1
EXHIBIT 10.14
================================================================================
THE NOTES TO BE OFFERED AND SOLD PURSUANT TO THIS NOTE AGREEMENT HAVE NOT BEEN
AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS, AND ARE BEING PRIVATELY OFFERED
IN THE UNITED STATES ONLY TO INSTITUTIONS THAT ARE "ACCREDITED INVESTORS"
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) AND (7) UNDER THE SECURITIES ACT
OR "QUALIFIED INSTITUTIONAL BUYERS" WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT. THE NOTES MAY BE REOFFERED, RESOLD OR OTHERWISE TRANSFERRED
ONLY IN ACCORDANCE WITH THE SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND IN
COMPLIANCE WITH THE PROVISIONS OF THIS NOTE AGREEMENT.
BOSQUE ASSET CORP.
NOTE AGREEMENT
DATED AS OF JUNE 6, 1997
$93,908,994 - 7.66% ASSET-BACKED NOTES DUE JUNE 5, 2002
================================================================================
2
TABLE OF CONTENTS
SECTION 1 DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.3 Other References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.4 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2 NOTES AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Notes and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Interest and Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Interest Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.5 Lockbox Accounts; Distributions of Portfolio Collections. . . . . . . . . . . . . . . . . . . . . . 17
2.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.7 Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 3 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.2 Authorization and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.3 No Conflicts or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.5 No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.7 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.8 No Default; Potential Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.10 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.11 Burdensome Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.13 Principal Office, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.15 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.16 Government Regulation; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.17 No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.18 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.19 Ownership of the Company and each Realty Company . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.21 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.22 Collateral Loan Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.23 No Setoff Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.24 Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.25 Ownership of the Collateral Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.26 Enforceability of Collateral Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.27 No Modification or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.28 Survival of Representations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) TABLE OF CONTENTS
3
SECTION 4 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1 Note Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.3 Delivery of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.5 Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.6 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.7 Incumbency Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.8 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.9 Recordable Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.10 Lien Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.12 Rating Agency Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.13 CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.14 Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.15 Opinion Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.16 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.1 Financial Statements, Reports and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.2 Additional Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3 Payment of Taxes, Impositions and Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Maintenance of Existence and Rights; Conduct of Business . . . . . . . . . . . . . . . . . . . . . . 29
5.6 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.7 Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.8 Compliance with Note Agreement Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.9 Compliance with Material Agreements and Organizational Documents . . . . . . . . . . . . . . . . . . 29
5.10 Operations and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.11 Books and Records; Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Authorizations and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.14 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.15 Collection Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.16 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.17 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.18 Grant of Specific Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.19 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.20 Disposition of Collateral Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.21 General Indemnity; Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.3 Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.4 Alteration of Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.5 Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(ii) TABLE OF CONTENTS
4
6.6 Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.7 Limitation on Sale of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.8 Name, Fiscal Year and Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.9 Liquidation, Mergers, Consolidations and Dispositions of Substantial Assets . . . . . . . . . . . . 33
6.10 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.11 No Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.12 Purchase of Substantial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.13 New Places of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.14 Fictitious Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.15 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.16 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 7 COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.2 Lien on REO Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Insurance of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 Possession of Collateral Documents; Sale of Collateral . . . . . . . . . . . . . . . . . . . . . . . 35
7.5 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.6 Appointment of Collateral Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.7 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.2 Remedies Upon Event of Default; Application of Payments . . . . . . . . . . . . . . . . . . . . . . 38
8.3 Performance by the Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.4 Breach of Certain Representations and Warranties; Breach of Collateral Document
Delivery Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9 TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.1 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Delegation of Duties; Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Limitation of Trustee's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.4 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.5 Collateral Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.6 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.7 Relationship of the Noteholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.8 Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.1 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.2 Accounting Terms and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.4 Payment of Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.6 Choice of Law; Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 46
10.7 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.8 Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.9 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(iii) TABLE OF CONTENTS
5
10.10 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.11 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.14 Registration; Exchange; Substitution of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.15 Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.16 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.17 Oral Agreements Ineffective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SCHEDULE 1 Collateral Loan Schedule
SCHEDULE 2 Location of Servicer's Offices
SCHEDULE 3 Allocated Purchase Price Schedule
SCHEDULE 4 Closing Review Procedures
EXHIBIT A Form of Note
EXHIBIT B Form of Collateral Assignment
EXHIBIT C Form of Mortgage
EXHIBIT D Form of REO Note
EXHIBIT E Form of Asset Portfolio Report
EXHIBIT F Form of Investor Letters
EXHIBIT G Form of Report to Noteholders
(iv) TABLE OF CONTENTS
6
NOTE AGREEMENT
THIS NOTE AGREEMENT is entered into as of June 6, 1997, among BOSQUE
ASSET CORP., a Texas corporation (the "COMPANY"), SVD REALTY, L.P., a Texas
limited partnership ("SVD"), SOWAMCO XXII, LTD., a Texas limited partnership
("SOWAMCO"), BOSQUE INVESTMENT REALTY PARTNERS, L.P., a Texas limited
partnership ("BOSQUE REALTY"; SVD, SOWAMCO and Bosque Realty, are herein each
referred to individually as a "REALTY COMPANY" and collectively as the "REALTY
COMPANIES"), and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as the Trustee for
the Noteholders.
RECITALS:
Contemporaneously herewith, the Company is (i) acquiring a portfolio
of secured and unsecured consumer, residential and commercial loans and (ii)
issuing and selling the Notes in the aggregate principal amount of ninety-
three million, nine hundred eight thousand, nine hundred ninety-four and No/100
Dollars ($93,908,994) to be used by the Company to acquire such portfolio of
loans.
For adequate and sufficient consideration, the Company, the Realty
Companies and the Trustee agree as follows for the benefit of each other and
for the equal and ratable benefit of the Noteholders:
SECTION 1 DEFINITIONS AND TERMS
1.1 DEFINED TERMS. As used in this Agreement:
"ACCOUNT DEBTOR" means, collectively, the "borrower" and each other
obligor, guarantor or other liable party under a Collateral Loan.
"ADDITIONAL LOCKBOX BANK" means Fort Xxxxx National Bank, in its
capacity as Additional Lockbox Bank under the applicable Lockbox Agreement, and
any replacements and successors designated pursuant to the terms of such
Lockbox Agreement, approved in writing by the Trustee and the Determining
Noteholders, and acceptable to the Rating Agencies.
"AFFILIATE" means, as to any Person, any Subsidiary of such Person, or
any Person which, directly or indirectly, controls, is controlled by, or is
under common control with such Person. For the purposes of this definition,
"control" means the possession of the power to direct or cause the direction of
management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" means this Note Agreement, as it may be amended, renewed,
extended, or restated from time to time.
"ALLONGE" shall mean an endorsement on a separate sheet of paper
accompanying a promissory note, endorsing the note to "Bankers Trust Company of
California, N.A., as Trustee for the Noteholders" or in blank.
NOTE AGREEMENT
7
"APPLICABLE ENVIRONMENTAL LAWS" mean any law, statute, ordinance,
rule, regulation, order or determination of any Governmental Authority or any
board of fire underwriters (or other body exercising similar functions),
pertaining to health, safety or the environment, including, without limitation,
all applicable flood disaster laws and health, safety and environmental laws
and regulations pertaining to health, safety or the environment, including
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Conservation and Recovery Act of 1976, the
Superfund Amendments and Reauthorization Act of 1986, the Occupational Safety
and Health Act, the Texas Water Code, the Texas Solid Waste Disposal Act, the
Texas Workers' Compensation Laws, and any federal, state or municipal laws,
ordinances, regulations or laws which may now or hereafter require removal of
asbestos or other hazardous wastes from any property of the Company, the
Servicer, or the Realty Companies, or impose any liability on the Company, the
Trustee, the Servicer, the Realty Companies, or any other Person related to
asbestos or other hazardous wastes in any property of the Company, the
Servicer, or the Realty Companies.
"ASSET PORTFOLIO" means the portfolio of secured and unsecured
consumer, residential and commercial loans acquired by the Company pursuant to
the Loan Contribution Agreements on or before the Closing Date and any REO
Property now owned by any Realty Company or hereafter acquired by the REO
Affiliate in connection with the future foreclosure, restructuring, or
settlement of such loans, including, without limitation all REO Notes, together
with all documents, instruments, certificates and other information related
thereto.
"ASSET PORTFOLIO REPORT" means a report, in a form substantially
similar to the form of report attached hereto as EXHIBIT E showing various
information concerning the Asset Portfolio and each Collateral Loan included
therein, as of the end of the month preceding delivery of such report.
"AUTHORIZED OFFICER" means the Chairman, President, Vice President of
any seniority or designation, Chief Financial Officer, Treasurer, Assistant
Treasurer, or any other officer authorized by the Board of Directors of the
Company or REO General Partner, as applicable.
"BUSINESS DAY" means any day other than Saturday, Sunday, and any
other day that commercial banks are authorized by Governmental Requirements to
be closed in Texas or California.
