REVOLVING LINE OF CREDIT AND SECURITY AGREEMENT
REVOLVING LINE OF CREDIT AND SECURITY AGREEMENT, entered into as of this
25th day of May 1993, by and between PIONEER COMMERCIAL FUNDING CORPORATION, a
New York corporation (herein referred to as "Borrower"), and UMB Bank and Trust
Company, a New York commercial bank (herein referred to as "Bank").
RECITALS
Borrower desires to borrow, and the Bank desires to lend, under a
secured revolving line of credit not to exceed at any one time outstanding, the
principal amount of One Million Dollars ($1,000,000.00) for the first six (6)
months of the term of the Line and to increase thereafter to Two Million Dollars
($2,000,000.00) for the purpose of funding a mortgage warehouse revolving line
of credit provided there has been no Default or Event of Default as defined
herein; and
Bank is willing to extend credit to Borrower from time to time from the
Effective Date of this Agreement to the Maturity Date in the amount hereinabove
specified upon the representations and warranties and subject to the terms and
provisions hereinafter set forth;
NOW THEREFORE, in consideration of these Recitals and of the mutual
covenants and conditions herein contained, the parties hereto agree as follows:
SECTION I
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIONS. The following terms, as used in this Agreement, shall
have the following meanings, unless the context clearly indicates otherwise:
"Advance(s)" means any amount of money drawn under the Revolving Line of
Credit but shall be limited to an amount equal to two points below the
percentage of the principal mortgage amount that is funded by the Borrower and
shall be used for the purpose of purchasing a Mortgage originated by a
pre-approved mortgage banking company.
"Advance Maturity Date" means, for any Advance, the date which
corresponds to the date for the Mortgage Take-out for such Advance.
"Affiliate" means any person (i) which directly or indirectly controls,
or is controlled by, or is under common control with, the Borrower or a
Subsidiary; (ii) which directly or indirectly beneficially owns or holds five
percent (5%) or more of
any class of voting stock of the Borrower or any Subsidiary; or (iii) five
percent (5%) or more of the voting stock of which is directly or indirectly
beneficially owned or held by the Borrower or the Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Revolving Line of Credit and Security Agreement,
as amended, supplemented, or modified from time to time.
"Business Day" means a day other than a Saturday, Sunday, legal holiday
or day on which Bank is authorized to close in the State of New York.
"Chapter 11 Case" means that certain matter known as In re PIONEER
COMMERCIAL FUNDING CORPORATION a/k/a PCFC of California, Chapter 11 Case Xx. 00
X 00000 (HS) filed in the United States Bankruptcy Court for the Southern
District of New York.
"Collateral" means all property which is subject or is to be subject to
the lien granted by the Security Agreement to be delivered to the Bank by the
Borrower pursuant to this Agreement.
"Commitment" means the Bank's obligation to fund the Line to the
Borrower pursuant to Article II in the amount referred to therein.
"Debt" means all items which, in accordance with GAAP, would be included
in determining total liabilities as shown on the liability side of a balance
sheet as at the date Debt is to be determined and, in any event, shall include
(without duplication) letters of credit and all obligations relating thereto,
any liability secured by any mortgage, pledge, lien or security interest on
property owned or acquired, whether or not such liability shall have been
assumed, and guarantees, endorsements (other than for collection in the ordinary
course of business} and other contingent obligations in respect of the
obligations of others. When Debt is to be determined on a consolidated basis for
two or more entities, obligations of one guaranteed by another shall not be
counted twice.
"Default" means the occurrence of any event specified in Section 7
regardless of whether or not any requirements for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
"Effective Date" means the entry date of an Order confirming the Plan of
Reorganization in the Chapter 11 Case.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same is or may be amended, and the regulations and interpretations thereof.
"Event of Default" means any act or occurrence specified as an Event of
Default in Section 7 hereof provided that any requirement for the giving of
notice, the lapse of time, or both, or any other condition, has been satisfied.
"GAAP" means generally accepted accounting principles and practices in
the United States, including principles of consolidation as consistently applied
by Borrower and certified to by the firm of independent certified public
accountants regularly employed as Borrower's auditors and approved by the Bank.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
otherwise), or preference, priority, or other security agreement or preferential
arrangement, charge or encumbrance of any kind or nature whatsoever (including
without limitation any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"Line" means the Revolving Line of Credit.
"Loan Documents" means this Agreement, the Notes, the financing
statements covering the Collateral, and any and all other documents,
instruments, certificates an agreements executed and/or delivered by Borrower in
connection herewith, or any one, more, or all of the foregoing, as the context
shall require.
"Maturity Date" means fifteen (15) months from the date of confirmation
of the Plan of Reorganization submitted in the Chapter 11 Case.
"Maximum Rate" shall mean the maximum legal rate of interest in the
State of New York or if no such rate then exists then of the highest lawful rate
of interest permitted under such other applicable law of Bank's choice in effect
on the date thereof.
"Mortgage" shall mean any mortgage which is in compliance with all
FNMA/FHLMC requirements and purchased pursuant to the Mortgage Warehouse Line.
"Mortgage Warehouse Line" shall mean the Line extended to the Borrower
by the Bank for the purpose of providing financing to the Borrower for the
acquisition of individual consumer mortgage loans and immediate disposition into
the secondary mortgage market.
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"Note" means any Revolving Credit Note.
"Person" shall mean an individual, partnership, subsidiary, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority, or other entity of whatever nature.
"Plan" means an employee benefit plan maintained for employees of
Borrower and subject to the provisions of ERISA.
"Plan of Reorganization" means that certain first amended and restated
plan of reorganization as such plan may be amended, submitted by the Borrower in
the Chapter 11 Case.
"Prime Rate" means the highest "rime rate" of interest, quoted from time
to time, by The Wall Street Journal as the "base rate on corporate loans at
large U.S. money center commercial banks," provided, however, that in the event
that The Wall Street Journal ceases quoting a "prime rate" of the type
described, "Prime Rate" shall mean the highest per annum rate of interest quoted
as the "Bank Prime Loan" rate for "This week" in Statistical Release H. 15 (519)
published from time to time by the Board of Governors of the Federal Reserve
System. The "Prime Rate" shall change effective on the date of the publication
of any change in the applicable index by which such "Prime Rate" is determined.
"Prohibited Transaction" means any transaction set forth in ERISA or
Section 4975 of the Internal Revenue Code of 1954, as amended from time to time.
"Qualified Investor" means any person or company that has been
preapproved by the Bank to purchase a mortgage from a Bank pre-approved mortgage
banking company.
"Reportable Event" means any of the events set forth in Section 4042 of
ERISA.
"Revolving Credit Note" means the promissory note, dated of even date
herewith, as amended or supplemented from time to time, in a principal amount
equal to the maximum amount of the Revolving Line of Credit, evidencing Advances
to be obtained by Borrower under the Revolving Line of Credit, together with any
renewals or extensions thereof, in whole or in part.
"Revolving Line of Credit" means that line of credit extended to
Borrower pursuant to section 2 hereof.
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"Subsidiary" means any corporation organized under the laws of any state
of the United States or the District of Columbia and conducting all its business
and having all its assets within the United States, all of whose outstanding
stock of all classes (other than director's qualifying shares, if any) is at the
time owned by the Borrower and/or one or more Subsidiaries.
