or animals
thereon, (b) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to such Hazardous Substance, (c)
any lawsuit brought or threatened, settlement reached, or governmental order
relating to such Hazardous Substances, (d) the cost of removal of all such
Hazardous Substances from all or any portions of any of the Mortgaged Property,
(e) taking necessary precautions to protect against the release of Hazardous
Substances on or affecting any of the Mortgaged Property, (f) complying with
all applicable Environmental Laws, (g) any violation of Environmental Laws or
requirements of the Bank which are based upon or in any way related to such
Hazardous Substances, and/or (h) the costs of any repair, cleanup or
remediation of any of the Mortgaged Property and the preparation and
implementation of any closure, remedial or other plans required to be
undertaken by applicable Environmental Laws. Upon the Bank's request, the
Borrower shall execute a separate indemnity covering the foregoing matters.
8.1.6. Remedial Work. In the event that any investigation,
site monitoring, containment, cleanup, removal, restoration or other remedial
work of any kind or nature (the "Remedial Work") is required to be undertaken
under any applicable local, state or federal law or regulation, any judicial
order, or by any governmental entity because of, or in connection with, the
current or reasonably threatened future presence or release of a Hazardous
Substance in or into the air, soil, ground water, surface water or soil vapor
at, on, about, under of with any of the Mortgaged Property (or any portion
thereof), the Borrower shall promptly after written demand for performance
thereof by appropriate governmental authorities or the Bank (or such shorter
period of time as may be required under any applicable law, regulation, order
or agreement), commence and thereafter diligently prosecute to completion, all
such Remedial Work. All Remedial Work shall be performed by contractors
selected by the Borrower and approved in advance by the Bank, and under the
supervision of a consulting engineering selected by the Borrower and approved
by the Bank (which approval the Bank shall not unreasonably withhold). All
costs and expenses of such Remedial Work shall be paid by the Borrower
including, but not limited to, the Bank's reasonable attorneys' fees and
reasonable costs incurred in connection with its monitoring or review of such
Remedial Work.
8.1.7. Certain Rights of the Bank. Upon the Bank's receipt
of notice from any source concerning the existence of any Hazardous Substance
or the noncompliance by the Borrower or any of the Mortgaged Property with any
Environmental Law, which matter, if true, could result in an order, suit or
other action against the Borrower and/or any of the Mortgaged Property and
which could, in the Bank's sole opinion, jeopardize the Borrower's ability to
repay the Indebtedness or the Bank's collateral security, the Bank shall have
the right (but not the obligation) to enter any such
47
49
Mortgaged Property or to take any other actions that the Bank deems appropriate
to clean up, remove, resolve or minimize the adverse impact of any such matter.
The foregoing sentence shall not be deemed to limit any other rights the Bank
may have under this Agreement, any other document, or at law or in equity. All
reasonable costs and expenses incurred by the Bank in the exercise of any such
rights shall become part of the Indebtedness, shall be secured by the
collateral contemplated hereunder, and shall be payable by the Borrower upon
demand.
8.2 Representations and Warranties Relating to Environmental
Matters. The Borrower represents and warrants to the Bank that, except as
disclosed on Schedule 8.2 hereto and in any Asset Portfolio Report hereafter
provided to the Bank in connection with Acquired Loans acquired after the date
of this Agreement, to the best of its knowledge:
8.2.1. No Existing Violation. None of the Mortgaged
Property, any Obligor, the Investment Adviser or any Servicer is in violation
of or subject to any existing, pending or, to the knowledge of the Borrower,
threatened investigation by any governmental authority under any Environmental
Law.
8.2.2. Previous Uses. The Borrower or its environmental
advisors has made diligent inquiry into previous uses and ownership of the
Mortgaged Property, and based upon such inquiry has no knowledge of any
Hazardous Substance disposed of or released on or to the Mortgaged Property.
8.2.3. Underground Storage. Except as disclosed to the Bank
in writing, no underground storage tanks, whether or not containing any
Hazardous Substances, are located on or under the Mortgaged Property.