"CLOSING DATE" means June 6, 1997.
"CLOSING REVIEW" means a review, in accordance with the procedures set
forth in SCHEDULE 4_attached hereto and incorporated herein, of the Asset
Portfolio conducted by KPMG Peat Marwick LLP or other audit firm engaged by the
Company and acceptable to the Determining Noteholders, for the benefit of the
Noteholders, to determine the accuracy of the representations made hereunder
with respect to the Collateral Loans, which review is to be completed and
delivered no later than thirty (30) days following the Closing Date and is to
be paid for by the Company.
"COLLATERAL" means, at any time, all Collateral Loans, all other
property then subject to the Security Agreement, and all REO Property.
"COLLATERAL ASSIGNMENT" means an Assignment of Notes and Liens in a
form substantially similar to EXHIBIT "B" attached hereto and incorporated
herein, and collectively, all Assignments of Notes and Liens, in favor of
Bankers Trust Company of California, N.A., as Trustee for the Noteholders, as
security
2 NOTE AGREEMENT
8
for the Obligation, each of which (a) is intended to cover all of the
Collateral Loans being a part of the Asset Portfolio and all renewals,
modifications, amendments, supplements and restatements thereof, (b) shall be
duly signed and notarized in accordance with applicable state law, and (c)
shall be in proper form for recording, in order to, when filed, confirm and
perfect the Trustee's Liens in the Collateral.
"COLLATERAL CUSTODIAN" means Fleet National Bank, a national banking
association, or its successor or any other Person agreed upon in writing by the
Trustee, the Determining Noteholders, and, provided no Event of Default exists,
the Company, and being a Person acceptable to the Rating Agency.
"COLLATERAL DOCUMENTS" means all promissory notes evidencing
Collateral Loans (including all REO Notes), all mortgages, deeds of trust,
security agreements, financing statements and other documents securing
Collateral Loans (including all REO Security Documents), and all loan
agreements and other documents executed by Account Debtors in connection with
Collateral Loans including, without limitation, the documents listed in SECTION
4.3.
"COLLATERAL LOAN" means each loan included in the Asset Portfolio
which has not been sold, foreclosed upon, settled, or otherwise disposed of and
each loan evidenced by an REO Note.
"COLLATERAL LOAN SCHEDULE" means SCHEDULE 1 attached hereto and
incorporated herein listing each Collateral Loan included in the Asset
Portfolio together with the outstanding principal balance of each Collateral
Loan, the last payment or pay-to date of each such Collateral Loan, the Asset
number for each such Collateral Loan and the name and address of each Account
Debtor.
"CUSIP NUMBER" is defined in SECTION 2.1(d).
"CUSTODIAL AGREEMENT" means the Custodial Agreement among the
Collateral Custodian, the Company, the Servicer and the Trustee whereby the
Collateral Custodian agrees to act as bailee on behalf of the Trustee for the
documents evidencing the Collateral Loans, as such Custodial Agreement may be
amended or supplemented from time to time, together with any replacement or
substitution therefor.
"DEFAULT RATE" means a rate per annum equal to 12.66% for the Notes.
"DETERMINING NOTEHOLDERS" means, on any date of determination those
Noteholders who collectively hold at least 51% of the then-outstanding
aggregate principal amount of the Notes (excluding any Notes held by the
Company, any Shareholder, the Servicer, the Realty Companies, the REO General
Partner or any Affiliate of the Company, any Shareholder, the Servicer, the
Realty Companies, or the REO General Partner).
"DISBURSEMENT ACCOUNT" means a trust account established with the
Trustee and styled "Bankers Trust Company of California, N.A., as Trustee for
Noteholders" into which the Lockbox Bank shall, pursuant to SECTIONS 2.5 (b)
and (c) hereof, deposit funds for payment by the Trustee to the Noteholders of
principal, interest and Make-Whole Amounts, if any, and into which all proceeds
received by the Trustee as a result of the Trustee foreclosing upon the
Collateral or otherwise exercising any other remedies available to it under the
Note Agreement Documents following the occurrence of an Event of Default shall
be deposited.
"DISTRIBUTION DATE" is defined in SECTION 2.1(b).
3 NOTE AGREEMENT
9
"DISPOSED" has the meaning specified in the Resource Conservation and
Recovery Act of 1976, provided that to the extent that any other applicable
federal, state or local Governmental Requirement establishes a meaning for
"disposed" which is broader, such broader meaning shall apply.
"ENVIRONMENTAL SITE ASSESSMENT" shall mean an environmental site
assessment report conforming to the standards for Phase I Environmental Site
Assessments in ASTM Standard Procedures for Environmental Site Assessments, E
1527-93 or other standards reasonably satisfactory to the Servicer (either of
which, if applicable, is herein called the "ACCEPTABLE STANDARDS"), which, if
applicable, is in all respects satisfactory to the Servicer and which, if
applicable, has been prepared by a qualified environmental firm reasonably
satisfactory to the Servicer (a) indicating that, on the basis of an
investigation conducted in accordance with the Acceptable Standards, (i) the
firm found no Hazardous Substance present on or in the property that is the
subject of its report at levels that require reporting or remediation, or both,
pursuant to any Applicable Environmental Laws that are applicable to such
property ("PROHIBITED HAZARDOUS SUBSTANCES"), (ii) it did not learn of any
conditions on or in the land adjacent to the property that is the subject of
its report that would cause it to believe that there might be prohibited
Hazardous Substances present on or in the property that is the subject of its
report, and (iii) no notice of violation of any of the Applicable Environmental
Laws, or other claim or order issued pursuant to any of the Applicable
Environmental Laws, has been duly filed against such property by any
Governmental Authority; or (b) if any Prohibited Hazardous Substance is present
on such property or if any such notice of violation, claim or order has been
filed, providing evidence satisfactory to the Servicer as to the extent and
nature of the environmental problem caused thereby and the likely costs and
duration of any recommended remediation.
"EQUITY PAYMENT" is defined in SECTION 2.5(c)(ii).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all regulations issued pursuant
thereto.
"EVENT OF DEFAULT" is defined in SECTION 8.1.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board, or through other appropriate boards or
committees thereof, as in effect from time to time in the United States of
America.
"GOVERNMENTAL AUTHORITY" means any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over the Company, the Servicer, the
Realty Companies or any of their businesses, operations or properties or any
other Person.
"GOVERNMENTAL REQUIREMENTS" means all applicable statutes, laws,
treaties, ordinances, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, and interpretations of any Governmental Authority.
"HAZARDOUS SUBSTANCE" has the meaning specified in the Superfund
Amendments and Reauthorization Act of 1986, provided that to the extent that
any other applicable federal, state or local Governmental Requirement
establishes a meaning for "hazardous substance," "hazardous materials," "toxic
substances," or "hazardous wastes" which is broader, such broader meaning shall
apply.
4 NOTE AGREEMENT
10
"IMPOSITIONS" means all real estate and personal property taxes;
charges for any easement, license or agreement maintained for the benefit of
any of the real property of the Realty Companies, or any part thereof; and all
other taxes, charges and assessments and any interest, costs or penalties with
respect thereto, general and special, ordinary and extraordinary, foreseen and
unforeseen, of any kind and nature whatsoever, which at any time prior to or
after the execution hereof may be assessed, levied or imposed upon any of the
real property of the Realty Companies, or any part thereof, or the ownership,
use, sale, occupancy or enjoyment thereof, in each case which, if not timely
paid or otherwise discharged, would materially and adversely affect (a) such
ownership, use, sale, occupancy or enjoyment, (b) the financial condition of
the Realty Company owning such property or (c) the Trustee's Lien on any such
property.
"INDEBTEDNESS" means, with respect to any Person, all indebtedness,
obligations and liabilities of such Person, including without limitation: (a)
all "liabilities" which would be reflected on a balance sheet of such Person,
prepared in accordance with GAAP; (b) all obligations of such Person in respect
of any guaranty; and (c) all obligations of such Person in respect of any
capital lease or sublease that is required by GAAP to be capitalized on a
balance sheet.
"INDEMNIFIED LIABILITIES" is defined in SECTION 5.21(a).
"INDEMNIFIED PARTIES" is defined in SECTION 5.21(a).
"INVESTMENT" in any Person means any investment, whether by means of
share purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person, the guaranty of any Indebtedness of such
Person, or the subordination of any claim against such Person to other
Indebtedness of such Person, other than any investments permitted by Servicer
under this Agreement in the ordinary course of servicing the Asset Portfolio.