"Take-out" means the sale to a Qualified Investor pre-approved by the
Bank of any Mortgage(s).
"Tangible Net Worth" means the excess of total assets over total debt of
Borrower determined on a consolidated basis, excluding, however, from the
determination of total assets (i) all intangible assets, including, without
limitation, goodwill (whether representing the excess cost over book value of
assets acquired or otherwise), patents, trademarks, trade names, copyrights,
franchises and deferred charges (including, without limitation, unamortized debt
discount and expense, organization costs, research and product development costs
and management contracts, (ii) treasury stock, (iii) cash set apart and held in
a sinking or other analogous fund established for the purpose of redemption or
other retirement of stock, and (iv) to the extent not already deducted from
total assets, reserves for depreciation, depletion, obsolescence and/or
amortization of properties and all other reserves or appropriation of retained
earnings which, in accordance with GAAP, should be established in connection
with the business conducted by Borrower.
"UCC" means the Uniform Commercial Code as in effect in the State of New
York.
1.2 ACCOUNTING TERMS. All accounting terms whether or not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
GAAP.
SECTION 2
THE REVOLVING LINE OF CREDIT
2.1 THE REVOLVING LINE OF CREDIT. Subject to all of the terms and
provisions of this Agreement, Bank agrees to make Advances to the Borrower from
time to time during the period from the Effective Date up to but not exceeding
more than thirty (30) days before the Maturity Date in an aggregate amount not
to exceed at any one time outstanding, the principal amount of One Million
Dollars ($1,000,000.00) for the first six (6) months of the term of the Line and
to increase thereafter to Two Million Dollars ($2,000,000.00) provided there has
been no Default.
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Borrower may borrow, repay and reborrow under the Line so long as the unpaid
principal balance does not exceed the maximum amount specified above.
2.2 ADVANCES. Advances granted by Bank to Borrower hereunder during the
first six (6) months of the Line shall be evidenced by a promissory note in
substantially the form attached hereto as Exhibit "A" with appropriate
insertions (herein referred to as the "First Note") dated of even date herewith
and maturing six months after the Effective Date on which date the full amount
of principal and interest remaining unpaid on the Note shall be due and payable.
If no Event of Default is then continuing, the Bank shall then renew the First
Note upon the same terms and conditions for an additional nine month term.
Advances granted by Bank to Borrower thereunder shall be evidenced by a
promissory note in substantially the form attached hereto as Exhibits "B"and "C"
(the "Second Notes" and "Consolidated Note" respectively) with appropriate
insertions and maturing fifteen (15) months after the Effective Date on which
date the full amount of principal and interest remaining unpaid on the
Consolidated Note shall be due and payable. The First Note, Second Note and
Consolidated Note shall bear interest from the date thereof on the outstanding
unpaid principal balance thereof, from time to time, at a rate per annum,
(computed on the basis of a year of three hundred sixty (360) days for the
actual number of days elapsed), equal to the Bank's Prime Rate in effect from
time to time plus One percent ( 1 %) with any change in rate to be effective
simultaneously with the corresponding change in the Bank's Prime Rate, payable
monthly commencing the first day of the first month succeeding the Effective
Date and continuing on the first day of each month thereafter until the Maturity
Date on which date all remaining interest and principal due hereunder shall be
due and payable. Should interest and/or principal not be paid when due, it/they
shall thereafter bear interest at the Maximum Rate.
The excess of Advances made by Bank over payments of principal shall be
the outstanding principal balance of the Note from time to time and at any time.
The books and records of Bank shall be evidence of any Advance, the outstanding
principal balance of the Note, accrued interest on the Note, and any payment of
principal or interest on the Note.
The Borrower shall pay to the Bank a $.50 penalty fee for any Advance
not paid on the Advance Maturity Date for such Advance unless, prior to said
Date, a new Take-out commitment has been provided by the Borrower and approved
by the Bank which extends the Advance Maturity Date.
Any extension of time for payment of principal or of interest on the
Note resulting from the due date falling on a day other than a Business Day
shall be included in the computation of interest.
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2.3 REQUEST FOR ADVANCE. Borrower shall furnish to Bank a written
request for each Advance at least one ( 1 ) Business Day prior to the date of
the proposed Advance, which request shall state the date and amount of the
Advance requested from Bank and shall be accompanied by a Certificate of No
Default in substantially the form attached hereto as Exhibit "D" and provided
for in Section 3.2(b) hereof. If said request is by telephone, it must be from a
pre-authorized officer of Borrower and it must be confirmed in writing by
Borrower no later than twenty-four (24) hours thereafter. The Bank will make
such Advance available to a preapproved title company in immediately available
funds by crediting the amount thereof to the Borrower's account. Notwithstanding
the foregoing, Borrower shall be liable for all Advances made by Bank pursuant
to telephone request whether or not Borrower has confirmed same in writing.
2.4 PREPAYMENT OF THE NOTE. Borrower may at any time prepay the Notes or
any of them, in full or in part, provided, however, that any prepayment of
principal shall include accrued interest to the date of prepayment of the
principal amount being prepaid. Any prepayment shall be applied first to
satisfaction of any accrued and unpaid interest on the Note and the balance
shall be against the principal balance thereof.
2.5 GRANT OF SECURITY INTEREST. For value received and as collateral
security for the Line, Borrower hereby grants to Bank a security interest, lien
and mortgage in and to, and agrees and acknowledges that Bank has, and shall
continue to have, a security interest, lien and mortgage in and to, and assigns
to Bank its rights in, and all of Borrower's power to transfer title to those
assets and properties of Borrower of the types described below, wherever
located, however arising or created, and whether now owned or existing or
hereafter arising, created or acquired:
(A) Each promissory note or other evidence of indebtedness
("Mortgage Note(s)") now held or hereafter assigned to or
acquired by Borrower relating to any loan transferred to Bank
under Section 3.3 of this Agreement and all instruments and other
forms of payment, all general intangibles and accounts, and all
proceeds thereunder and therefrom (excepting servicing rights
with respect to the Mortgage Notes), and all books and records
relating to any of the above;
(B) All collateral, security, liens and security interests now or
hereafter held for each such Mortgage Note, including without
limitation, the beneficial interest in any related deed of trust
or mortgage and all guarantees thereof;
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(C) All present and future title insurance policies insuring any
of the deeds of trust or mortgages issued in connection with any
Mortgage Note;
(D) All present and future commitments of a Qualified Investor to
purchase a Mortgage Note or Mortgage Notes from Borrower as may
be assigned;
(E) All present and future rights of Borrower under contracts to
service Mortgage Notes and related deeds of trust for its own
account or for the account of third parties;
(F) Any and all present and future money and deposit accounts and
all other assets of Borrower in which Bank receives a security
interest or which hereafter come into the possession, custody or
control of Bank;
(G) All proceeds, instruments, general intangibles, property,
property rights, privileges and benefits arising out of, from the
enforcement of, or in connection with, the collateral described
in subparagraphs (A) through (F), above, {the "Collateral");
(H) All books, records, files, computer programs, data processing
records, computer software, documents and other information,
property, or general intangibles, at any time evidencing,
describing, or pertaining to the Collateral described or referred
to in subsections (A) through (G) above (the "Books and
Records"); and
(I) All products and proceeds (as defined in the UCC) of any of
the Collateral described above in any form, and all proceeds of
such proceeds, including, without limitation, all cash and credit
balances, all payments under any indemnity, warranty or guaranty
with respect to any of such property, all awards for taking by
eminent domain, all proceeds of fire or other insurance,
including any refunds of unearned premiums in connection with any
cancellation, adjustment, or termination of any insurance policy,
all proceeds obtained as a result of any legal action or
proceeding with respect to any of such property, and claims by
Borrower against third parties for loss or damage to, or
destruction of, any of such property.