8.3. Environmental Risk Assessment. At any time (a) that the Bank
reasonably believes that Hazardous Substances have been disposed of on, or have
been released to or from any of the Mortgaged Property in violation of
Environmental Laws, or (b) after an Event of Default arising under Section 9,
within 30 days after a written request therefor by the Bank, the Borrower shall
deliver to the Bank a current Environmental Site Assessment prepared at the
Borrower's cost and expense by an environmental consultant acceptable to the
Bank, detailing the results of an environmental investigation concerning the
Mortgaged Property, including results of any soil and ground water samples that
may have been taken in connection with such investigation.
8.4. Survival of Obligations. The provisions of this Section 8
shall be in addition to any and all other obligations and liabilities the
Borrower may have to the Bank at common law or pursuant to any other agreement
and, notwithstanding anything in Section 10.21 hereof to the contrary, shall
survive (a) the repayment of the Note and all other Indebtedness, (b) the
satisfaction of all of the Borrower's other obligations hereunder and under the
other Loan Documents, (c) the discharge of any Mortgage hereafter granted to
the Bank, and (d) the foreclosure or acceptance of a deed in lieu of
foreclosure of any Mortgage hereafter granted to the Bank.
48
50
SECTION 9. EVENTS OF DEFAULT-ENFORCEMENT-APPLICATION OF PROCEEDS.
9.1. Event of Default. The occurrence of any of the following
events shall constitute an Event of Default (herein so called) hereunder:
9.1.1. Failure to Pay Monies Due. If any principal of or
accrued interest on the Note, any fees under Section 2.6. of this Agreement or
any other Indebtedness shall not be paid when due, by acceleration or
otherwise, unless such failure to pay is cured within five (5) calendar days of
such Default.
9.1.2. Misrepresentation. If any warranty or representation
of any of the Obligors or any Servicer in connection with or contained in this
Agreement or any other document related hereto, or if any financial data or
other information now or hereafter furnished to the Bank by or on behalf of any
Obligor or any Servicer shall prove to be false or misleading in any material
respect.
9.1.3. Noncompliance with Bank Agreements. If any Obligor
or the Servicer shall fail to perform any of its covenants under, or shall fail
to comply with any of the provisions of, this Agreement or any other agreement
with the Bank to which it may be a party, unless such Default is fully cured
and satisfied within fifteen (15) calendar days of the date the Bank gives
notice to the Borrower of such Default.
9.1.4. Other Defaults. If any Obligor shall default in the
due payment of any of its indebtedness (other than the Indebtedness) or in the
observance or performance of any term, covenant or condition in any agreement
or instrument evidencing, securing or relating to such indebtedness and such
default results in the acceleration of the Debt, irrespective of whether any
such default shall be forgiven or waived by the holder thereof, unless such
payment is being contested in good faith and adequate reserves for the payment
thereof have been established.
9.1.5. Judgments. If there shall be rendered against any
Obligor or any Servicer one or more judgments or decrees involving an aggregate
liability of $50,000 or more, which has or have become nonappealable and shall
remain undischarged, unsatisfied by insurance and unstayed for more than 20
days, whether or not consecutive; or of a writ of attachment or garnishment
against the property of any such Person shall be issued and levied in an action
claiming $100,000 or more and not released or appealed and bonded in a manner
satisfactory to the Bank.
9.1.6. Business Suspension, Bankruptcy, Etc. If any Obligor
or any Servicer shall voluntarily suspend transaction of its business; or if
any such Person shall not pay its debts, generally, as they mature or shall
make a general assignment for the benefit of creditors; or proceedings in
bankruptcy, or for reorganization or liquidation of any such Person under the
Bankruptcy Code or under any other state or federal law for the relief of
debtors shall be commenced by any such Person or shall be commenced against any
such person and shall not be discharged within sixty (60) days of commencement;
or a receiver, trustee or custodian shall be appointed for any such Person or
for any substantial portion of its respective properties or assets.
49
51
9.1.7. Change of Management. If both Xxxxxx Xxxxxxxx and
Xxx Xxxxxxxxxxx shall cease to serve in positions of management with the
Borrower in substantially the same capacities and with substantially the same
powers as they currently serve or have.
9.1.8. Inadequate Funding or Termination of Employee/Benefit
Plan(s). If any Obligor or any Servicer shall fail to meet its minimum funding
requirements under ERISA with respect to any employee benefit plan established
or maintained by such Person, or if any such plan shall be the subject of
termination proceedings (whether voluntary or involuntary) and there shall
result from such termination proceedings a liability of such Person to the PBGC
which in the opinion of the Bank will have a materially adverse effect upon the
operations, business, property, assets, financial condition or credit of such
Person.
