EXHIBIT NUMBER 10.01
NASD
REVOLVING SUBORDINATED LOAN AGREEMENT
AGREEMENT entered into on August 4, 1998 to be effective December 22, 1998
between Custodial Trust Company (the "Lender") and Friedman, Billings, Xxxxxx &
Co., Inc. (the "Broker-Dealer").
Subject to the terms and conditions hereinafter set forth, the Lender is
willing to make revolving credit loans agrees to loan to the Broker-Dealer from
time to time between the effective date and December 22, 1999 (the "Scheduled
Maturity Date") sums of money not to exceed $40,000,000 in the aggregate (the
"Credit Line," or "Aggregate Principal Amount").
The Credit Line shall be loaned to the Broker-Dealer on a revolving basis
and the Broker-Dealer may, subject to the provisions of this Agreement, borrow,
repay and reborrow such amounts ("Advances") as it may see fit. Each such
Advance made hereunder shall have a stated maturity date of at least twelve
months from the date of each such Advance, unless prepaid pursuant to the
permissive prepayment provisions of this agreement.
Any Advances obtained under this Agreement shall be used and dealt with by
the Broker-Dealer as part of its capital and shall be subject to the risks of
the business. The Broker-Dealer shall have the right to deposit any Advance
obtained under this Agreement in any account or accounts in its own name in any
bank or trust company.
The obligation of the Broker-Dealer to repay the principal amount of each
Advance shall be evidenced by promissory notes executed by the Broker-Dealer
(the "Note") in substantially the form attached hereto as Exhibit "A", payable
to the order of the Lender in a face amount equal to each Advance, bearing
interest at rates to be agreed upon by the Lender and the Broker-Dealer at the
time of the Advance.
The Broker-Dealer shall notify the NASD in writing at the time an Advance
is made, such notice to specify both the amount and the maturity date of each
such Advance.
The Lender irrevocably agrees that the obligations of the Broker-Dealer
under this Agreement with respect to the payment of principal and interest shall
be and are subordinate in right of payment and subject to the prior payment or
provision for payment in full of all other present and future creditors of the
Broker-Dealer arising out of any matter occurring prior to the date on which the
related Advance(s) matures consistent with the provisions of 17 CFR 240.15c3-1
and 240.15c3-1d, except for claims which are the subject of subordination
agreements which rank on the same priority as or are junior to the claim of the
Lender under such subordination agreements.
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I. PERMISSIVE PREPAYMENTS (OPTIONAL)
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(a) Prepayment of balances outstanding less than 12 months
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At the option of the Broker-Dealer, but not at the option of the Lender,
payment of all or any part of an Advance amount prior to the maturity date of
the Advance may be made by the Broker-Dealer only upon receipt of the prior
written approval of the NASD. No prepayment shall be made if, after giving
effect thereto and all payments of any other Payment Obligations (as defined
herein) under any other subordination agreements then outstanding, the maturity
or accelerated maturity of which are scheduled to fall due either within six
months after the date such prepayment is to occur or on or prior to the date on
which the Advance hereof is scheduled to mature, whichever date is earlier),
without reference to any projected profit or loss of the Broker-Dealer, either
aggregate indebtedness of the Broker-Dealer would exceed 900% of its net capital
or such lesser percent as may be made applicable to the Broker-Dealer from time
to time by the NASD, or a governmental agency or self-regulatory body having
appropriate authority, or if the Broker-Dealer is operating pursuant to
paragraph (a(1)(ii) of 17 CFR 240.15c3-l, its net capital would be less than
6% of aggregate debit items computed in accordance with 17 CFR 240.15c3-3a, or,
if registered as a futures commission merchant, 10% of the funds required to be
segregated pursuant to the Commodity Exchange Act and the regulations thereunder
(less the market value of commodity options purchased by option customers on or
subject to the rules of a contract market, provided however, the deduction for
each option customer shall be limited to the amount of customer funds in such
option customer's account), if greater, or its net capital would be less than
200% of the minimum dollar required by 17 CFR 240.15c3-1 including paragraph
(a)(1)(ii), if applicable, or
pretax losses during the latest three-month period equaled more than 15%
of current excess net capital, or
any other requirement as may be made applicable to the Broker-Dealer by the
NASD, or a governmental agency or self-regulatory body having appropriate
authority.