2.6 REPAYMENT OF THE NOTE. Each Qualified Investor shall sign a
preapproved Bailee Flow Agreement acknowledging, inter alia, certain irrevocable
instructions whereby the Qualified Investor shall agree that all payments shall
be made directly to the Bank.
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SECTION 3
CONDITIONS PRECEDENT TO CREDIT ADVANCE
3.1 INITIAL CREDIT ADVANCE. Bank's obligation to make the initial
Advance hereunder is subject to the condition precedent that the Bank shall have
received on or before the day of such Advance each of the following, in form and
substance acceptable to the Bank:
(a) Delivery of Documents. Bank shall have received all of the
following in form and substance satisfactory to it:
(1) Loan Documents. The Borrower's Note drawn to the order of
Bank and any other documents evidencing the instant transaction that Bank
reasonably requests.
(2) Other Corporate Documents. Certified copies of those
resolutions of the Board of Directors of Borrower approving and authorizing the
execution, delivery and performance of this Agreement, the Note and all other
documents provided for herein and all other actions to be taken by Borrower in
connection herewith.
(3) Commissioner of Corporations Consent. The written consent
of the California Commissioner of Corporations to Borrower's pledge of
Collateral to secure the Note.
(4) Opinion of Counsel. The written opinion of counsel for
Borrower, acceptable to Bank, in form and substance satisfactory to Bank, to the
effect that:
(i) Borrower is duly incorporated and organized, validly
existing and in good standing under the laws of the State of New York without
limitation on the duration of its existence and is duly licensed or qualified as
a foreign corporation and is in good standing in the State of California and in
all other jurisdictions wherein the character of the property owned or the
nature of the business transacted makes such licensing or qualification
necessary.
(ii) Borrower is duly authorized under the law, its
Articles of Incorporation, and its By-Laws to execute and carry out this
Agreement, the Note, the pledge of Collateral to secure the Note and all other
documents provided for herein; the same have been duly authorized by all
necessary corporate action and either do not require the consent or approval of
such governmental body, agency or authority or the prior consent or approval of
any governmental
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body, agency or authority has been obtained by Borrower; and this Agreement, the
Note, the pledge of Collateral to secure the Note and all other documents
provided for herein when executed and delivered for value received, will
constitute the legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally.
(iii) There is no provision in Borrower's Articles of
Incorporation, By-Laws or preferred stock, nor any indenture, contract or
agreement to which Borrower is a party, nor any New York statute, rule or
regulation binding on Borrower, nor any judgment, order or decree of any court
or arbiter, which, to the knowledge of such counsel, would be contravened by the
execution and delivery of this Agreement, the Note, the pledge of Collateral to
secure the Note or any other documents provided for herein, or by the
performance of any term, provision or covenant of Borrower contained herein or
therein.
(c) Accuracy of Representations and Warranties. The representations
and warranties contained in Section 4 of this Agreement shall be true and
correct on and as of the date of the initial Advance.
(d) No Event of Default. No Default or Event of Default and no
event which, with the giving of notice or the lapse of time, or both, would
constitute an Event of Default shall have occurred and be continuing.
(e) Approval of Bank Counsel. All legal matters incident to, or in
connection with, the transactions hereby contemplated shall be reasonably
satisfactory to counsel for Bank.
(f) Evidence of Collateral. Bank shall have received the Collateral
and all documents necessary to perfect its security interest therein in form and
substance satisfactory to Bank in its sole discretion.
(g) Confirmation of Plan of Reorganization. In addition to all
other conditions herein referenced, the Credit Line shall not become operative
until there is an entry of an order confirming Borrower's First Amended and
Restated Plan of Reorganization, as such plan may be amended (the "Plan of
Reorganization"), filed with the United States Bankruptcy Court for the Southern
District of New York pursuant to applicable provisions of Chapter 11 of Title 11
of the United States Code (the "Bankruptcy Code") with regard to that certain
matter known as In re PIONEER COMMERCIAL FUNDING CORPORATION a/k/a PCFC of
California, Chapter 11 Case Xx. 00 X 00000 (HS) filed in the United States
Bankruptcy Court for the Southern District of New York and referred to
hereinafter as the "Chapter 11 Case".
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3.2 SUBSEQUENT ADVANCES. Bank's obligation to make any Advances other
than the initial Advance hereunder shall be subject to the fulfillment of the
following conditions precedent:
(a) Bank shall have received a written request from Borrower as
provided in Section 2.3 hereof; and
(b) Bank shall have received a certificate dated the date of such
credit extension, executed on behalf of Borrower by the President, Executive
Vice President or the Vice President and Secretary of Borrower advising that:
(i) The representations and warranties contained in Section 4
hereof are correct on and as of the date of such credit as though made on and as
of such date, other than those which specifically refer to an earlier date; and
(ii) No Default or Event of Default has occurred and is
continuing, or would result from such credit extension, and no event has
occurred which would constitute an Event of Default but for the requirement that
notice be given or that time elapse, or both.
(c) The Bank shall have received such other approvals, opinions, or
documents as the Bank may reasonably request.
3.3 ALL ADVANCES. Prior to or concurrently with the Bank making any
Advance hereunder, Borrower shall furnish to the Bank the following documents
pursuant to the Mortgage Warehouse Line:
(a) Mortgage application approved by the Bank.
(b) A complete mortgage warehouse package, including but not
limited to 1) a copy of the mortgage, 2) promissory note, 3) application, 4)
audit report, and 5) appraisal, all in compliance with FNMA/FHLMC requirements,
including, but not limited to, receipt by the Bank of the original promissory
note, endorsed in blank, a preliminary title report acceptable to the Bank,
issued by a title company that has been pre-approved by the Bank, and a
corporate assignment from the Borrower to the Bank of the Deed of Trust for the
respective mortgage (received by the Bank prior to disbursement).
(c) Mortgages will be from a mortgage banking company that has been
pre-approved by the Bank.
(d) Mortgages will conform to pre-approved written criteria that
may not be modified without the written consent of the Bank except that
mortgages shall at all times comply with FNMA/FHLMC requirements.
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(e) The Mortgage loan package(s) shall be received by the Bank no
later than 10:30 a.m. The Bank shall notify the Borrower by 5:00 p.m. of that
same business day whether the Mortgage funding requests have been accepted or
declined for funding.
(f) The Borrower shall pay to the Bank $50 plus out-of-pocket
expenses incurred to cover examination of each Mortgage package reviewed.
(g) The Borrower shall pay to the Bank $300 for each mortgage
company submitted to the Bank for approval.