"LEASE-UP EXPENSES" means as to any REO Property, (a) all reasonable
and customary leasing commissions, (b) all reasonable tenant improvement costs
actually paid by the Company or the Realty Company with respect to the leasing
of space in such REO Property pursuant to a written lease, and (c) all capital
expenditures actually paid by the Company or the Realty Company with respect to
other improvements to such REO Property, provided that such capital
expenditures are expended in accordance with a budget for such REO Property
which has been approved in writing by the Servicer; all as evidenced by
invoices and such other back-up information as the Servicer may require.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or capital lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"LIQUIDITY RESERVE ACCOUNT" means, with respect to the Asset
Portfolio, an interest bearing trust account established by the Company with
the Lockbox Bank which account shall be (a) funded and disbursed in accordance
with SECTION 2.5(b)(VII) and SECTION 2.7 and (b) pledged and assigned pursuant
to the Pledge of Accounts to the Trustee for the benefit of the Noteholders as
additional security for the payment, performance and observance of the
Obligation. Funds on deposit in the Liquidity Reserve Account may only be
invested in Temporary Cash Investments or used to make interest payments on the
Notes.
5 NOTE AGREEMENT
11
"LIQUIDITY RESERVE AMOUNT" means an amount equal to the interest
payable on the Notes for a two-(2) month period calculated on the outstanding
principal balance of the Notes on each Payment Date after giving effect to
principal payments actually paid on or prior to such Payment Date and assuming
no additional principal payments are made during such two-month period.
"LOAN CONTRIBUTION AGREEMENTS" means the Loan Contribution Agreements,
dated as of the date hereof by and between one of the Shareholders, as
transferor, and the Company, as transferee.
"LOCKBOX" means each post office box, or collectively the post office
boxes, established by (i) the Company and the Lockbox Bank and (ii) the Company
and the Additional Lockbox Bank, in each case pursuant to the provisions of
SECTION 3.5 and the applicable Lockbox Agreement for the receipt of payments
from the Collateral Loans.
"LOCKBOX ACCOUNTS" means (i) a segregated trust account or accounts
established by the Company and maintained with the Lockbox Bank and styled
"Bosque Asset Corp., for the benefit of Bankers Trust Company of California,
N.A., as Trustee," and (ii) a segregated trust account or accounts established
by the Company and maintained with the Additional Lockbox Bank and styled
"Bosque Asset Corp., for the benefit of Bankers Trust Company of California,
N.A., as Trustee," which accounts shall be (a) subject to the provisions of
SECTION 2.5, and (b) pledged and assigned to the Trustee pursuant to the Pledge
of Accounts for the benefit of the Noteholders as additional security for the
payment, performance and observance of the Obligations.
"LOCKBOX AGREEMENTS" means (i) that certain Lockbox Agreement, dated
on or before the Closing Date, executed by and among the Company, the Realty
Companies, the Trustee, the Servicer and the Lockbox Bank, and all amendments,
modifications and replacements thereof and (ii) that certain Lockbox Agreement,
dated on or before the Closing Date, executed by and among the Company, the
Realty Companies, the Trustee, the Servicer and the Additional Lockbox Bank,
and any and all amendments, modifications and replacements thereof.
"LOCKBOX BANK" means NationsBank of Texas, N.A., in its capacity as
Lockbox Bank under the applicable Lockbox Agreement, and any replacements and
successors designated pursuant to the terms of such Lockbox Agreement, approved
in writing by Trustee and the Determining Noteholders, and acceptable to the
Rating Agency.
"MAKE-WHOLE AMOUNT" means, as of the date of prepayment pursuant to
SECTION 2.2(c)(i) (the "PREPAYMENT DATE"), the excess, if any, discounted as
provided for herein below, of (a) the amount of interest that would have
accrued on the Notes as provided for herein during the Premium Period
(hereinafter defined) over (b) the amount of interest that would have accrued
on the Notes during the Premium Period at a per annum rate of interest equal to
0.5% added to the yield on an interpolated United States Treasury security with
a maturity equal to the average life of the Notes. Such excess amount shall be
discounted to a present value amount to the Prepayment Date at the yield
described in CLAUSE (a) above. As used herein, the term "PREMIUM PERIOD" means
the period commencing upon the Prepayment Date through the earlier of (i) the
Maturity Date or (ii) the average life of the Notes applying the remaining
Projected Portfolio Collections in effect as of the last day of the month
preceding the Prepayment Date.
"MATERIAL ADVERSE EFFECT" means any circumstance or event which (a)
could have any adverse effect whatsoever upon the validity, performance or
enforceability of any Note Agreement Documents, (b)
6 NOTE AGREEMENT
12
is or might be material and adverse to the financial condition or business
operations of the Company or any Realty Company, (c) could impair the ability
of the Company or any Realty Company to fulfill its obligations under the Note
Agreement Documents, or (d) could reasonably be expected to have a material and
adverse effect on the timely payment of interest on, or the ultimate payment of
principal of, the Notes.
"MATURITY DATE" means the earlier of (a) the day on which the Company
satisfies in full all of its Obligations hereunder and in respect of the other
Note Agreement Documents and the Trustee and the Noteholders so acknowledge in
writing or (b) June 5, 2002.
"MAXIMUM RATE" means, on any date of determination, the highest
nonusurious rate of interest (if any) permitted by applicable Governmental
Requirements on such day.
"MOODY'S" means Xxxxx'x Investors Service, Inc. and its successors.
"MORTGAGE" means any deed of trust or mortgage (duly acknowledged and
in recordable form) in a form substantially similar to EXHIBIT "C" attached
hereto, with such modifications as may be necessary to reflect legal
requirements and local practices of the jurisdiction in which the REO Property
is located, covering an REO Property, executed by a Realty Company, and granted
to the Company to secure repayment of the REO Notes, in form and substance
sufficient to grant a first priority lien on the REO Property, and all
renewals, extensions, modifications, amendments or supplements thereto, and all
mortgages or deeds of trust given in renewal, extension, modification,
restatement or replacement thereof.
"NET OPERATING INCOME" means, with respect to each REO Property and
any period, the excess of (a) all of the Company's or the Realty Company's cash
receipts related to such REO Property (including all rents and other revenues
but excluding security deposits) over (b) all reasonable and customary expenses
actually paid during such period which, in accordance with GAAP, would be
classified as operating expenses for a property similar to such REO Property
(including utility-related expenses, taxes, insurance expenses, repair and
maintenance expenses, and janitorial and property-management fees actually paid
by the Company or the Realty Company to an unrelated third party) and all
Lease- Up Expenses paid for such REO Property during such period.
"NET SALES PROCEEDS" means, with respect to the sale of any REO
Property, Collateral Loan or other Collateral, including any personal property
securing a Collateral Loan, the gross proceeds received from such sale, less
the reasonable and customary closing costs actually paid by the Company or the
applicable Realty Company to unrelated third parties.
"NOTE AGREEMENT DOCUMENTS" means this Agreement, the Notes, the REO
Security Documents, the Partnership Pledge Agreement, the Pledge of Accounts,
the Collateral Assignments and Allonges for each Collateral Loan, the Lockbox
Agreements, the Custodial Agreement, the Security Agreement, the Servicing
Agreement, the Loan Contribution Agreements (including any renewals, extensions
and refundings thereof of all such documents and agreements), and any
agreements, certificates or documents, including UCC-1 financing statements and
UCC-3 assignments of financing statements (and with respect to this Agreement,
and such other agreements and documents, any amendments or supplements thereto
or modifications thereof) executed and delivered pursuant to the terms of this
Agreement.
"NOTEHOLDER" means each holder of the Notes issued hereunder.
7 NOTE AGREEMENT
13
"NOTES" means the 7.66% Notes due June 5, 2002, executed by the
Company and delivered to the Noteholders pursuant to the terms of this
Agreement, substantially in the form of EXHIBIT "A", together with any
renewals, extensions or modifications thereof, which Notes have been rated "A2"
by Moody's as of the date of issuance of the Notes.
"OBLIGATION" means all present and future indebtedness, obligations,
and liabilities of the Company to the Noteholders, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this Agreement or
represented by the Notes, including, without limitation, all principal thereof,
all interest accruing thereon, all Make- Whole Amounts, and all attorneys' fees
incurred in the enforcement or collection thereof, regardless of whether such
indebtedness, obligations and liabilities are direct, indirect, fixed,
contingent, joint, several or joint and several; together with all
indebtedness, obligations and liabilities of the Company to the Trustee or the
Noteholders evidenced or arising pursuant to any of the other Note Agreement
Documents, and all renewals and extensions thereof.
"OPERATING RESERVE ACCOUNT" means, with respect to the Asset
Portfolio, an interest bearing checking account established by the Company with
the Lockbox Bank and styled "J-Hawk Servicing Corporation, as agent for Bosque
Asset Corp., for the benefit of Bankers Trust Company of California, N.A., as
Trustee for Noteholders", which account shall be (a) funded in accordance with
SECTION 2.5(b)(VI) and SECTION 2.7 of this Agreement and disbursed by the
Servicer, and (b) pledged and assigned pursuant to the Pledge of Accounts to
the Trustee for the benefit of the Noteholders as additional security for the
payment, performance and observance of the Obligation. Funds on deposit in the
Operating Reserve Account may only be invested in Temporary Cash Investments.