(b) Prepayment of balances outstanding longer than 12 months
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At the option of the Broker-Dealer, but not at the option of the Lender,
payment of all or any part of an Advance amount prior to the maturity date of
the Advance (but at least 12 months after the Advance was received) may be made
by the Broker-Dealer only upon receipt of the prior written approval of the
NASD. No prepayment shall be made if, after giving effect thereto (and all
payments of Payment obligations under any other subordination agreements then
outstanding, the maturity or accelerated maturity of which are scheduled to fall
due either within six months after the date such prepayment is to occur or on or
prior to the date on which the Payment Obligation hereof is scheduled to mature,
whichever date is earlier), without reference to any projected profit or loss of
the Broker-Dealer, either aggregate indebtedness of the Broker-Dealer would
exceed 1000 percent of its net capital or such lesser percent as may be made
applicable to the Broker-Dealer from time to time by the NASD, or a governmental
agency or self-regulatory body having appropriate authority, or if the
Broker-Dealer is operating pursuant to paragraph (a)(1)(ii) of 17 CFR
240.15c3-l, its net capital would be less than 5 percent of aggregate debit
items computed in accordance with 17 CFR 240.15c3-3a, or, if registered as a
futures commission merchant, 7 percent of the funds
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required to be segregated pursuant to the Commodity Exchange Act and the
regulations thereunder (less the market value for commodity options purchased by
option customers on or subject to the rules of a contract market, provided,
however, the deduction for each option customer shall be limited to the amount
of customer funds in such option customers account), if greater, or its net
capital would be less than 120 percent of the minimum dollar amount required by
17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if applicable, or such greater
dollar amount as may be made applicable to the Broker-Dealer by the NASD, or a
governmental agency or self-regulatory body haying appropriate authority.
If a prepayment is made of all or any part of the principal hereof
prior to the due date of an Advance and if the Broker-Dealer's net capital is
less than the amount required to permit such prepayment pursuant to the
foregoing provisions of this section, the Lender agrees irrevocably (whether or
not the Lender had any knowledge or notice of such fact at the time of such
prepayment) to return such prepayment to the Broker-Dealer, its successors, or
assigns, the sum so paid to be held by the Broker-Dealer pursuant to the
provisions hereof as if such prepayment had never been made.
II. SUSPENDED REPAYMENTS
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(a) The Payment Obligation shall be suspended and shall not mature if,
after giving effect to such payment (together with the payment of any Payment
Obligation of the Broker-Dealer under any other subordination agreement
scheduled to mature on or before such Payment Obligation) the aggregate
indebtedness of the Broker-Dealer would exceed 1200% of its net capital or such
lesser percent as may be made applicable to the Broker-Dealer from time to time
by the NASD, or a governmental agency or self-regulatory body having appropriate
authority, or if the Broker-Dealer is operating pursuant to paragraph (a)(1)(ii)
of 17 CFR 240.15c3-1, its net capital would be less than 5% of aggregate debit
items computed in accordance with 17 CFR 240.15c3-3a, or, if registered as a
futures commission merchant, 6% of the funds required to be segregated pursuant
to the Commodity Exchange Act and the regulations thereunder, (less the market
value of commodity options purchased by option customers on or subject to the
rules of a contract market, provided however, the deduction for each option
customer shall be limited to the amount of customer funds in such option
customer's account), if greater, or its net capital would be less than 120% of
the minimum dollar amount required by 17 CFR 240.15c3-1 including paragraph
(a)(1)(ii), if applicable, or such greater dollar amount as may be made
applicable to the Broker-Dealer by the NASD, or a governmental agency or self-
regulatory body having appropriate authority.
(b) (optional) the Broker-Dealer agrees that if its obligation to pay
the principal amount hereof is suspended for a period of six months, the
Broker-Dealer will thereupon commence a rapid and orderly complete liquidation
of its business. The date on which the liquidation commences shall be the
maturity date for each subordination agreement of the Broker-Dealer then
outstanding.
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III. LENDER'S RIGHT TO ACCELERATE THE MATURITY OF THE PAYMENT OBLIGATION
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(OPTIONAL)
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By written notice to the Broker-Dealer at its principal office and to
the NASD, no sooner than six months after the effective date of this Agreement,
the Lender may accelerate the Scheduled Maturity Date and any such Payment
Obligation together with accrued interest or compensation, to a date not earlier
than six months after giving of such notice. However, the right of the Lender to
receive payment together with accrued interest or compensation shall remain
subordinate as required by the provisions of 17 CFR 240.15c3-1 and
240.15c3-1d.