SECTION 4
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that:
4.1 CORPORATE EXISTENCE. Borrower is a corporation duly organized and
validly existing under the laws of New York, is in good standing therein, is
duly licensed or qualified as a foreign corporation in the State of California
and in all other jurisdictions wherein the character of the property owned or
the nature of the business transacted by it makes licensing or qualification as
a foreign corporation necessary and is duly authorized, qualified and licensed
under all applicable laws, regulations, ordinances or orders of public
authorities to carry on its business in the places and in the manner presently
conducted. Borrower has the corporate power to execute and deliver this
Agreement, the Note, the pledge of Collateral to secure the Note and all other
documents related hereto, to obtain credit hereunder, and to perform the terms
and conditions hereof and thereof.
4.2 CORPORATE AUTHORIZATION. The execution, delivery and performance by
Borrower of the Loan Documents have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
Borrower's shareholders; (ii) contravene Borrower's charter or bylaws; (iii)
violate any provision of law, any effective Order in the Chapter 11 Case, rule,
regulation (including, without limitation, Regulation U of the Board of
Governors of the Federal Reserve System), order, writ, judgment, decree,
injunction, determination, or award presently in effect having applicability to
the Borrower; (iv) result in a breach of, or violation under any indenture, bank
loan, credit agreement, lease, instrument or agreement to which Borrower is a
party or to which any of Borrower's properties is subject; (v) result in, or
require, the creation or imposition of any lien, upon or with respect to any of
the properties now owned or hereafter acquired by the Borrower, other than liens
granted to the Bank; or (vi) cause the
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Borrower to be in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination, or award or any such indenture,
agreement, lease or instrument.
4.3 FINANCIAL STATEMENTS. Financial statements of Borrower for its most
recent fiscal year, copies of which have heretofore been furnished to the Bank,
are complete and accurately and fairly represent the financial condition of
Borrower, the results of its operations and the transactions in its equity
accounts as of the dates and for the periods referred to therein, and have been
prepared in accordance with GAAP. There are no material liabilities, direct or
indirect, fixed or contingent, of Borrower as of the date of such financial
statements which are not reflected therein or in the notes thereto. There has
been no material adverse change in the financial condition or operation of
Borrower since the date of the balance sheet contained in such financial
statements.
4.4 ASSETS. Borrower has good and marketable title to all property and
assets reflected in the balance sheet referred to in Section 4.3 hereof, except
property and assets sold or otherwise disposed of in the ordinary course of
business subsequent to that date. There are no outstanding liens or encumbrances
on any properties or assets of Borrower, nor are there any security agreements
to which Borrower is a party, or title retention agreements, whether in the form
of leases or otherwise, of any personal property other than those reflected in
those financial statements referred to in Section 4.3 hereof or those permitted
under Section 6.2.
4.5 LITIGATION. Other than the Chapter 11 Case there are no actions,
suits, proceedings or investigations pending, or to the knowledge of Borrower
upon reasonable inquiry, threatened, against or affecting Borrower at law, in
equity, or before or by any governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign which, if adversely determined,
would have a material adverse effect on the business or condition, financial or
otherwise, of Borrower and Borrower is not in default in any material respect
with respect to any order, writ, injunction, ruling, determination or decree of
any of the foregoing except as heretofore disclosed to the Bank in writing.
4.6 BURDENSOME PROVISIONS. Borrower is not a party to any indenture,
agreement, instrument or lease, or subject to any charter, by-law, or other
corporate restriction, or any law, rule, regulation, order, writ, judgment or
injunction, having a material adverse effect on the business, operations,
properties or assets of Borrower.
4.7 NO DEFAULT OF OTHER AGREEMENTS. Borrower is not in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any debenture, note or other evidence of indebtedness of Borrower
or in any indenture or agreement of Borrower.
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4.8 TAXES. Except as permitted pursuant to Section 5.6, Borrower has
filed all tax returns (federal, state and local) which are required to be filed
by Borrower and has paid or made adequate provision for the payment of all taxes
which have or may become due pursuant to said returns and pursuant to any
matters raised by audits or pursuant to any assessment received by Borrower or
for other causes known to Borrower, including, but not limited to, interest and
penalties, if any.
4.9 VALID AND BINDING OBLIGATIONS. This Agreement, the Note, the pledge
of Collateral to secure the Note and all other documents related hereto when
executed and delivered will constitute valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms, except
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally. Borrower will
duly and punctually pay the principal and interest payable under the Note
according to the terms thereof and hereof.
4.10 REGULATION U. No part of the proceeds of Advances made hereunder
will be used to purchase or carry any margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any margin
stock. Borrower is not engaged principally in or as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying any such margin stock. If requested by Bank, Borrower will furnish Bank
a statement in conformity with the requirements of Federal Reserve Form U-1.
4.11 ERISA. The Borrower is in compliance in all material respects with
all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any Plan; no notice
of intent to terminate a Plan has been filed, nor has any Plan been terminated;
no circumstances exist which constitute grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administrate, a Plan, nor has the PBGC instituted any such proceedings; the
Borrower has not completely or partially withdrawn under Section 4201 or 4204 of
ERISA from a Multi-employer Plan; the Borrower has met its minimum funding
requirements under ERISA with respect to all of its Plans and the present value
of all vested benefits under each Plan exceeds the fair market value of all Plan
assets allocable to such benefits, as determined on the most recent valuation
date of the Plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability of the Borrower
to the PBGC or the Plan under Title IV of ERISA; and the Borrower has not
incurred any liability to the PBGC under ERISA.
14
4.12 OPERATION OF BUSINESS. The Borrower possesses all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, or rights
thereto, to conduct its business substantially as now conducted and as presently
proposed to be conducted, and the Borrower is not in violation of any valid
rights of others with respect to any of the foregoing.
4.13 NO MISREPRESENTATION. No information, material or data supplied to
the Bank by the Borrower in connection with this Line includes any untrue
statement of a material fact, nor is a material fact omitted.
SECTION 5
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as credit shall remain
available hereunder, and until the full and final payment of any promissory note
made in favor of the Bank, unless Bank waives compliance in writing:
5.1 FINANCIAL INFORMATION. Borrower will deliver to Bank:
(a) Within ninety (90) days after the end of each of Borrower's
fiscal years, complete copies of its audit report, which report shall include at
least a balance sheet as of the close of each such fiscal year, a statement of
income and retained earnings for each such fiscal year, and a statement of cash
flow of Borrower for such fiscal year, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in
the prior fiscal year, as at the end of said fiscal year, together with the
report by a firm or firms of independent certified public accountants acceptable
to Bank. Such financial statements shall be prepared in accordance with GAAP and
shall fairly reflect the financial condition and operations of Borrower and
shall be accompanied by a certificate of said accountants, certified to the
Bank, to the effect that, in making the examination necessary for their audit of
the financial affairs of Borrower for such fiscal year, nothing has come to
their attention of any violation of any of the terms or provisions of this
Agreement or of the occurrence of any condition, event or act which, with or
without notice or lapse of time, or both, would constitute an Event of Default
or, if such accountants shall have obtained knowledge of any such violation,
condition, event or act, the nature and status thereof.