"OTHER TAXES" means, for any Person, all stamp or documentary taxes or
any excise or property taxes, charges or similar levies which arise from any
payment under this Agreement or the Notes or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or the Notes, but
not including the Taxes.
"PARTNERSHIP PLEDGE AGREEMENTs" means each Security Agreement and
Pledge of Partnership Interest, dated on or before the Closing Date and
executed by the Realty General Partners and each other partner of each Realty
Company.
"PAYMENT DATE" is defined in SECTION 2.2(a).
"PERMITTED LEASE-UP EXPENSES" means all Lease-Up Expenses with respect
to any REO Property which do not exceed, on a cumulative basis with respect to
such REO Property, $100,000 or such other limit as may be agreed to in writing
by the Servicer.
"PERMITTED LIENS" means: (a) Liens granted to the Trustee for the
benefit of Noteholders to secure the Obligation; (b) pledges or deposits made
to secure payment of worker's compensation (or to participate in any fund in
connection with worker's compensation), unemployment insurance, pensions or
social security programs; (c) Liens imposed by mandatory provisions of law such
as for materialmen's, mechanic's, warehousemen's and other like Liens arising
in the ordinary course of business, securing Indebtedness whose payment is not
yet due; (d) Liens for Taxes, imposed upon a Person or upon such Person's
income or profits or property, if the same are not yet due and payable, if the
same are being contested in good faith and as to which adequate reserves have
been provided or if the same are otherwise permitted by SECTION 5.3 hereunder;
(e) good faith deposits in connection with tenders, leases, real estate
8 NOTE AGREEMENT
14
bids or contracts (other than contracts involving the advance of money),
pledges or deposits to secure public or statutory obligations, deposits to
secure (or in lieu of) surety, stay, appeal or customs bonds and deposits to
secure the payment of taxes, assessments, customs duties or other similar
charges; (f) encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, provided that such do not
impair the use of such property for the uses intended, and none of which is
violated by existing or proposed structures or land use; (g) exceptions
affecting title which are shown in a title policy or attorney's opinion
included in the Company's files and (h) Permitted Prior Liens.
"PERMITTED PRIOR LIENS" means Liens upon any Underlying Collateral
securing payment of a Collateral Loan existing on the date the Collateral Loan
was acquired by the Company and any Liens securing an REO Note.
"PERSON" shall include an individual, a corporation, a joint venture,
a partnership, a limited liability company, a trust, an unincorporated
organization or a government or any agency or political subdivision thereof.
"PLAN" means an employee benefit plan or other plan maintained by the
Company for employees of the Company and/or the Realty Companies and covered by
Title IV of ERISA, or subject to the minimum funding standards under SECTION
412 of the Internal Revenue Code of 1986, as amended.
"PLEDGE OF ACCOUNTS" means the Security Agreement, Assignment of
Deposits and Money Market Instruments, executed by the Company in favor of the
Trustee for the benefit of the Noteholders.
"PORTFOLIO COLLECTIONS" for any calendar month (commencing May 1,
1997) means an amount equal to any and all cash proceeds received by the
Company, the Realty Companies or the Servicer or any of their Affiliates with
respect to the Company's or the Realty Companies' (or their Affiliate's)
ownership, management and disposition of any and all Collateral Loans and REO
Properties in the Asset Portfolio, including, without limitation, (i) all
interest, principal, and other payments on Collateral Loans from any source,
(ii) all Net Operating Income from REO Properties, (iii) all loan settlement
payments, any restructure or commitment or other loan fees, payments on any
judgments or settlement of litigation with respect to Collateral Loans, (iv)
all Net Sales Proceeds from the sale of REO Properties, Collateral Loans, and
other items of Collateral including any payments received by the Company from
any Shareholder or made by the Company to the Lockbox Accounts, in each case,
as required by SECTION 8.4, (v) all insurance proceeds and condemnation
proceeds, and (vi) all interest, dividends and other earnings directly or
indirectly paid to the Company on funds, accounts (including all investment
earnings on funds in the Liquidity Reserve Account, Lockbox Accounts, Operating
Reserve Account and all other general or special deposit accounts of the
Company or the Realty Companies) and investments of the Company, but excluding
any escrow deposits paid to the Company for tax or insurance escrows under the
Collateral Loans. Notwithstanding anything to the contrary contained in this
Agreement, all Net Operating Income from any REO Property with respect to any
calender month shall not be deemed to be a part of Portfolio Collections
received by the Company until the first to occur of (i) the payment of such Net
Operating Income by the respective Property Manager to the Company, the
applicable Realty Company or the Servicer, or (ii) the fifteenth (15th) day of
the next following calendar month.
"POTENTIAL DEFAULT" means an event or condition which but for the
lapse of time or the giving of notice, or both, would constitute an Event of
Default.
9 NOTE AGREEMENT
15
"PROJECTED PORTFOLIO COLLECTIONS" means the Portfolio Collections
which the Company and Servicer reasonably expect to receive from the Asset
Portfolio and which have been determined in a manner consistent with the
Servicer's past practices taking into consideration the Servicer's historical
performance in collecting assets similar to the Collateral, and which are
reflected in the monthly Asset Portfolio Report.
"PROPERTY ACCOUNT" means the demand deposit bank account established
by a Property Manager, upon the direction of Servicer, in connection with the
operation and management of a REO Property.
"PROPERTY MANAGER" means any Person hired by Servicer to manage an REO
Property.
"PROTECTIVE ADVANCE" means a payment of expenses by the Company,
Servicer or any Property Manager which in the reasonable determination of the
Servicer shall be necessary to protect and maintain the value of any Collateral
Loan or REO Property (such expenses shall include, without limitation,
Permitted Lease-Up Expenses, ad valorem taxes, insurance expenses, security,
deferred maintenance, litigation expenses, expenses to enforce remedies, and
payments on Permitted Liens).
"PURCHASE PRICE" means, with respect to the purchase of a Collateral
Loan by a Shareholder or the payment by the Company into the applicable Lockbox
Account, in each case as required by SECTION 8.4, the allocated price for such
Collateral Loan as set forth on SCHEDULE 3, plus any out-of-pocket expenses
incurred by the Company in connection with such Collateral Loan during its
ownership of such Collateral Loan, minus any principal payments made on such
Collateral Loan received by the Company during its ownership of the Collateral
Loan.
"QUALIFIED INSTITUTIONAL BUYER" has the meaning ascribed to such term
in Rule 144A promulgated under the Securities Act.
"RATING AGENCY" means Moody's.
"RECORD DATE" means, for any payments on the Notes to be made on any
Payment Date, the twentieth (20th) day of each month (whether or not a Business
Day), immediately preceding such Payment Date.
"REGISTER" is defined in SECTION 10.14(b).
"RELEASE" has the meaning specified in the Superfund Amendments and
Reauthorization Act of 1986, provided that to the extent that any other
applicable federal, state or local Governmental Requirement establishes a
meaning for "release" which is broader, such broader meaning shall apply.
"REALTY COMPANIES" is defined in the Preamble to this Agreement.
"REALTY GENERAL PARTNER" means each general partner of the Realty
Companies.
"REO AFFILIATE" means Bosque Investment Realty Partners, L.P., a Texas
limited partnership.
"REO GENERAL PARTNER" means, Bosque Investment Realty Corp., a Texas
corporation and the general partner of the REO Affiliate.
10 NOTE AGREEMENT
16
"REO NOTE" means, as to each REO Property, a demand promissory note
in a form substantially similar to EXHIBIT "D" attached hereto and incorporated
herein (i) previously delivered by a Realty Company to Company or (ii) to be
delivered by the REO Affiliate in connection with any foreclosure upon any
collateral securing a Collateral Loan that shall (a) be in a principal amount
equal to 96% of the Projected Portfolio Collections attributable to such REO
Property (b) require principal and interest payments due thereunder to be paid
not less frequently than on each Payment Date, (c) require principal and
interest payments to be in an amount equal to all Net Operating Income received
by the Realty Company with respect to the underlying REO Property each calendar
month, and (d) provide that an Event of Default (as such term is defined in
this Agreement) shall constitute an event of default thereunder permitting the
acceleration of all amounts owing thereunder.
"REO PROPERTY" means any and all real or personal property (together
with any fixtures appurtenant thereto and any improvements and personal
property located thereon) or interest in real or personal property now or
hereafter owned by any Realty Company including any real or personal property
that has been, or shall be acquired as a result of a foreclosure or
deed-in-lieu of foreclosure or otherwise, all of which shall be deemed to
constitute proceeds of the Collateral.
"REO SECURITY DOCUMENTS" means the Mortgages and all related
assignments of leases and rents, security agreements, and appropriate UCC
financing statements, all in form and substance sufficient to grant first
priority liens covering each REO Property (including, all personal property
associated therewith), in favor of the Company as security for the applicable
REO Note as the same may be amended, renewed, modified, extended or restated
from time to time with the prior written consent of Servicer.