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VI. NOTICE OF MATURITY OR ACCELERATED MATURITY
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The Broker-Dealer shall immediately notify the NASD if, after giving
effect to all payments of Payment Obligations under subordination agreements
then outstanding which are then due or mature within six months without
reference to any projected profit or loss of the Broker-Dealer, either the
aggregate indebtedness of the Broker-Dealer would exceed 1200 percent of its net
capital, or in the case of a Broker-Dealer operating pursuant to paragraph
(a)(1)(ii) of 17 CFR 240.15c3-l, its net capital would be less than 5 percent of
aggregate debit items computed in accordance with 17 CFR 240.15c3-3a, or, if
registered as a futures commission merchant, 6 percent of the funds required to
be segregated pursuant to the Commodity Exchange Act and the regulations
thereunder, (less the market value of commodity options purchased by option
customers on or subject to the rules of a contract market, provided however, the
deduction for each option customer shall be limited to the amount of customer
funds in such option customer's account), if greater, and in either case, if its
net capital would be less than 120 percent of the minimum dollar amount required
by 17 CFR 240.15c3-1 including paragraph (a)(1)(ii), if applicable, or such
greater dollar amount as may be made applicable, to the Broker-Dealer by the
NASD, or a governmental agency or self-regulatory body having appropriate
authority.
VII. BROKER-DEALERS CARRYING THE ACCOUNTS OF SPECIALISTS AND MARKET MAKERS
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IN LISTED OPTIONS
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A Broker-Dealer who guarantees, endorses, carries or clears specialist
or market-maker transactions in options listed on a national
securities exchange or facility of a national securities association
shall not permit a reduction, prepayment or repayment of the unpaid
principal amount if the effect would cause the equity required in such
specialist or market-maker accounts to exceed 1000 percent of the
Broker-Dealer's net capital or such percent as may be made applicable
to the Broker-Dealer from time to time by the NASD or a governmental
agency or self-regulatory body having appropriate authority.
VIII. BROKER DEALERS REGISTERED WITH CFTC
-----------------------------------
If the Broker-Dealer is a futures commission merchant or introductory
broker as that term is defined in the Commodity Exchange Act, the organization
agrees, consistent with the requirements of 1.17(h) of the regulations of the
CFTC (17 CFR 1.17 (h)), that:
(a) Whenever prior written notice by the Broker-Dealer to the NASD is required
pursuant to the provisions of this Agreement, the same prior written notice
shall be given by the Broker-Dealer to (i) the CFTC at its principal office in
Washington, D.C., attention Chief Accountant of Division of Trading and
Markets, and/or (ii) the commodity exchange of which the Organization is a
member and which is then designated by the CFTC as the organization's designated
self-regulatory organization the "DSRO";
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(b) Whenever prior written consent, permission or approval of the NASD is
required pursuant to the provisions of this Agreement, the Broker-Dealer shall
also obtain the prior written consent, permission or approval of the CFTC
(and/or of the DSRO).
(c) Whenever the Broker-Dealer receives written notice of acceleration of
maturity pursuant to the provisions of this Agreement, the Broker-Dealer shall
promptly give written notice thereof to the CFTC at the address stated above
and/or to the DSRO.
IX. GENERAL
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This Agreement shall not be subject to cancellation by either the
Lender or the Broker-Dealer, and no repayment of any Advance shall be made, nor
the Agreement terminated, rescinded, or modified by mutual consent or otherwise
if the effect thereof would be inconsistent with the requirements of 17 CFR
240.15c3-1d.
The Agreement may not be transferred, sold, assigned, pledged, or
otherwise encumbered or otherwise disposed of, and no lien, charge or other
encumbrance may be created or permitted to be created thereon without the prior
written consent of the NASD.
In the event of the appointment of a receiver or trustee of the
Broker-Dealer or in the event of its insolvency, liquidation pursuant to the
Securities Investor Protection Act of 1970 or otherwise, bankruptcy assignment
for the benefit of creditors, reorganization whether or not pursuant to
bankruptcy laws, or any other marshalling of the assets and liabilities of the
Broker-Dealer shall mature, and the holder hereof shall not be entitled to
participate or share, ratably or otherwise, in the distribution of the assets of
the Broker-Dealer until all claims of all other present and future creditors of
the Broker-Dealer, whose claims are senior hereto, have been fully satisfied.
The Lender irrevocably agrees that the execution of this Agreement is
not being made in reliance upon the standing of the Broker-Dealer as a member
organization of the NASD or upon the NASD surveillance of the Broker-Dealer's
financial position or its compliance with the by-laws, rules and practices of
the NASD.
