PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
SOLD EXCEPT IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH
ACT OR AN EXEMPTION THEREUNDER.
$23,400,000 New York, New York
October 4, 1996
FOR VALUE RECEIVED, the undersigned, DELTA FUNDING
CORPORATION, a New York corporation (the "Company"), hereby
unconditionally promises to pay to the order of the parties listed on
Schedule A (each, a "Lender") or registered assigns (the "Holder"),
the aggregate principal amount of Twenty-Three Million Dollars
($23,400,000), to be paid in the amounts indicated on Schedule A,
together with interest, compounded as provided below, at a rate of
6.5% per annum on the principal amount hereof from time to time
outstanding as provided below.
1. Payments; Prepayments.
(a) The Company shall pay the entire unpaid
principal amount of this Note on September 30, 1998 (the "Maturity
Date"), unless accelerated as provided herein.
(b) The Company may, at its option, at any time and
from time to time, prepay, in whole or in part, the principal amount
of this Note. Any such prepayment shall be applied to reduce payments
of principal, in order of their maturity.
(c) If any payment or prepayment hereunder becomes
due on a day that is not a business day, such payment or prepayment
shall become due on the next succeeding business day.
2. Principal. This Note is issued by the Company as a
dividend declared in connection with the Company's termination of its
status as a Subchapter S corporation. Of the principal amount of the
Note, $12.4 million represents previously earned and undistributed S
corporation earnings and $11 million represents the estimated taxes
payable at the applicable statutory rate by the Existing Stockholders
on the net estimated earnings of the Company for the period from
January 1, 1996 through September 30, 1996. Unless prepaid prior to
the Maturity Date, principal on this Note shall be payable
semi-annually on the first day of September and March of each year
(each, a "Payment Date"), in four equal installments of Four Million
Six Hundred Eighty Thousand Dollars ($4,680,000), with a final
principal payment of Four Million Six Hundred Eighty Thousand Dollars
($4,680,000) due on the Maturity Date.
3. Interest Rate.
(a) This Note shall bear interest (computed on the
basis of a 360-day year of twelve 30-day months) on the outstanding
principal hereof at the rate of 6.5% per annum compounded annually
(the "Applicable Rate"), payable on each Payment Date of each year and
on repayment of the principal amount of this Note until the principal
amount of this Note together with any accrued interest is fully paid.
Payments hereunder shall be applied first against accrued and unpaid
interest and then against principal hereof. If the Company shall
default in the payment of the principal of or interest on this Note
when due and payable (whether upon a Payment Date, the Maturity Date
or by acceleration hereof), the Company shall on demand, from time to
time, pay interest on such defaulted amount from the time of such
default until such defaulted amount is paid at a per annum rate equal
to two percent over the Applicable Rate. Notwithstanding anything
contained herein to the contrary, if at any time the rate of interest
charged hereunder, together with all other charges provided for herein
which are treated as interest under applicable law, shall exceed the
maximum lawful rate which may be contracted for, charged or received
by Lender in accordance with applicable law (the "Maximum Rate"), the
rate of interest, if any, payable under this Note, together with all
such other charges, shall be limited to the Maximum Rate.
4. Form of Payments. All payments hereunder shall be
made in lawful money of the United States of America at the address
of each Lender set forth on Schedule A hereto, or at such other place
or places as each Lender may designate by notice to the Company.
5. Waivers. The Company hereby waives diligence,
presentment, demand, protest and notice of any kind. The non-
exercise by Lender of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that
or any subsequent instance.
6. Subordination. If requested by the holders of any Bank
Indebtedness (as hereinafter defined), the payment of the principal of
and interest on this Note shall be subordinated in right of payment to
such Bank Indebtedness and each Lender, if requested by the holders of
such Bank Indebtedness, agrees to enter into an appropriate
subordination agreement acceptable to the holders of such Bank
Indebtedness. As used herein, "Bank Indebtedness" shall mean all
indebtedness of the Company and its subsidiaries for money borrowed
(including principal, interest, premium, if any, and fees, if any)
from banks or other financial institutions, whether outstanding on the
date hereof or hereinafter incurred, as the same may be extended,
modified or renewed.