9.1.9. Occurrence of Certain Reportable Events. If there
shall occur, with respect to any pension plan maintained by any Obligor or any
Servicer any reportable event (within the meaning of Section 4043(b) of ERISA)
which the Bank shall determine in good faith constitutes a ground for the
termination of any such plan, and if such event continues for thirty (30) days
after the Bank gives written notice to the Borrower, provided that termination
of such plan or appointment of such trustee would, in the opinion of the Bank,
have a materially adverse effect upon the operations, business, property,
assets, financial condition or credit of any such Person.
9.1.10. Loss or Damage. If any loss, theft, substantial
damage or destruction to or of any material portion of the Collateral
comprising a material portion of the Borrower's assets occurs which is not
fully covered by insurance.
9.1.11. Adverse Change. If any material and adverse
change in the business operations and condition, financial or otherwise, of any
Obligor or any Servicer occurs.
9.1.12. PBGC. Except as expressly permitted herein, if a
notice of lien, levy or assessment is filed of record with respect to all or
any of the assets of any Obligor or any Servicer by the United States of
America, or any department, agency, or instrumentality thereof, or by any
state, county, municipal or other governmental agency, including, without
limitation, the PBGC, or if any taxes or debts owing at any time or times
hereafter to any one of them becomes a lien or encumbrance upon the Collateral
or any other assets of any such Person.
9.2. Remedies. Upon the occurrence of any Event of Default, and at
any time thereafter, the obligation, if any, to make a Loan shall cease and
terminate, and the Bank shall have the right, at its option, to declare the
unpaid balance of the Indebtedness to be immediately due and payable without
further notice (including notice of intent to accelerate and notice of
acceleration), protest or demand or presentment for payment, all of which are
hereby expressly waived by the Borrower, and to enforce or avail itself of any
and all powers, rights and remedies available at law or provided in this
Agreement, the Note, the other Loan Documents or any other document executed
pursuant hereto or in connection herewith. Notwithstanding any provision in
this Section to the contrary, upon the occurrence of any Event of Default, the
Bank shall have the right, immediately and without notice,
50
52
to take possession of and exercise possessory rights with regard to any
Collateral. Every power, right or remedy of the Bank set forth in this
Agreement, the Note and the other Loan Documents or any other document executed
pursuant hereto or in connection herewith, or afforded by law may be exercised
from time to time, and as often as may be deemed expedient by the Bank.
9.3. Application of Proceeds. The proceeds of any sale or other
disposition of the Collateral authorized by this Agreement shall be applied by
the Bank, first upon all expenses authorized by the Uniform Commercial Code and
all reasonable attorneys' fees and legal expenses incurred by the Bank; the
balance of the proceeds of such sale or other disposition shall be applied to
the payment of the Indebtedness, first to interest, then to principal; and the
surplus, if any, shall be paid over to the Borrower or to such other person or
persons as may be entitled thereto under applicable law. The Borrower shall
remain jointly and severally liable for any deficiency, which the Borrower
shall pay to the Bank immediately upon demand.
9.4. Cumulative Remedies. The remedies provided for herein are
cumulative to the remedies for collection of the Indebtedness as provided by
law, in equity or by any mortgage, security agreement or other document
contemplated hereby. Nothing herein contained is intended, nor should it be
construed, to preclude the Bank from pursuing any other remedy for the recovery
of any other sum to which the Bank may be or become entitled for the breach of
this Agreement by the Borrower.
SECTION 10. MISCELLANEOUS.
10.1. Independent Rights. No single or partial exercise of any
right, power or privilege hereunder, or any delay in the exercise thereof,
shall preclude other or further exercise of the rights of the parties to this
Agreement.
10.2. Covenant Independence. Each covenant in this Agreement shall
be deemed to be independent of any other covenant, and an exception in one
covenant shall not create an exception in another covenant.