"REPRESENTATIVES" means representatives, officers, directors,
trustees, employees, attorneys, accountants, and agents.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" means the Security Agreement (as the same may be
modified or amended from time to time) whereby the Company grants to the
Trustee, for the benefit of the Noteholders, a security interest in the
Collateral.
"SECURITY DOCUMENTS" means the REO Security Documents, the Collateral
Assignments, the Security Agreement, the Pledge of Accounts, the Partnership
Pledge Agreements, the Lockbox Agreements, all Mortgages and all other
documents or instruments granting a Lien in favor of the Trustee for the
benefit of the Noteholders as collateral for the Obligation, and all financing
statements related thereto, and all modifications, renewals or extensions
thereof and any documents executed in modification, renewal, extension or
replacement thereof.
"SERVICER" shall mean J-Hawk Servicing Corporation, a Texas
corporation, or any replacement therefor designated pursuant to the terms of
the Servicing Agreement, approved in writing by the Trustee and the Determining
Noteholders, and acceptable to the Rating Agency.
"SERVICING AGREEMENT" shall mean the Servicing Agreement entered into
by the Company, the Realty Companies, the Servicer and the Trustee with respect
to servicing the Collateral, together with all amendments and modifications
thereto.
11 NOTE AGREEMENT
17
"SERVICING FEE" means the fee payable on a monthly basis to the
Servicer under the Servicing Agreement in an amount equal to six and fifteen
hundredths percent (6.15 %) of the remainder of (i) Portfolio Collections for
any given month less (ii) Protective Advances to be made from such Portfolio
Collections.
"SETTLEMENT" means, with respect to any Collateral Loan, the
satisfaction of the Company's claims against the respective Account Debtor in
connection with such Collateral Loan, whether pursuant to a full or discounted
payment.
"SHAREHOLDERS" means, Diversified Financial Systems, Inc., an Indiana
corporation, Diversified Performing Assets, Inc., an Indiana corporation,
Diversified Financial Systems L.P., an Indiana limited partnership, SV Asset
Partners L.P., a Texas limited partnership, WAMCO XXII, Ltd., a Texas limited
partnership, WAMCO IX, Ltd., a Texas limited partnership and J-Hawk
Corporation, a Texas corporation.
"STANDARD & POOR'S" means Standard & Poor's, a division of the
XxXxxx-Xxxx Companies, Inc., or its successor.
"STANDARD INDUSTRY PRACTICES" means such collateral control, servicing
and collection procedures that are customarily followed by Persons actively
engaged in the business of acquiring distressed assets in a bulk transaction
and managing and disposing of such assets, provided such collateral control,
servicing and collection procedures shall be at least as rigorous as the
Servicer, the Company, and the Realty Companies apply in managing, servicing
and disposing of their own assets.
"SUBSIDIARY" of any Person means any entity of which more than 50% (in
number of votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by that Person.
"TAX ESCROW ACCOUNT" means a non-interest bearing account established
by the Company with the Lockbox Bank into which the Tax Escrow Payments are to
be deposited.
"TAX ESCROW PAYMENTS" mean all payments made by or on behalf of
Account Debtors (including REO Tax Escrow Payments) for a specified purpose
(such as real estate tax payments, insurance payments, etc.) other than
payments of principal, interest, fees and other amounts owed to the Company
with respect to the Collateral Loans and all net insurance and condemnation
proceeds received by or on behalf of the Company which are not available to be
applied to the outstanding balance under the Collateral Loan in question but,
rather, are required by the Collateral Documents to be used for purposes of
repairing or rebuilding the real property in question.
"TAXES" is defined in SECTION 2.6(a).
"TEMPORARY CASH INVESTMENT" means any Investment (a) in obligations of
the United States of America and agencies thereof and obligations guaranteed by
the United States of America maturing within one year from the date of
acquisition; (b) demand deposits and interest bearing time deposits evidenced
by certificates of deposit issued by NationsBank of Texas, N.A., which are
fully insured by the Federal Deposit Insurance Corporation or are issued by
commercial banks organized under the Laws of the United States of America or
any state thereof and having combined capital, surplus, and undivided profits
of not less than $100,000,000 (as shown on such Person's most recently
published statement of condition), and which certificates of deposit have the
highest rating from Moody's; (c) commercial paper which has the
12 NOTE AGREEMENT
18
highest rating from Moody's; (d) eurodollar investments with demand deposits
and interest bearing time deposits evidenced by financial institutions having
combined capital, surplus, and undivided profits of not less than $100,000,000
(as shown on such Person's most recently published statement of condition), and
which Investments have the highest rating from Moody's; or, if such
institutions do not have a commercial paper rating, a comparable bond rating;
(e) any repurchase obligations secured by a pooling of one or more of the
foregoing, including repurchase agreements with NationsBank of Texas, N.A., for
so long as the short term unsecured debt of the repurchase obligor or its
parent is rated in the highest rating category by Moody's; and (f) money market
funds comprised of money market instruments with the highest rating by Moody's.
No such Temporary Cash Investment may have a maturity which extends beyond the
Distribution Date next succeeding the date of such Temporary Cash Investment.
"TRUSTEE" means Bankers Trust Company of California, N.A. (or its
successor appointed hereunder), acting as Trustee for the Noteholders under the
Note Agreement Documents.
"UNDERLYING COLLATERAL" means the real property, together with all
improvements thereon, and any personal property which secures any of the
Collateral Loans, or any one of such parcels of real property or items of
personal property.
"UNITED STATES PERSON" means (i) a citizen or resident of the United
States, (ii) a domestic partnership, (iii) a domestic corporation, (iv) any
estate (other than a foreign estate as defined under section 7701(a)(31)(a) of
the Internal Revenue Code of 1986, as amended), and (v) any trust if (a) a
court within the United States is able to exercise primary supervision over the
administration of the trust, and (b) one or more United States fiduciaries have
the authority to control all substantial decisions of the trust
1.2 TIME REFERENCES. Unless otherwise specified, in this
Agreement (a) time references (e.g., 10:00 a.m.) are to time in New York, New
York, and (b) in calculating a period from one date to another, the word "from"
means "from and including" and the word "to" or "until" means "to but
excluding."
1.3 OTHER REFERENCES. Unless otherwise specified, in this
Agreement (a) where appropriate, the singular includes the plural and vice
versa, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c)
monetary references are to currency of the United States of America, (d)
section, paragraph, annex, schedule, exhibit, and similar references are to the
particular document in which they are used, (e) references to "telecopy,"
"facsimile," "fax," or similar terms are to facsimile or telecopy
transmissions, (f) references to "including" mean including without limiting
the generality of any description preceding that word, (g) references to any
Person include that Person's heirs, personal representatives, successors,
trustees, receivers, and permitted assigns, (h) references to any Governmental
Requirement include every amendment or supplement to it, rule and regulation
adopted under it, and successor or replacement for it, and (i) references to
this Agreement or other document include every renewal and extension of it,
amendment and supplement to it, and replacement or substitution for it.
1.4 ACCOUNTING PRINCIPLES. Except as used in SECTION 3.18 herein
and unless otherwise specified, in this Agreement (a) GAAP determines all
accounting and financial terms used herein, (b) all accounting principles
applied in a current period must be comparable in all material respects to
those applied during the preceding comparable period, and (c) all accounting
and financial terms and compliance with reporting covenants must be on a
consolidated basis.
13 NOTE AGREEMENT
19
SECTION 2 NOTES AND TERMS OF PAYMENT
2.1 NOTES AND PAYMENTS.
(a) NOTES; DENOMINATIONS. The Company will authorize the
issuance and sale of $93,908,994 aggregate principal amount of its
Notes. The Notes will be issued only in registered form and in
minimum denominations of $2,000,000 principal amount and in integral
multiples of $1,000 in excess thereof, except that one Note may be
issued in a principal amount not in an integral multiple of $1,000.
The Notes shall be known and designated as the "7.66% Asset Backed
Notes Due June 5, 2002" of the Company.
(b) PAYMENT. Distributions of Portfolio Collections, and
to the extent necessary, fundings from the Liquidity Reserve Account,
for payment of interest, principal and Make-Whole Amounts, if any,
shall be made by the Lockbox Bank to the Trustee by wire transfer of
immediately available funds into the Disbursement Account pursuant to
SECTION 2.5 hereof by 5:00 p.m. on the Business Day prior to each
Payment Date (each such date being a "DISTRIBUTION DATE"), upon
receipt of payment instructions from the Servicer which have been
verified by the Trustee. Each payment and prepayment on the Notes
shall be (i) paid to the Person in whose name the Note is registered
at the close of business on the Record Date (each a "HOLDER OF
RECORD") and (ii) made to each such Holder of Record in immediately
available funds by 12:00 p.m. on each Payment Date by the Trustee to
the extent of funds in the Disbursement Account. Note payments made
after 12:00 p.m. on any Payment Date shall be deemed made on the next
succeeding Business Day and such funds shall accrue interest as if
such payments were made on the next succeeding Business Day. Should
the principal of, or any installment of the principal or interest on,
the Notes become due and payable on a day other than a Business Day,
the due date thereof shall be extended to the next succeeding Business
Day and interest shall be payable on the amount of such payment, at
the respective rates set forth in the Notes, with respect to such
extension.