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7. Events of Default. In the case of the happening of any
of the following events (each called an "Event of Default"):
(a) The Company shall default in the payment of the
principal or interest of this Note, as and when due and payable,
whether upon a Payment Date, the Maturity Date or by acceleration
hereof or otherwise;
(b) The Company shall (A) become insolvent or admit
in writing its inability to pay its debts as they mature, (B) apply
for, consent to, or acquiesce in the appointment of a receiver,
trustee, liquidator or similar official for itself or any of its
assets, (C) make a general assignment for the benefit of creditors,
(D) be adjudicated as bankrupt or insolvent, (E) voluntarily commence
a proceeding or file a petition under any law relating to bankruptcy,
insolvency, the relief of debtors or the liquidation or adjustment of
indebtedness or (F) consent to the institution of, or fail to contest
in a timely and appropriate manner, any proceeding or the filing of
any petition described in paragraph (c) below; or
(c) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed under any law relating to
bankruptcy, insolvency, the relief of debtors or the liquidation or
adjustment of indebtedness, against the Company, or the assets of the
Company, and such proceeding or petition shall not be dismissed within
thirty (30) days;
then, and in every such event, and at any time thereafter during the
continuance of such event, the Lenders may, by written notice to the
Company, declare this Note to be (provided, however, that in the case
of an event described in paragraph (b) or (c) above, this Note shall
automatically become) immediately due and payable, whereupon this Note
shall become immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly
waived by the Company, anything contained herein to the contrary
notwithstanding. In addition, upon the occurrence of an Event of
Default, the Lenders may exercise any or all rights, powers and
remedies available to the Lenders at law or in equity or by statute or
otherwise for the protection and enforcement of the rights of Lender.
8. Costs. The Company shall pay to Lenders, on demand,
all costs and expenses incurred to collect any indebtedness
evidenced hereby, including, without limitation, reasonable
attorneys fees, whether suit be brought or not.
9. Severability. In the event any one or more of the
provisions of this Note shall for any reason be held to be
invalid, illegal or unenforceable, in whole or in part or in any
respect, or in the event that any one or more of the provisions
of this Note operate to invalidate this Note, then and in either
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of those events, such provision or provisions only shall be deemed
null and void and shall not affect any other provision of this Note
and the remaining provisions of this Note shall remain operative and
in full force and effect and shall in no way be affected, prejudiced
or disturbed thereby.
10. GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED,
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO THE CHOICE OF LAW PROVISIONS OF NEW YORK LAW).
11. Titles. The titles, captions or headings of the
paragraphs herein are for convenience of reference only and are
not intended to be a part of or to affect the meaning or
interpretation of this Note.
12. Miscellaneous.
(a) If this Note is mutilated, lost, stolen or
destroyed, the Company may issue a new Note of like form and maturity
to the Holder hereof upon presentment and surrender of the mutilated
Note, in the case of mutilation, and upon receipt of evidence of loss,
theft or destruction in all other cases, cash in form satisfactory to
the Company.
(b) In any case where the date of maturity of
interest on or principal of this Note shall not be a business day,
then in each such case such date shall be changed to the next
succeeding business day.
(c) All agreements of the Company in this Note shall
bind its successor.
DELTA FUNDING CORPORATION
By: /s/ Xxxx X. Xxxxxx
________________________
Name: Xxxx X. Xxxxxx
Title: President
(Corporate Seal)
ATTEST:
By: /s/ Xxxxx Xxxx
________________________
Name: Xxxxx Xxxx
Title: Secretary
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SCHEDULE A TO PROMISSORY NOTE
Lender Principal Amount
______ ________________
Xxxxxx X. Xxxxxx $11,730,420.00
Xxxx X. Xxxxxx $ 3,276,000.00
Xxxxxx X. Xxxxxx Grantor
Retained Annuity Trust $ 3,999,060.00
Xxxx X. Xxxxxx Grantor
Retained Annuity Trust $ 4,394,520.00
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