(b) As soon as such statements are available, but not later than
ninety (90) days after the end of each quarter, a copy of unaudited financial
statements of Borrower, including its balance sheets as of the close of such
quarter and its statement of income and retained earnings for such quarter and
for that part of the fiscal year ending with the last day of such quarter, all
in reasonable detail and
15
all certified to by the Borrower's chief financial officer as having been
prepared in accordance with GAAP. Such financial statements shall be accompanied
by a certificate of said officer stating that he has no knowledge that an Event
of Default, or an event which, with notice or lapse of time or both, would
constitute an Event of Default, has occurred and is continuing or, if an Event
of Default or such event has occurred and is continuing, a statement as to the
nature thereof and the action which Borrower proposes to take with respect
thereto.
(c) Promptly, after sending or filing thereof, copies of any and
all proxy statements, financial statements and reports, if any, which Borrower
sends to its public stockholders and copies of all regular and periodic reports
and all registration statements which Borrower files with the Securities and
Exchange Commission;
(d) The Bank and its agents shall have the right, both prior to
closing and from time to time thereafter, at Borrower's expense, (i) to visit
and inspect Borrower's business premises, and the premises where Borrower's
assets and books and records are located and (ii) to conduct an audit of the
books and records of Borrower. The results of any such visit and inspection or
of any such audit shall be acceptable to the Bank in the Bank's sole discretion.
So long as the Borrower is not in default, Borrower's expense for the Bank's
audit shall be limited to $1,300.00 per annum. In the event that the Borrower is
in default, then the Borrower shall be liable for all of the Bank's expenses
incurred under this paragraph.
(e) Such additional information as Bank may from time to time
reasonably request with respect to the business affairs and financial condition
of Borrower.
5.2 Management/Performance Reports. Borrower shall provide all internal
reports within 10 days after the end of each month. These reports will consist
of, but not be limited to, a:
(a) trial balance segmented by mortgage company showing mortgagor's
name; address; city; date that Borrower funded the mortgage company; amount of
mortgage; amount advanced by Borrower; documentation fee; date of takeout
commitment; and the name and address of the respective investor.
(b) Commitment fail report segmented by mortgage company and
containing all information referenced in 5.2 (a) herein.
(c) Delinquency report referencing all mortgage companies that are
15 days or more past due in payment of interest. The report will indicate the
date of
16
last contact; reason for tardiness; anticipated cure date; and what action has
been taken to avoid reoccurrence.
(d) Monthly trend reports of the prior 24 months of mortgage
company activity and performance indicating:
(i) the volume in both numbers and dollars and average dollars
per mortgage;
(ii) days late in payment of interest;
(iii) those mortgages which were not taken out ("Commitment
fails") as required; and
(iv) the number of mortgages declined and their aggregate
amount.
5.3 USE OF PROCEEDS OF THE REVOLVING CREDIT. Borrower will use the
proceeds of the Advances made by Bank to Borrower to support Borrower's Mortgage
Warehouse Line.
5.4 MAINTENANCE OF CORPORATE EXISTENCE. Borrower will remain in and
continue to operate substantially the same line of business it is presently
engaged in; maintain and preserve its corporate existence and all rights,
privileges and franchises necessary or desirable in the conduct of its business;
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required; and, conduct its business in an orderly,
efficient and customary manner.
5.5 MAINTENANCE OF PROPERTIES. Borrower will maintain, preserve and keep
all properties and assets (tangible and intangible) necessary or useful in its
business in good working order and condition, ordinary wear and tear excepted.
5.6 COMPLIANCE WITH LAWS. Borrower will comply with the requirements of
all applicable laws, rules, regulations and orders of any governmental
authority, including, but without limitation, any obligations imposed by ERISA,
non-compliance with which could adversely affect its business or credit, except
where contested in good faith and by appropriate proceedings.
5.7 TAXES AND CLAIMS. Borrower will pay and discharge promptly, all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and pay all lawful claims for labor,
materials and supplies that, if unpaid, might become a lien or charge upon its
property, provided that
17
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently be
contested in good faith and by proper proceedings and if Borrower shall have set
aside on its books and shall maintain adequate reserves for the payment of the
same in conformity with GAAP.
5.8 INSURANCE. Borrower will obtain and maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and against such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated, which insurance may
provide for reasonable deductibility but in no event be less than the amount of
the Line. Borrower shall furnish Bank on request full information as to the
insurance maintained by Borrower.
5.9 NOTICE OF DEFAULTS. Borrower will give prompt written notice to Bank
as soon as possible but in no event, within five (5) days, of any Event of
Default or of any event of default under any other agreement or indenture
entered into by Borrower or of any other matter which has resulted or might
result in a material adverse change in the condition, financial or otherwise, or
operations of Borrower.
5.10 CHANGES IN MANAGEMENT. Borrower will give prompt written notice to
Bank of any changes in the senior management of Borrower.
5.11 NOTICE OF LITIGATION. Borrower will notify the Bank Promptly after
the commencement thereof, notice of all actions, suits and proceedings before
any court or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower, which, if
determined adversely to the Borrower, could have a material adverse effect on
the financial condition of the Borrower.
5.12 RIGHT OF INSPECTION OF RECORDS. Borrower will keep and maintain
full and accurate accounts and records of its operations according to GAAP and
permit Bank and its designated officers, employees, agents and representatives,
to have access to such accounts, records and operations and to make examinations
thereof at all reasonable times. The Bank may discuss the affairs, finances and
accounts of the Borrower with any of Borrower's employees, officers, directors
and the Borrower's independent accountants.
5.13 EXECUTION OF OTHER DOCUMENTS. Borrower will do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, all and every such further acts, covenants, assurances or further
instruments and documents as Bank may reasonably request in order to carry out
the intent and purpose hereof.
18
5.14 DEPOSITORY ACCOUNT. During the term hereof, Borrower will maintain
a deposit or account with Bank.
SECTION 6
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as the Bank has a Commitment
to the Borrower hereunder, and until the full and final payment of the Note,
unless Bank waives compliance in writing, Borrower will not:
6.1 CONSOLIDATION AND MERGER. Liquidate or dissolve or enter into any
consolidation, merger, partnership, joint venture, syndicate or other
combination, except that Borrower may be consolidated with or merged with any
other corporation, provided that in any such merger or consolidation. Borrower
shall be the surviving or resulting corporation and immediately after the
effectiveness of such merger or consolidation, there shall have occurred and be
continuing no Default or Event of Default.
6.2 LIENS. Create, incur, assume, or suffer to exist any Lien upon or
with respect to any of its properties, now owned or hereafter acquired, except:
(1) Liens in favor of the Bank;
(2) Liens for taxes or assessments or other government charges or
levies if not yet due and payable;
(3) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than thirty (30) days;
(4) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement) public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(5) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and enjoyment by the Borrower of the property or assets
encumbered thereby in the normal course of its business or materially impair the
value of the property subject thereto; and
19
(6) Liens (other than on the Collateral) to secure financing
described in Section 6.03(4).
6.03 DEBT. Create, incur, assume, or suffer to exist, any Debt, except:
(1) Debt of the Borrower under this Agreement or the Note;
(2) Debt of the Borrower subordinated on terms satisfactory to the
Bank to the Borrower's obligations under this Agreement and the Note;
(3) Accounts payable to trade creditors for goods or services which
are not aged more than ninety (90) days from the billing date and current
operating liabilities (other than for borrowed money) which are not more than 90
days past due, in each case incurred in the ordinary course of business and paid
within the specified time; and
(4) Additional financing obtained by the Borrower in order to
support its mortgage warehouse lending activity.