(c) LEGENDING OF THE NOTES; RESTRICTION ON TRANSFERS.
(i) The Notes shall not be transferable except
upon the satisfaction of the conditions specified below. Each Note
shall be stamped or otherwise imprinted with a legend in substantially
the following form:
THIS NOTE WAS ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
XXXXXXX 0 XX XXX XXXXXX XXXXXX SECURITIES ACT OF 1933 (THE "SECURITIES
ACT") AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED
THAT THE HOLDER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE
HOLDER OF THIS NOTE HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(a) THIS NOTE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE HOLDER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE
144A OR (b) TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (PROVIDED THAT
PRIOR TO
14 NOTE AGREEMENT
20
SUCH TRANSFER, THE HOLDER MUST FURNISH TO THE TRUSTEE AND ISSUER AN
INVESTOR LETTER, LEGAL OPINIONS AND OTHER INFORMATION AS THE ISSUER
AND TRUSTEE MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT) AND
(2) IN EACH CASE, (a) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, (b) BY DELIVERY OF A SIGNED LETTER CONTAINING
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE
TRUSTEE) AND (c) IN ACCORDANCE WITH THE PROVISIONS OF THE NOTE
AGREEMENT DATED AS OF JUNE 6, 1997 (A COPY OF WHICH WILL BE PROVIDED
BY THE ISSUER TO THE HOLDER UPON WRITTEN REQUEST AT NO CHARGE), AND
(b) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY
ANY PURCHASER OF THE NOTE OF THE RESALE RESTRICTIONS SET FORTH IN (a)
ABOVE.
THIS NOTE MAY NOT BE PURCHASED BY OR TRANSFERRED TO A PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY
PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR A PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR ANY GOVERNMENTAL
PLAN, AS DEFINED IN SECTION 3(32) OF ERISA, SUBJECT TO ANY FEDERAL,
STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), OR
A PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR USING THE ASSETS OF A
PLAN TO ACQUIRE SUCH NOTE UNLESS IT IS PURCHASING THE NOTE WITH THE
ASSETS OF AN INSURANCE COMPANY GENERAL ACCOUNT AND THE EXEMPTIVE
RELIEF AFFORDED UNDER SECTIONS I AND III OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 ("PTE 95-60") IS AVAILABLE FOR THE PURCHASE AND
HOLDING OF THE NOTE BY SUCH PURCHASER. EACH TRANSFEREE OF THIS NOTE
SHALL BE REQUIRED TO (i) EXECUTE AN INVESTOR LETTER IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE TRUSTEE AND ISSUER STATING
THAT (a) IT IS NOT, AND IS NOT ACTING ON BEHALF OF, A PLAN OR USING
THE ASSETS OF A PLAN TO ACQUIRE SUCH NOTE OR (b) IT IS ACQUIRING THE
NOTE WITH THE ASSETS OF AN INSURANCE COMPANY GENERAL ACCOUNT AND THAT
THE EXEMPTIVE RELIEF AFFORDED UNDER SECTIONS I AND III OF PTE 95-60 IS
AVAILABLE FOR THE PURCHASE AND HOLDING OF SUCH NOTE; OR (ii) PROVIDE
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO
THE TRUSTEE AND ISSUER THAT THE PURCHASE OR HOLDING OF THE NOTE BY OR
ON BEHALF OF SUCH PLAN WILL NOT RESULT IN THE ASSETS OF THE ASSET
PORTFOLIO BEING DEEMED TO BE "PLAN ASSETS" AND SUBJECT TO THE
PROVISIONS OF ERISA AND THE CODE OR SIMILAR LAW AND WILL NOT SUBJECT
THE ISSUER OR THE TRUSTEE TO ANY OBLIGATION IN ADDITION TO THOSE
UNDERTAKEN IN THE NOTE AGREEMENT.
(ii) Each Noteholder by acceptance of a Note
bearing the restrictive legend set forth above, agrees that (i) the
Notes have not been and will not be registered under the
15 NOTE AGREEMENT
21
Securities Act or any state or foreign securities laws and (ii) the
Notes may be transferred, resold or pledged only to a Qualified
Institutional Buyer purchasing for its own account or for the account
of a Qualified Institutional Buyer to whom notice is given that the
resale, pledge or transfer is being made in reliance on Rule 144A
under the Securities Act or (y) to sophisticated institutional
investors which are "accredited investors" as such term is defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act, or, if the
Notes are to be purchased for one or more institutional accounts
("investor accounts") for which a person is acting as fiduciary or
agent (except if such person is a bank as defined in Section 3(a)(2)
of the Securities Act, or a savings and loan association or other
institution as described in Section 3(a)(5)(a) of the Securities Act,
whether acting in its individual or in a fiduciary capacity), each
such investor account is an institutional investor and an "accredited
investor" on a like basis. The Noteholder further understands that
neither the Company nor the Trustee is under any obligation to
register the Notes or make an exemption available. In the event that
such a transfer is to be made in reliance upon an exemption from the
Securities Act and from applicable state or foreign securities laws,
unless such transfer is made in reliance on Rule 144A of the
Securities Act by a person not affiliated with the Company, the
Trustee or the Company shall, if such transfer is made within two
years from the later of (a) the Closing Date and (b) the last date on
which the Company or any affiliate of the Company was the beneficial
owner of the Note which is proposed to be transferred, require an
opinion of counsel that such transfer may be made pursuant to an
exemption from the Securities Act and any applicable state and foreign
securities laws, which opinion of counsel shall not be an expense of
the Trustee or the Company. The Noteholder shall, and does hereby
agree to, indemnify the Trustee and the Company against any liability
that may result if the transfer is not so exempt or is not made in
accordance with such federal, state and foreign laws. In addition, no
transfer of a Note may be made unless the prospective transferee
provides the Company and the Trustee with an Investor's Letter
substantially in one of the forms attached as Exhibit F.
(d) CUSIP NUMBERS. The Company in issuing the Notes may
use "CUSIP PLACEMENT NUMBERS" (herein so called) issued by Standard &
Poor's CUSIP Service Bureau (if then generally in use), and the
Trustee shall use CUSIP Numbers in notices as a convenience to
Noteholders; provided that any such notice shall state that no
representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice and that reliance
may be placed only on the other identification numbers printed on the
Notes.
2.2 INTEREST AND PRINCIPAL PAYMENTS.
(a) INTEREST. Notwithstanding any cure periods available
under SECTION 8.1(a) hereof, interest on the unpaid principal amount
outstanding under the Notes shall be payable monthly on the fifth
(5th) day of each month following the Closing Date hereafter,
commencing July 5, 1997, and on the Maturity Date (each such date a
"PAYMENT DATE"). Interest payable on each Payment Date shall be all
interest accrued and unpaid through the last day of the month
preceding the Payment Date, including any additional interest required
under SECTION 2.3 hereof calculated at the Default Rate. In the event
that the amount of accrued and unpaid interest on the Notes payable on
any Payment Date exceeds the funds available to the Trustee for
distribution to the Noteholders on such Payment Date, the Company
shall remain liable for the prompt payment of such excess amount of
interest on the applicable Payment Date.
16 NOTE AGREEMENT
22
(b) PRINCIPAL. The unpaid principal amount of the Notes
shall be due and payable from distributions of Portfolio Collections
pursuant to SECTION 2.5(b)(IX), provided however, that all unpaid
principal, together with accrued-but-unpaid interest on the Notes and
any Make-Whole Amount, shall be due and payable in full on the
Maturity Date.
(c) PREPAYMENTS.
(i) OPTIONAL PREPAYMENTS. The Company may upon
ten (10) Business Days prior written notice to the Trustee,
prepay the principal of the Notes then outstanding, in whole
or in part, at any time or from time to time. Until such time
as the aggregate outstanding principal balance of the Notes is
less than $9,390,900, if the Company prepays any outstanding
principal of the Notes before June 5, 1999 (other than from
distributions of Portfolio Collections pursuant to SECTION
2.5(b) hereof) the Company shall pay to each Noteholder that
Noteholder's pro rata part of the total Make-Whole Amount
related to the Notes in connection with such prepayment. In
no case shall the Company be required to pay the Make-Whole
Amount with respect to principal on the Notes prepaid on or
after June 5, 1999.
(ii) GENERAL PREPAYMENT PROVISIONS. Any
prepayment of the Notes shall be (a) made together with
interest accrued (through the date of such prepayment) on the
principal amount prepaid, and (b) applied first to accrued
interest and then to principal.