10.3. Waivers and Amendments. No forbearance on the part of the
Bank in enforcing any of its rights under this Agreement, nor any renewal,
extension or rearrangement of any payment or covenant to be made or performed
by the Borrower hereunder or by any Obligor under any of the other Loan
Documents, shall constitute a waiver of any of the terms of this Agreement or
of any such right. No Default or Event of Default shall be waived by the Bank
except in writing signed and delivered by an officer of the Bank, and no waiver
of any Default or Event of Default shall operate as a waiver of any other
Default or Event of Default or of the same Default or Event of Default on a
future occasion. No other amendment, modification or waiver of, or consent
with respect to, any provision of this Agreement or the Note or other documents
contemplated hereby shall be effective unless the same shall be in writing and
signed and delivered by an officer of the Bank.
51
53
10.4. GOVERNING LAW. THIS AGREEMENT, AND EACH AND EVERY TERM AND
PROVISION HEREOF, SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE
STATE OF TEXAS.
10.5. Survival of Warranties, Etc. All of the covenants,
agreements, representations and warranties made by any Obligor in connection
with this Agreement and any document contemplated hereby shall survive the
borrowing and the delivery of the Note hereunder and shall be deemed to have
been relied upon by the Bank, notwithstanding any investigation heretofore or
hereafter made by the Bank. All statements contained in any certificate or
other document delivered to the Bank at any time by or on behalf of any
Obligor, the Investment Adviser or any Servicer pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower in connection with this
Agreement.
10.6. Binding Effect. This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto and their respective successors
and assigns; provided, however, the Borrower may not assign or transfer its
rights or obligations hereunder without the prior written consent of the Bank.
10.7. Maintenance of Records. The Borrower will keep all of its
records concerning the Collateral at its principal place of business. The
Borrower will give the Bank prompt written notice of any change in its
principal place of business, or in the location of said records.
10.8. Notices. All notices and communications provided for herein
or in any document contemplated hereby or required by law to be given shall be
in writing (unless expressly provided to the contrary) and, if personally
delivered, effective when delivered at the address below or, in the case of
mailing, effective two days after sending by first class mail, postage prepaid,
addressed as follows, or to such other address as a party shall have designated
to the other in writing in accordance with this section:
If to Borrower: Plymouth Commercial Mortgage Fund
c/o Emerald Advisers, Inc.
00000 Xxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
If to Bank: Comerica Bank-Texas
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
P. O. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxx X. Xxx
with a copy to: Comerica Bank-Texas
52
54
000 X. 0xx Xxxxxx
Xxxxxx, Xxxxx 00000
P. O. Xxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
The giving of at least five (5) days notice before the Bank shall take any
action described in any notice shall conclusively be deemed reasonable for all
purposes; provided, that this shall not be deemed to require the Bank to give
five (5) days notice or any notice if not specifically required in this
Agreement.
10.9. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures were upon the same
instrument.
10.10. Headings. Article and section headings in this Agreement
are included for the convenience of reference only and shall not constitute a
part of this Agreement for any purpose.
10.11. Capital Adequacy. If as a result of any regulatory change
directly or indirectly affecting the Bank or any of the Bank's affiliates there
shall be imposed, modified or deemed applicable any tax, reserve, special
deposit, minimum capital, capital ratio, or similar requirement against or with
respect to or measured by reference to loans made or to be made hereunder or
participations therein, and the result shall be to increase the cost to the
Bank or any of the Bank's affiliates of making or maintaining any loan
hereunder or to any other party maintaining any participation therein, or
reduce any amount receivable in respect of any such loan (which increase in
cost, or reduction in amount receivable, shall be the result of the Bank's or
the Bank's affiliated company's reasonable allocation among all affected
customers of the aggregate of such increases or reductions resulting from such
event), then, within ten (10) days after receipt by the Borrower of a
certificate from the Bank containing the information described in this Section
below which shall be delivered to the Borrower, the Borrower agrees from time
to time to pay the Bank such additional amounts as shall be sufficient to
compensate the Bank or any of the Bank's affiliates (for as long as such
increased costs or reductions in amount receivable exist) for such increased
costs or reductions in amount receivable which the Bank determines in the
Bank's sole discretion are material. The certificate requesting compensation
under this Section shall identify the regulatory change which has occurred, the
requirements which have been imposed, modified or deemed applicable, the amount
of such additional cost or reduction in amount receivable and the way in which
such amount has been calculated.