The Lender has made such investigation of the Broker-Dealer and its
partners, officers, directors and stockholders as the Lender deems necessary and
appropriate under the circumstances. The Lender is not relying upon the NASD to
provide any information concerning or relating to the Broker-Dealer and agrees
that the NASD has no responsibility to disclose to the Lender any information
concerning or relating to the Broker-Dealer which it may now, or at any future
time, have.
The term "Broker-Dealer" as used in this Agreement shall include the
broker-dealer, its heirs, executors, administrators, successors, and assigns.
The term "Payment Obligation" shall mean the obligation of the
Broker-Dealer to repay cash loaned to it pursuant to this Revolving Subordinated
Loan Agreement.
The provisions of this Agreement shall be binding upon the
Broker-Dealer and the Lender and their respective heirs, executors,
administrators, successors and assigns.
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Any controversy arising out of or relating to this Agreement may be
submitted to and settled by arbitration pursuant to the By-Laws and rules of the
NASD. The Broker-Dealer and the Lender shall be conclusively bound by such
arbitration.
This instrument embodies the entire agreement between the
Broker-Dealer and Lender and no other evidence of such agreement has been or
will be executed without the prior written consent of the NASD.
This Agreement shall be deemed to have been made under, and shall be
governed by, the laws of the State of ______________________ in all respects.
IN WITNESS WHEREOF, the parties have set their hands and seal this
day of August 4, 1998.
Friedman, Billings, Xxxxxx & Co., Inc.
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(Name of Broker-Dealer)
By /s/ Xxxx Xxxxxxxx (L.S.)
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Custodial Trust Company (L.S.)
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(Lender)
By /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, SVP
FOR NASD USE ONLY
ACCEPTED BY /s/ Xxxxx X. Xxxxx
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(Name)
Compliance Specialist
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(Title)
EFFECTIVE DATE: Dec. 22, 1998
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LOAN NUMBER: 07-R SLA-10227
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ADDENDUM
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(1) Notwithstanding any contrary provision in the Revolving
Subordinated Loan Agreement dated August 4, 1998 (the "Agreement") between
Custodial Trust Company (the "Lender") and Friedman, Billings, Xxxxxx & Co.,
Inc. (the "Broker-Dealer"), the obligation of Lender to make any Advance under
the Credit Line shall be subject to the fulfillment of the condition precedent
that on or before the date for the making of such Advance there not have
occurred or exist a material adverse change (or an event or condition that has a
reasonable likelihood of resulting in or causing a material adverse change) in
any of (a) the condition (financial or otherwise), business, performance,
operations or properties of Broker-Dealer, (b) the prospects of Broker-Dealer or
of the securities industry in general, (c) the legality, validity or
enforceability of the Agreement or the Note, (d) the ability of Broker-Dealer to
repay any Advance or to perform any of its other obligations under the Agreement
or the Note, or (e) the rights and remedies of Lender under the Agreement or the
Note. If an Advance is made, then such condition precedent shall be deemed to
have been fulfilled with respect to such Advance. Any Advance made by Lender
shall be subject to all the provisions of the Agreement.
(2) Lender may at any time and from time to time, at its discretion
and without Broker-Dealer's further consent, sell participations in any or all
of the Advances to one or more affiliates of Lender, provided, however (a) that
Lender's obligations under the Agreement shall remain unchanged and Lender shall
remain solely responsible to Broker-Dealer for the performance thereof, (b) that
each such participation shall be subject to all the terms and conditions of the
Agreement, and (c) that Lender shall provide the NASD with (i) a copy of the
participation agreement pursuant to which any such participation is created and
sold and (ii) an attestation from each purchaser of any such participation
setting forth substantially the same type of information as is required by the
NASD form of Lender's Attestation.
(3) On each Commitment Fee Payment Date (as herein defined),
Broker-Dealer shall pay to Lender a commitment fee computed at the rate of fifty
basis points (0.50%) per annum on the average daily unused portion of the Credit
Line during the period commencing with the immediately preceding Commitment Fee
Payment Date and ending with such Commitment Fee Payment Date (or, in the case
of the first such period, commencing with the effective date). "Commitment Fee
Payment Date" means (i) the first business day of the third, sixth
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and ninth calendar month commencing after the effective date, and (ii) the
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Scheduled Maturity Date.
FRIEDMAN, BILLINGS, XXXXXX & CO., INC.
(Broker-Dealer)
By: /s/ Xxxx Xxxxxxxx
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Name:
Title:
By:
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Name:
Title:
CUSTODIAL TRUST COMPANY
(Lender)
By: /s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
Title: Senior Vice President