2.3 INTEREST RATE. The unpaid principal of the Notes shall bear
interest from the Closing Date until paid in full at a rate per annum which
shall be equal to the lesser of (a) the Maximum Rate and (b) 7.66%. All past
due principal, and to the extent permitted by applicable Governmental
Requirements, interest and Make-Whole Amount, if any, on the Notes shall bear
interest from the applicable Payment Date until paid at the lesser of (a) the
Default Rate or (b) the Maximum Rate.
2.4 INTEREST CALCULATIONS. Interest will be computed as if each
calendar month consisted of 30 days and each calendar year consisted of 360
days (unless the calculation would result in an interest rate greater than the
Maximum Rate). All interest rate determinations and calculations by the
Servicer or the Trustee are conclusive and binding absent manifest error.
2.5 LOCKBOX ACCOUNTS; DISTRIBUTIONS OF PORTFOLIO COLLECTIONS.
(a) LOCKBOX ACCOUNT. All Portfolio Collections shall be
directed to and deposited into one of the Lockbox Accounts. Any
payments or other proceeds of Collateral received by the Company,
Servicer, or the Realty Companies shall be deemed received by that
party in trust for the owner or beneficiary of the Lockbox Accounts
and shall be forthwith deposited by that party, immediately upon
receipt, into one of the Lockbox Accounts in the form received, duly
endorsed by that party for deposit into such Lockbox Account.
(b) DISTRIBUTIONS OF PORTFOLIO COLLECTIONS. On the
Business Day preceding each Distribution Date, the Company shall cause
funds on deposit in the Lockbox Account maintained with the Additional
Lockbox Bank to be transferred to the Lockbox Account maintained with
the Lockbox Bank. Subject to SECTION 8.2 hereof, on each Distribution
Date, the Company shall cause funds on deposit in the Lockbox Account
maintained with the Lockbox Bank, to be transferred by
17 NOTE AGREEMENT
23
the Lockbox Bank, (i) upon receipt of payment instructions from the
Servicer delivered to the Lockbox Bank and the Trustee in a form
mutually agreed upon between the Trustee and the Servicer, and (ii)
following approval by the Trustee, and applied in the following
priorities:
(i) First, (a) to transfer out of such Lockbox
Account any funds that do not constitute Portfolio Collections
and that were erroneously deposited to the related Lockbox
Account and (b) to transfer any Tax Escrow Payments related to
the Asset Portfolio received from Account Debtors to the
appropriate Tax Escrow Account in an amount requested by the
Servicer, which amount shall represent the total amount of Tax
Escrow Payments related to the Asset Portfolio paid into such
Lockbox Account prior to such Payment Date to the extent not
previously deposited in the Tax Escrow Account;
(ii) Second, to the payment of any fees and
expenses then due and payable to the Trustee, the Lockbox
Bank, the Additional Lockbox Bank, and the Collateral
Custodian pursuant to this Agreement, the Lockbox Agreements
and the Custodial Agreement;
(iii) Third, to reimburse the Company or Servicer
for any Protective Advances made and not previously
reimbursed;
(iv) Fourth, to the payment to the Servicer of any
Servicing Fees then due to the Servicer pursuant to the terms
of the Servicing Agreement;
(v) Fifth, to the payment to the Trustee by
deposit in the Disbursement Account, for distribution to the
Noteholders, of all accrued and unpaid interest on the Notes
which is due and payable on the Payment Date next following
such Distribution Date;
(vi) Sixth, at the option of the Servicer, to the
deposit into the Operating Reserve Account, of such amounts as
Servicer may reasonably deem necessary to ensure adequate
funds are available when needed to pay (a) budgeted expenses
for the Asset Portfolio and (b) other operating expenses of
the Company payable to third parties which operating expenses
shall not exceed $50,000 in the aggregate for any given year,
or such expenses as are otherwise approved in writing by the
Trustee, with the consent of the Determining Noteholders,
provided, however that the amount in the Operating Reserve
Account shall never exceed three per cent (3%) of the
aggregate outstanding principal balance of the Notes at any
point in time, unless otherwise approved in writing by the
Trustee, with the consent of the Determining Noteholders;
(vii) Seventh, to the deposit, if necessary, into
the Liquidity Reserve Account, of such amounts required to
replenish such account up to the Liquidity Reserve Amount as
of the Payment Date next following such Distribution Date;
(viii) Eighth, to repay the Company (in an aggregate
amount for all Distribution Dates) the sum of $1,198,904.83,
evidencing the amount initially deposited by the Company into
the Liquidity Reserve Account on the Closing Date; and
18 NOTE AGREEMENT
24
(ix) Ninth, the balance is to be paid to the
Noteholders and applied as principal payments on the Notes
until payment of the Notes in full.
2.6 TAXES.
(a) Any and all payments by the Company under this
Agreement or under the Notes shall be made free and clear of, and
without deduction for, any and all present or future taxes,
assessments, levies, imposts, deductions, charges or withholdings
imposed upon Company, its income, or any of its properties, franchises
or assets by any Governmental Authority excluding, in the case of each
Noteholder, (a) taxes imposed on its income and franchise taxes
imposed on it by the jurisdiction under the laws of which each such
Noteholder is organized or is or should be qualified to do business or
any political subdivision thereof (b) taxes, duties or other charges
imposed as a result of the failure by any Noteholder to provide any
form or certificate required under SECTION 2.6(d) and (c) any "backup
withholding" required pursuant to Section 3406 of the United States
Internal Revenue Code (all such non-excluded taxes, duties and charges
being herein called "TAXES"). If the Company shall be required by law
to deduct any Taxes from or in respect of any sum payable under this
Agreement or under the Notes, (i) the sum payable shall be increased
as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
SECTION 2.6), the Noteholders receive an amount equal to the sum they
would have received had no such deductions been made, (ii) the Company
shall make such deductions and (iii) the Company shall pay the full
amount deducted to the relevant taxation authority or other authority
in accordance with applicable Governmental Requirements.
(b) In addition, the Company agrees to pay any present or
future Other Taxes.
(c) The Company will indemnify the Noteholders for the
full amount of Taxes or Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this SECTION 2.6) paid by the Noteholders or any
liability (including penalties and interest) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made
within 30 days from the date any Noteholder makes written demand
therefor.
(d) Each Noteholder agrees to indemnify and hold harmless
(severally and not jointly, and only as to actions by that Noteholder)
the Company and the Trustee against any United States withholding
taxes (and related interest and penalties) which the Company or the
Trustee fails to withhold on payments to such Noteholder as a result
of the invalidity of any certificate or form provided by such
Noteholder pursuant to this SECTION 2.6.
(e) Within 30 days after the date of any payment of
Taxes, the Company will furnish to any Noteholder on whose account
such Taxes were paid, at its address referred to herein, the original
or a certified copy of a receipt evidencing payment thereof.
(f) Without prejudice to the survival of any other
agreement of the Company hereunder, the agreements and obligations of
the Company contained in this SECTION 2.6 shall survive the payment in
full of all principal and interest hereunder.
19 NOTE AGREEMENT
25
2.7 RESERVE FUNDS.
(a) OPERATING RESERVE ACCOUNT. The Company shall
establish an account with the Lockbox Bank (the "OPERATING RESERVE
ACCOUNT") to deposit cash available for distribution on any Business
Day in accordance with SECTION 2.5(b)(vi) for the sole purposes of (a)
making Protective Advances, (b) funding property improvement expenses,
(c) funding Permitted Lease-Up Expenses with respect to REO Property
and (d) paying operating expenses of the Company provided for in this
Agreement. On the Closing Date, the Company shall deposit, out of
first month's Portfolio Collections, the sum of $500,000 into the
Operating Reserve Account and the balance of such month's Portfolio
Collections into one of the Lockbox Accounts.
(b) LIQUIDITY RESERVE ACCOUNT. The Company shall
establish an account with the Lockbox Bank (the "LIQUIDITY RESERVE
ACCOUNT") and shall deposit cash on the Closing Date in an amount
equivalent to two (2) months of projected interest on the Notes
(assuming no payments of principal on the Notes are made during such
two-month period) for the sole purpose of enabling the Lockbox Bank,
upon the directions of the Servicer and with the authorization of the
Trustee, to deposit with the Trustee required interest payments on the
Notes. In the event that the amount of funds in the Lockbox Account
maintained with Lockbox Bank for any month is insufficient for all
interest payments to be made in such month, the Servicer with the
authorization of the Trustee, shall direct the Lockbox Bank to wire
transfer in immediately available funds no later than 5:00 p.m. on
the Distribution Date amounts in the Liquidity Reserve Account as
necessary to make the payments required by SECTION 2.1(b) hereof. On
each Distribution Date, the amount by which the funds on deposit in
the Liquidity Reserve Account exceed the Liquidity Reserve Amount
(after giving effect to all payments required by SECTION 2.5 to be
made on the Payment Date next succeeding such Distribution Date),
shall be transferred by the Lockbox Bank and applied in the order set
forth in SECTION 2.5(b).