10.12. Costs and Attorneys' Fees. If the Bank retains an attorney
in connection with any default or to collect, enforce or defend this Agreement,
the Note or any of the Loan Documents in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if the Borrower sues the
Bank in connection with this Agreement, the Note or any of the Loan Documents
and does not prevail, then the Borrower agree to pay to the Bank, in addition
to principal and interest, all reasonable costs and expenses incurred by the
Bank in trying to collect this note or in any such suit
53
55
or proceeding, including reasonable attorneys' fees. To the extent not
prohibited by applicable law, the Borrower will pay all costs and expenses and
reimburse the Bank for any and all expenditures of every character incurred or
expended from time to time, regardless of whether or not a default has
occurred, in connection with (a) the preparation, negotiation, documentation,
closing, renewal, revision, modification, increase, review or restructuring of
this Agreement or any of the other Loan Documents including, without
limitation, legal, accounting, auditing, architectural engineering and
inspection services and disbursements, or in connection with collecting or
attempting to enforce or collect this Agreement, the Note or any of the other
Loan Documents, (b) the Bank's evaluating, monitoring, administrating and
protecting any Collateral now or hereafter securing payment of any part of the
Indebtedness and (c) the Bank's creating, perfecting and realizing upon the
Bank's security interests in and liens on any Collateral, and all costs and
expenses relating to the Bank's exercising any of its rights and remedies
hereunder or under any other Loan Document or at law, including, without
limitation, all appraisal fees, consulting fees, filing fees, taxes, brokerage
fees and commissions, title review and abstract fees, UCC search fees, other
fees and expenses incident to title searches, reports and security interests,
escrow fees, attorneys' fees, legal expenses, court costs, other fees and
expenses incurred in connection with any complete or partial liquidation of any
Collateral and all fees and expenses for any professional services relating to
the Collateral or any operations conducted in connection with it; provided,
that no right or option granted by the Borrower to the Bank or otherwise
arising pursuant to any provision of this or any other instrument shall be
deemed to impose or admit a duty on the Bank to supervise, monitor or control
any aspect of the character or condition of the Collateral or any operations
conducted in connection with it for the benefit of the Borrower or any other
Person other than the Bank. The Borrower agrees to indemnify, defend and hold
the Bank, its shareholders, directors, officers, agents and employees
(collectively "INDEMNIFIED PARTIES") harmless from and against any and all
loss, liability, obligation, damage, penalty, judgment, claim, deficiency,
expense, action, suit, cost and disbursement of any kind or nature whatsoever
(including interest, penalties, attorneys' fees and amounts paid in
settlement), REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE
OF ANY OF THE INDEMNIFIED PARTIES, imposed on, incurred by or asserted against
the Indemnified Parties growing out of or resulting from this note, any Loan
Document or any transaction or event contemplated herein or therein (except
that such indemnity shall not be paid to any Indemnified Party to the extent
that such loss, etc. directly results from the gross negligence or willful
misconduct of that Indemnified Party). Any amount to be paid under this
Paragraph by the Borrower to the Bank shall be a demand obligation owing by
such the Borrower to the Bank and shall bear interest from the date of
expenditure until paid at the Past Due Rate.
10.13. Gender. Throughout this Agreement, the masculine
shall include the feminine and vice versa and the singular shall include the
plural and vice versa, unless the context of this Agreement indicates
otherwise.
10.14. Cross Default; Cross Collateral. The Borrower hereby
agrees that all other agreements between the Borrower and the Bank or any of
its affiliates is hereby amended so that a default under this Agreement is a
default under all other agreements and a default under any one of the other
agreements is a default under this Agreement, and the collateral under this
Agreement
54
56
secures the obligations now or hereafter outstanding under all other agreements
between the Borrower and the Bank or any of its affiliates and the collateral
pledged under any other agreement with the Bank or any of its affiliates
secures the obligations under this Agreement.
10.15. Joint and Several Obligations. The Borrower shall be
jointly and severally liable for the payment and performance of the
Indebtedness without regard to which the Borrower receives the proceeds hereof.
The Borrower hereby acknowledges that it expects to derive economic advantage
from each of the Loans.
10.16 Severability of Provisions. Any provision of this
Agreement, the Note or any other Loan Documents that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, the Note or such other
documents or affecting the validity or enforceability of such provision in any
other jurisdiction.