6.04 LEASES. Create, incur, assume, or suffer to exist, any obligation
as lessee for the rental or hire of any real or personal property, except leases
existing on the date of this Agreement and any extension or renewals thereof.
6.05 SALE AND LEASEBACK. Sell, transfer, or otherwise dispose of any
real or personal property to any Person and thereafter directly or indirectly
lease back the same or similar property.
6.06 DIVIDENDS. Declare or pay any dividends or purchase, redeem,
retire, or otherwise acquire for value any of its capital stock now or hereafter
outstanding; or make any distribution thereof to its stockholders as such
whether in cash, assets, or obligations of the Borrower; or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of, any shares of its capital
stock; or make any other distribution by reduction of capital or otherwise in
respect to any shares of its capital stock except that: (i) the Borrower may
declare and deliver dividends and make distributions payable solely in common
stock of the Borrower; and (ii) the Borrower may purchase or otherwise acquire
shares of its capital stock by exchange for or out of the proceeds received from
a substantially concurrent issue of new shares of its capital stock.
6.07 SALE OF ASSETS. Sell, lease, assign, transfer, or otherwise dispose
of any of its now owned or hereafter acquired assets, receivables, and leasehold
interest, except: (i) for inventory, including mortgages, disposed of in the
ordinary
20
course of business; and (ii) the sale or other disposition of assets no longer
used or useful in the conduct of its business.
6.08 INVESTMENTS. Make any loan or advance to any Person, (other than
loans constituting a part of its mortgage warehouse lending activities) or
purchase or otherwise acquire any capital stock, assets, obligations, or other
securities of, make any capital contribution to, or otherwise invest in or
acquire any interest in any Person except: (i) direct obligations of the United
States or any agency thereof with maturities of one year or less from the date
of acquisition; (ii) commercial paper of a domestic issue rated at least "A-1"
by Standard & Poor's Corporation or "P-1" by Xxxxx'x Investors Service, Inc.;
{iii) certificates of deposit with maturities of one year or less from the date
of acquisition issued by any FDIC insured bank in an amount less than One
Hundred Thousand Dollars ($100,000.00); and (iv) for stock, obligations, or
securities received in settlement of debts (created in the ordinary course of
business) owing to the Borrower.
6.09 GUARANTIES. Assume, guarantee, endorse, or otherwise be or become
directly or contingently responsible or liable (including, but not limited to,
an agreement to purchase any obligation, stock, assets, goods, or services, or
to supply or advance any funds, assets, goods or to maintain or cause such
Person to maintain a minimum working capital or net worth, or services or
otherwise to assure the creditors of any Person against loss) for obligations of
any Person, except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of its
mortgage warehouse lending business.
6.10 TRANSACTION WITH AFFILIATE. Enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate except in the ordinary course of and pursuant
to the reasonable requirements of the Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than would be obtained in a
comparable arm's length transaction with a Person not an Affiliate.
6.11 DEFAULT UNDER OTHER AGREEMENTS. Borrower will not commit or do, or
fail to commit or do, any act or thing which would constitute a breach of, or
default under, any of the terms or provisions of any other agreement or
indenture, contract, document or instrument executed or to be executed by
Borrower in connection with the borrowing of money and under which Borrower may
be obligated as borrower or guarantor, if such breach or default consists of the
failure to pay any indebtedness when due or if such breach or default caused the
acceleration of any indebtedness or requires that any such indebtedness be paid
prior to its stated maturity or due date or causes the termination of any
commitment to lend.
21
SECTION 7
EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT. If any one or more of the following events
(herein called "Events of Default") described herein shall occur for any reason
whatsoever (and whether the occurrence shall be voluntary or involuntary or come
about or to be effected by operation of law or pursuant to or in compliance with
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body), then Borrower shall be in default:
(a) Note. If Borrower shall default in the payment of principal of,
or interest on, the Note when the same shall become due and payable; or
(b) Misrepresentation. If any of the representations or warranties
made herein or in any certificate or financial or other statement heretofore or
hereafter furnished to Bank by or on behalf of Borrower in connection with this
Agreement or the extension of any credit hereunder shall be false or misleading
in any material respect at the time made; or
(c) Covenants. If Borrower shall fail to perform or observe any
other covenant, term, provision, condition, agreement or obligation of this
Agreement and such failure to perform or observe has a material adverse effect
on the collectability of the Advances; or
(d) Other Debts. If Borrower shall fail to perform or observe any
material covenant, term, provision, condition, agreement or obligation under any
other agreement, indenture, document, note or other instrument (including, but
not limited to the generality of the foregoing, other indebtedness owing to
Bank) executed or to be executed by Borrower, which failure shall entitle the
lender thereon to accelerate debt due under such agreement; or
(e) Insolvency. If Borrower shall become insolvent; or admit in
writing the inability to pay its debts as they mature; or fail generally to pay
debts as they become due; or make an assignment for the benefit of creditors of
commence a case for dissolution; or apply for or consent to the appointment of,
or taking possession by a trustee, liquidator, assignee, custodian, sequestrator
or receiver (or similar official) for the Borrower or for a substantial part of
the property or business of the Borrower; or shall take any corporate action in
furtherance of any of the foregoing; or
(f) Appointment. If a trustee, liquidator, assignee, custodian,
sequestrator or receiver (or similar official) shall be appointed for Borrower
or for a substantial part of the property or business of Borrower without the
consent of
22
Borrower and shall not be discharged within thirty (30) calendar days after such
appointment; or
(g) Custody. If any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of
Borrower and shall not be dismissed within thirty (30) calendar days thereafter;
or
(h) Liens. If any money judgment, writ or warrant of attachment, or
similar process shall be entered or filed against Borrower or any of the
properties or other assets of Borrower and shall remain unvacated, unbended, or
unstayed for a period of fifteen (15) calendar days; or
(i) Bankruptcy. If a bankruptcy, reorganization, insolvency, or
liquidation case or other case for relief under any bankruptcy law or any law
for the relief of debtors shall be commenced by or against Borrower and, if
instituted against Borrower, shall not be dismissed within thirty (30) calendar
days after such institution or Borrower shall by any action or answer approve
of, consent to, or acquiesce in any such case or admit the material allegations
of, or default in answering a petition filed in any such case; or
(j) Suspension of Business. If Borrower shall voluntarily or
involuntarily suspend the transaction of its business or a vital component of
its business, as presently conducted, for more than five (5) consecutive
Business Days;
(k) Material Adverse Change. If there shall be any material adverse
change from the present condition or affairs (financial or otherwise) of the
Borrower that in the Bank's reasonable opinion impairs its security or increases
its risk; or
(l) Validity Contest. If this Agreement, the Note, or any other
document related hereto shall, at any time while the Note shall remain unpaid,
cease to be in full force and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by Borrower or Borrower
shall deny that it has any or further liability or obligation under this
Agreement, the Note, or any other documents related hereto.
SECTION 8
REMEDIES
8.1 REMEDIES. Upon the occurrence of any Event of Default or Default,
Bank's obligation to disburse any undisbursed portion of the Line shall
immediately cease; provided, however, that if such obligation has ceased due to
the occurrence of
23
a Default or an Event of Default and such Default or Event of Default has been
cured or waived, then such obligation shall be reinstated as of the date such
Default or Event of Default is cured or waived. Upon the occurrence or existence
of any Default or Event of Default or at any time thereafter so long as such
Default or Event of Default is continuing, without prejudice to the rights of
Bank to enforce its claim against Borrower for damages for failure by Borrower
to fulfill any of its obligation hereunder or to bring suit against Borrower for
specific performance of this Agreement, Bank shall have all of the rights and
remedies described hereafter, inclusive, and it may exercise any one, more, or
all of such remedies, in its sole discretion, without thereby waiving any of the
others.
(a) Acceleration of the Line. Bank, at its option, may declare the
Line to be immediately due and payable, and in the event a voluntary or
involuntary case is commenced under the Bankruptcy Code by or against Borrower
as a debtor, the Line automatically will be due and payable without any notice
or declaration by Bank, whereupon the same shall become immediately due and
payable without presentment, demand, protest, notice of non-payment or any other
notice required by law relative thereto, all of which are hereby expressly
waived by Borrower, anything contained herein to the contrary notwithstanding
and, in connection therewith, the rate of interest charged on the Note then
outstanding shall automatically and without further notice increase to a rate
per annum equal to the Maximum Rate. If any Note of Borrower to Bank, shall be a
demand instrument however, the recitation of the right of Bank to declare any
and all amounts outstanding to be immediately due and payable, whether such
recitation is contained in such Note, or in this Agreement, as well as the
recitation of the above events permitting Bank to declare all amounts
outstanding due and payable, shall not constitute an election by Bank to waive
its right to demand payment under a demand at any time in any event, as Bank in
its discretion may deem appropriate. Thereafter, Bank, at its option, may, but
shall not be obligated to, accept less than the entire amount due, if tendered,
provided, however, that unless then agreed to in writing by Bank, no such
acceptance shall be deemed to constitute a waiver of any Default or a
reinstatement of any Commitment of Bank to Borrower hereunder.
(b) Remedies of a Secured Party. Bank shall have the rights and
remedies of a secured party under the UCC in effect on the date of the Event of
Default or Default (regardless of whether the same has been enacted in the
jurisdiction where the rights or remedies are asserted), including, without
limitation, the right to take the Collateral or any portion thereof into its
possession, by such means (without breach of the peace) and through agents or
otherwise as it may elect (and, in connection therewith, demand that the
Borrower assemble the Collateral at a place or places and in such manner as Bank
shall prescribe), and sell, lease or otherwise dispose of the Collateral or any
portion thereof in its then condition or following any commercially reasonably
preparation or processing, which disposition may be by public or private
proceedings, by one or more contracts,
24
as a unit or in parcels, at any time and place and on any terms, so long as the
same are commercially reasonable. Bank may apply the proceeds of any such sale
or disposition to any of the amounts due and owing under the Line in such order
as Bank, in its sole discretion, may elect. Bank shall give Borrower written
notice of the time and place of any public sale of the Collateral or the time
after which any other intended disposition thereof is to be made, except where
the Collateral is perishable or threatens to decline speedily in value or is of
a type customarily sold on a recognized market. The requirement of sending
reasonable notice shall be met if such notice is given to Borrower at least five
(5) days before such disposition. Expenses of retaking, holding, insuring,
preserving, protecting, preparing for sale or selling or the like with respect
to the Collateral shall include, in any event, reasonable attorneys' fees and
other legally recoverable collection expenses, all of which shall constitute the
amount due and owing under the Line.
For the purposes of the preceding paragraph, the Bank may, so far
as the Borrower can give authority therefor, enter upon any or all of the
premises where any of the Collateral or books or records may be situated and
take possession and remove the same therefrom.
(c) Sole Determination. The Bank shall have the right in its sole
discretion to determine which rights, security liens, security interests or
remedies it shall at any time pursue, relinquish, subordinate, modify or take
any other action with respect thereto, without in any way modifying or affecting
any of them or any of the Bank's rights hereunder. Any moneys, deposits,
balances, or other property of Borrower which may come into the Bank's hands at
any time or in any manner, may be retained by the Bank and applied to any of the
indebtedness of Borrower to Bank.
(d) Rights and Remedies Cumulative. No right or remedy herein
conferred upon the Bank is intended to be exclusive of any other right or remedy
contained herein or in any other instrument or document delivered in connection
with or pursuant to this Agreement, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
(e) Rights and Remedies Not Waived. No course of dealing between
the Borrower and the Bank or any failure or delay on the part of the Bank in
exercising any rights or remedies hereunder shall operate as a waiver of any
rights or remedies of the Bank and no single or partial exercise of any rights
or remedies hereunder shall operate as a waiver or preclude the exercise of any
other rights or remedies hereunder.
25
(f) Right of Setoff. Upon the occurrence and during the continuance
of any Event of Default, the Bank is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower) to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Bank to or for the credit or the account of the Borrower
against any and all the obligations of the Borrower now or hereafter existing
under this Agreement or the Note or any other Loan Document, irrespective of
whether or not the Bank shall have made any demand under this Agreement or the
Note or such other Loan Document and although such obligations may be unmatured.
The Bank agrees promptly to notify the Borrower after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of the Bank under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Bank may have.
(g) Cross Default. Upon the occurrence of an Event of Default under
the terms and conditions of the Line, said Event of Default or Default shall
also act as a default under the terms and conditions of any other loan made by
Bank to Borrower and upon the occurrence of a default or event of default under
the terms and conditions of any other loan made by Bank to Borrower, then such
default or event of default shall also act as an Event of Default hereunder.
Upon the happening of such event of default, or Event of Default, the entire
principal balance under the terms of the Line, and/or any other outstanding
loan, with all accrued interest thereon, shall become immediately due and
payable in full. This provision shall apply to any future modifications,
renewals and/or extensions hereof.
SECTION 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES. Any notices, payments, requests, reports information or
demands which any party hereto may desire or may be required to give to any
other party shall be given or made upon such other party either through deposit
in the mails, by hand delivery or transmitted by facsimile (FAX) at its address
as follows:
Borrower:
PIONEER COMMERCIAL FUNDING CORP.
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
FAX NO: (000) 000-0000
Attn: Xxx Xxxxxxxx, Executive Vice President
26
Bank:
UMB BANK AND TRUST COMPANY
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
FAX NO: (000) 000-0000
Attn: Xxxxxxxxx X. Xxxx, Vice President
or as to each party, at such other address as shall be designated by such party
in a written notice to such other party, complying as to delivery with the terms
of this Section. All such notices, requests, demands, directions and other
communications shall, when mailed, delivered or FAXed, be effective when
deposited in the mails or FAXed, respectively, addressed as aforesaid, except
that notices or requests to the Bank pursuant to Section 2.3 shall not be
effective until received by Bank.