10.17. Assignment. The Bank shall have the absolute and
unrestricted right to sell, assign, transfer, or grant participation in, all or
any portion of the loans and any collateral, guaranties or other security
relating thereto without the consent of the Borrower; provided, however, no
such action on the part of the Bank shall have the effect of changing any of
the Borrower's obligations hereunder without the written consent of the
Borrower. The Bank shall give the Borrower written notice of any absolute
assignment of any of the loans if the result thereof will be to cause the
Borrower to deal directly with another financial institution which is not the
successor in interest by merger to the Bank.
10.18. Power of Attorney. Without limiting any other rights
and remedies available to the Bank hereunder, the Borrower hereby appoints the
Bank as the Borrower's attorney-in-fact, with full power of substitution, for
the purpose of carrying out the provisions of this Agreement or any Loan
Documents and taking any action and executing in the name of the Borrower,
without recourse to the Borrower, any document or instrument, which the Bank
may deem necessary or advisable to accomplish the purposes hereof and of any
Loan Document (including, without limitation, perfecting or protecting the
liens on and security interests in any Collateral) which appointment is coupled
with an interest and is irrevocable. The Borrower hereby authorizes the Bank
in its discretion at any time and from time to time, regardless of whether any
Default or Event of Default shall have occurred, to exercise such Power of
Attorney, including without limitation (a) completing any Collateral Assignment
which heretofore was, or hereafter at any time may be, executed and delivered
by the Borrower to the Bank so that such assignment describes a mortgage which
is security for any Acquired Loan now or hereafter at any time constituting
Collateral and recording same, and (b) completing any other assignment or
endorsement that was delivered in blank hereunder or pursuant to the terms
hereof.
10.19. Venue. This Agreement and the other Loan Documents
is performable in Dallas County, Texas, which shall be a proper place of venue
for suit on or in respect of this Agreement and the other Loan Documents. The
Borrower irrevocably agrees that any legal proceeding in respect of this
Agreement and the other Loan Documents shall be brought in the district courts
of Dallas
55
57
County, Texas or the United States District Court for the Northern District of
Texas, Dallas Division (collectively, the "Specified Courts"). The Borrower
hereby irrevocably submits to the nonexclusive jurisdiction of the state and
federal courts of the State of Texas. The Borrower hereby irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to any Loan Document brought in any Specified Court, and
hereby further irrevoca xxx waives any claims that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of the Bank to commence legal proceedings
or otherwise proceed against any Obligor in any jurisdiction or to serve
process in any manner permitted by applicable law. The Borrower agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
10.20. Inconsistency with Other Agreements. Except as
provided below, to the extent any terms or provisions contained in this
Agreement shall be inconsistent with any provision in any other document or
instrument executed in connection herewith, this Agreement shall control.
Notwithstanding the foregoing, the Custodial Agreement shall control over this
Agreement to the extent of the matters contained therein.
10.21. Release and Discharge. Upon full payment of the
Indebtedness and performance by the Borrower of all its other obligations
hereunder, except as otherwise expressly provided herein, the parties shall
thereupon automatically each be fully, finally and forever released and
discharged from any claim, liability or obligation in connection with this
Agreement and the other documents contemplated hereby.
10.22. WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK
HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRAIL BY JURY WITH RESPECT TO ANY AND ALL
ACTIONS OR PROCEEDINGS AT ANY TIME IN WHICH THE BORROWER AND THE BANK ARE
PARTIES ARISING OUT OF THIS AGREEMENT. THE BORROWER HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
10.23. POST-CLOSING LETTER. PURSUANT TO LETTER OF EVEN DATE
ATTACHED HERETO, BORROWER IS MAKING CERTAIN ADDITIONAL REPRESENTATIONS AND
AGREEMENTS.
56
58
10.24. ORAL AGREEMENTS INEFFECTIVE. THIS AGREEMENT AND THE
OTHER "LOAN AGREEMENTS" (AS DEFINED IN SECTION 26.02(A)(2) OF THE TEXAS
BUSINESS AND COMMERCE CODE, AS AMENDED) REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES, AND THIS AGREEMENT AND THE OTHER WRITTEN LOAN AGREEMENTS MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first written above.
PLYMOUTH COMMERCIAL MORTGAGE FUND,
a Delaware business trust
By:/s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
----------------------------------
Title: Vice President
----------------------------------
COMERICA BANK-TEXAS, a state banking
association
By:/s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
----------------------------------
Title: Senior Vice President
-----------------------------------
57