9.2 WAIVER. Neither the failure of, nor any delay on the part of any
party hereto in exercising any right, power or privilege hereunder shall
preclude other or further exercise thereof, or the exercise of any right, power
or privilege; nor shall any waiver of any right, power, privilege or default
hereunder constitute a waiver of any other right, power, privilege or default or
constitute a waiver of any other default of the same or of any other term or
provision. No amendment or waiver of any provision of this Agreement or the Note
shall be effective unless contained in writing signed by Bank, and then such
shall only be effective in the specific instance and for the specific purpose
given. All rights and remedies herein provided are cumulative and not exclusive
of any rights or remedies otherwise provided by law.
9.3 BANKER'S LIEN OR SET OFF. Nothing in this Agreement shall be deemed
any waiver or prohibition of Bank's right of banker's lien or setoff.
9.4 EXPENSES OF BANK. The Borrower shall pay on demand all out-of-pocket
costs and expenses incurred in connection with the filing and recording of the
Loan Documents and Borrower shall also pay for all stamp and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of any of the Loan Documents and the other
documents to be delivered under any such Loan Documents, and agrees to save the
Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
9.5 ASSIGNABILITY. This Agreement shall bind and the benefits thereof
shall inure to, Borrower and Bank and their respective successors and assigns,
as the case may be. Borrower may not assign this Agreement or any of the rights
of Borrower hereunder without the prior written consent of Bank.
27
9.6 GOVERNING LAW. This Agreement, the Notes, and all other documents
executed pursuant to the provisions hereof shall all be deemed entered into in
the State of New York and shall be governed by and construed according to the
laws of the State of New York without giving effect to its conflict of law
principles.
9.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties with respect to the matters herein contained and, as such,
supersedes and cancels all prior understandings and agreements between the
parties.
9.8 HEADINGS. The headings hereinabove set forth are solely for the
purpose of identification and shall not be construed as a part of the paragraphs
they head.
9.9 AMENDMENTS. No amendment, modification, termination or waiver of any
provision of any Loan Document to which the Borrower is a party, nor consent to
any departure by the Borrower from any Loan Document to which it is a party,
shall in any event be effective unless the same shall be in writing and signed
by the Bank, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
9.10 SEVERABILITY OF PROVISIONS. Any provision of any Loan Document
which 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 such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
9.11 NUMBER - GENDER. As used herein, the singular shall include the
plural, the plural shall include the singular, and, masculine, feminine and
neuter pronouns shall be fully interchangeable,where the context so requires.
9.12 INCORPORATION. This Agreement specifically incorporates all such
terms and conditions contained in the Commitment letter executed by the parties.
If there is any conflict between the Agreement and the Commitment, this
Agreement shall be controlling. The Commitment shall be incorporated and become
one of the Loan Documents.
JURY TRIAL WAIVER
BORROWER AND BANK HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED
HEREIN, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, AND ANY
28
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF EACH PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK IN ENTERING
INTO THIS AGREEMENT. BORROWER FURTHER ACKNOWLEDGES THAT THIS JURY TRIAL WAIVER
PROVISION HAS BEEN EXPLAINED TO IT BY ITS COUNSEL AND THAT IT UNDERSTANDS AND
AGREES TO SAME.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto by their respective corporate officers thereunto duly authorized, all as
of the date first hereinabove written.
UMB BANK AND TRUST COMPANY PIONEER COMMERCIAL FUNDING
CORPORATION
_____________________________________ By:______________________________
XXXXXXXXX X. XXXX, Vice President Title:
_____________________________________
XXXXX XXXXX, Assistant Vice President
00
XXXXX XX XXX XXXX
XXXXXX XX XXX XXXX
SWORN TO, SUBSCRIBED AND ACKNOWLEDGED before me this day
of 199_, by ______________________ as___________________________ of
PIONEER COMMERCIAL FUNDING CORP., a New York corporation, on behalf of said
corporation.
_________________________________
Notary Public, State of New York
My Commission Expires:
STATE OF NEW YORK
COUNTY OF NEW YORK
SWORN TO, SUBSCRIBED AND ACKNOWLEDGED before me this day of
199_, by XXXXXXXXX X. XXXX as Vice President of UMB Bank and Trust
Company, a New York chartered commercial bank, on behalf of said bank.
________________________________
Notary Public, State of New York
My Commission Expires:
STATE OF NEW YORK
COUNTY OF NEW YORK
SWORN TO, SUBSCRIBED AND ACKNOWLEDGED before me this day of ,
199_, by XXXXX XXXXX as Assistant Vice President of ___________________________
corporation, on behalf of said corporation.
__________________________________
Notary Public, State of New York
My Commission Expires:
[Letterhead of United Mizrahi Bank and Trust Company]
February 21, 1996
Xxxxxx X. Xxxxx,
Senior Vice President
Pioneer Commercial Funding Corporation
0000 Xxxxxx Xxxx. Xxxxx 000
Xxxxxx, Xx. 00000
REFERENCE IS MADE TO THE REVOLVING LINE OF CREDIT AND SECURITY AGREEMENT
DATED AS OF MAY 25, 1993 ("THE REVOLVER") BETWEEN UMB BANK AND TRUST
COMPANY N/K/A UNITED MIZRAHI BANK AND TRUST COMPANY, "THE BANK" AND PIONEER
COMMERCIAL FUNDING CORPORATION "PCFC".
Dear Xxx. Xxxxx:
The Bank has agreed to amend Section 2.1 of the Revolver by increasing the
principal amount of advances available by One million five hundred thousand
dollars ($1,500,000.00) to an aggregate amount not to exceed four million
dollars ($4,000,000.00). In consideration of the amendment, PCFC agrees to pay a
facility fee of one percent (1%), per annum on the increased amount which is
eight thousand ($8,000.00), which fee will be charged to PCFC's checking account
upon receipt of the signed copy of this letter.
Section 5.4 of the Revolver is hereby deleted. Section 5.4 will now state:
Borrower will remain in and continue to operate solely in the business of
warehousing of loans, which may include second mortgages and home improvement
loans under FHA/VA/HUD guidelines, provided that such loans do not exceed
borrowers thirty-five percent (35%) of borrower's capital; maintain and preserve
its corporate existence and all rights, privileges and franchises necessary or
desirable in the conduct of its business; qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
required; and conduct its business in an orderly, efficient and customary
manner.
And PCFC also agrees, upon completion of its Initial Public Offering,
("I.P.O."), that it will issue to the Bank, Warrants for Common Stock, in an
amount equal to four point nine percent (4.9%), of the common stock issued and
outstanding at the time of the I.P.O. The exercise price of each warrant will be
five dollars and fifty cents per share ($5.50). Each year after the first year,
twenty-five percent (25%), of the warrants would be exercisable at the Bank's
discretion, however, in the event that the four
Page 2 of 2
million dollar commitment is reduced or terminated any unexercised warrants in
the bank's possession would be reduced proportionately to the extent of the
reduced commitment.
All other terms and conditions of the Revolver shall remain in full force and
effect and none of the terms of the Revolver are or shall be deemed to amended,
modified or waived except by the express terms contained herein.
Very truly yours,
Xxxxx X. Xxxxx
Assistant Vice President
Xxxxxxxxx X. Xxxx
Vice President
Accepted and agreed to this day of February, 1996
Pioneer Commercial Funding Corporation
By:________________________________________
Xxxxxx Xxxxx, Senior Vice President