(c) PLEDGE OF RESERVE FUNDS. The Lockbox Accounts,
Operating Reserve Account and Liquidity Reserve Account will be
established for the Company and pledged to the Trustee on behalf of
the Noteholders pursuant to the Pledge of Accounts.
SECTION 3 REPRESENTATIONS AND WARRANTIES. The Company and each Realty
Company, each represents and warrants to the Trustee, for the benefit of each
Noteholder that as of the Closing Date:
3.1 ORGANIZATION AND GOOD STANDING. Each of the Company and each
Realty General Partner is a corporation, duly organized and validly existing
under the laws of the State of Texas; has duly qualified and is authorized to
do business and is in good standing in all states and jurisdictions where the
character of its assets or the nature of its activities make such qualification
necessary and where the failure to qualify could have a Material Adverse
Effect; and has not been known as or used any corporate, fictitious or trade
names in the past, except as was required to conduct business in a state other
than its state of incorporation, in which case it used a name substantially
similar to its name. Each Realty Company is a limited partnership duly
organized and validly existing under the laws of the State of Texas; has duly
qualified and is authorized to do business and is in good standing in all
states and jurisdictions where the character of its assets or the nature of its
activities make such qualification necessary and where the failure to qualify
could have a Material Adverse Effect; and has not been known as or used any
corporate, fictitious or trade names in the past, except as was required to
conduct business in a state other than its state of formation, in which case it
used a name substantially similar to its name. The chief executive office and
20 NOTE AGREEMENT
26
principal place of business of the Company and each Realty Company is at the
address identified as the Company's address in SECTION 10.5.
3.2 AUTHORIZATION AND POWER. The Company and the Realty Companies
have the power and requisite authority to execute, deliver and perform this
Agreement, the Notes and the other Note Agreement Documents to which they are a
party; the Company and the Realty Companies are duly authorized to, and all
necessary action has been taken to authorize the Company and the Realty
Companies to, execute, deliver and perform this Agreement, the Notes and any
other document executed in connection therewith and such Persons are and will
continue to be duly authorized to perform under these agreements.
3.3 NO CONFLICTS OR CONSENTS. Neither the execution and delivery
of this Agreement, the Notes or the other Note Agreement Documents, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or with the terms and
provisions thereof, will contravene or materially conflict with any provision
of law, statute or regulation to which the Company or any Realty Company is
subject or any judgment, license, order or permit applicable to the Company or
any Realty Company, or any indenture, loan agreement, mortgage, deed of trust,
or other agreement or instrument to which the Company or any Realty Company is
a party or by which the Company, or any Realty Company may be bound, or to
which the Company or any Realty Company may be subject, or violate any
provision of the partnership agreement of the Company or any Realty Company.
No consent, approval, authorization or order of any court or Governmental
Authority or third party is required in connection with the execution and
delivery by the Company or any Realty Company of this Agreement, the Notes, the
other Note Agreement Documents, or to consummate the transactions contemplated
hereby or thereby.
3.4 ENFORCEABLE OBLIGATIONS. This Agreement, the Notes and the
other Note Agreement Documents are the legal and binding obligations of the
Company and the Realty Companies, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or other laws of
general application relating to the enforcement of creditors' rights and
general equity principles. Each Loan Contribution Agreement is genuine and is
the legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to the enforcement of creditors' rights
and general equity principles.
3.5 NO LIENS. Except for Permitted Liens, all of the properties
and assets of the Company and the Realty Companies are free and clear of all
mortgages, liens and encumbrances and the Company and the Realty Companies have
and will have good and indefeasible title to their properties and assets.
3.6 FINANCIAL CONDITION. No changes having a Material Adverse
Effect have occurred in the financial condition or business of the Company
since the date of formation of the Company.
3.7 FULL DISCLOSURE. There is no fact that the Company has not
disclosed to any Noteholder purchasing the Notes on the Closing Date, in
writing that could have a Material Adverse Effect. Neither the Note Agreement
Documents nor any financial statement, certificate, report, document or other
writing furnished by or on behalf of the Company or the Realty Companies to
any such Noteholder in connection with negotiation of the sale of the Notes and
other transactions contemplated by the Note Agreement Documents contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained herein or therein, taken as a whole, not misleading
in light of the circumstances under which they were made.
21 NOTE AGREEMENT
27
3.8 NO DEFAULT; POTENTIAL DEFAULT. No event has occurred and is
continuing which constitutes an Event of Default or Potential Default.
3.9 MATERIAL AGREEMENTS. Other than the Loan Contribution
Agreements, the documents contemplated thereby to be executed by the Company or
the Realty Companies and the Note Agreement Documents, there are no material
agreements (including, without limitation, all agreements which, if breached,
could directly or indirectly have a Material Adverse Effect) of the Company or
the Realty Companies.
3.10 NO LITIGATION. There are no actions, suits or legal,
equitable, arbitration or administrative proceedings pending, or to the
knowledge of the Company or the Realty Companies threatened, against the
Company or the Realty Companies. There are no actions, suits or legal,
equitable, arbitration or administrative proceedings pending, or to the
knowledge of the Company or the Realty Companies threatened, against any of
their respective assets except for any defenses or counterclaims asserted by an
Account Debtor in any pending litigation relating to collection or foreclosure
of the Collateral Loans or bankruptcy of the Account Debtor, provided that the
amount asserted in any such counterclaims, in the reasonable determination of
the Servicer, does not exceed the principal balance of the applicable
Collateral Loan.
3.11 BURDENSOME CONTRACTS. Neither the Company nor any Realty
Company is a party to, or is bound by, any contract other than those
contemplated by this Agreement.
3.12 TAXES. All tax returns required to be filed by the Company
and the Realty Companies in any jurisdiction have been filed and, subject to
SECTION 5.3 herein with respect to payment of ad valorem taxes, all taxes
(including mortgage recording taxes), assessments, fees and other governmental
charges upon the Company or the Realty Companies or upon any of their
properties, income or franchises, have been paid prior to the time that such
taxes could give rise to a lien thereon. There is no proposed tax assessment
against the Company or the Realty Companies and there is no basis for such
assessment.
3.13 PRINCIPAL OFFICE, ETC. The principal office, chief executive
office and principal place of business of the Company and the Realty Companies
is at 0000 Xxxxxxxx Xxxxx, X.X. Xxx 0000, Xxxx, Xxxxx, 00000-0000. The Company
and the Realty Companies maintain their principal records and books at such
address.
3.14 ERISA. No Plan exists or has existed in the past.
3.15 COMPLIANCE WITH LAW. The Company and the Realty Companies
have duly complied with, and their assets, business operations and leaseholds
are in compliance in all material respects with, the provisions of all federal,
state and local laws, rules, regulations and orders (including, without
limitation, Applicable Environmental Laws) applicable to the Company or the
Realty Companies, as the case may be, and their assets or the conduct of their
business and they possess all required licenses, permits, authorizations and
approvals for the conduct of their business, the ownership of their properties
and their execution, delivery and performance of this Agreement except where
the failure to do so would not have a Material Adverse Effect on the Company or
the Realty Companies, as the case may be. To the best knowledge of the Company
and the Realty Companies, neither the Company nor the Realty Companies, nor any
of the REO Property or Underlying Collateral, is in material violation of any
Applicable Environmental Law or subject to any existing, pending or overtly
threatened investigation by
22 NOTE AGREEMENT
28
any Governmental Authority under any Applicable Environmental Law. To the best
knowledge of the Company and the Realty Companies, no Hazardous Substance (a)
has been disposed of or released on any REO Property or the Underlying
Collateral or (b) is located thereon. No REO Property, Underlying Collateral
or any property adjoining any REO Property or Underlying Collateral is being
used, or, to the Company's or each Realty Company's best knowledge, has been
used at any time, for the generation, disposal, storage, treatment, processing
or other handling of any Hazardous Substance, and no environmental permits are
required for the operation of the businesses or other activities being
conducted on any REO Property or Underlying Collateral. The foregoing
provisions of this SECTION 3.15 are subject to the following qualifications:
(a) the use by the Realty Companies or the owners of any Underlying Collateral
of limited quantities of Hazardous Substances in the ordinary conduct of their
business and in accordance with industry customs and all Applicable
Environmental Laws shall not be a breach of the representations of this SECTION
3.15 and (b) such representations are subject to the exception of (i) with
respect to the Company and the Realty Companies, all matters disclosed to any
Noteholder purchasing its Notes on the Closing Date and (ii) with respect to
any Collateral Loans, all matters disclosed to or otherwise made available to
any such Noteholder in writing before the date of this Agreement.
3.16 GOVERNMENT REGULATION; MARGIN REGULATIONS. The Company is not
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce
Act (as any of the preceding acts have been amended), or any other law (other
than Regulation X) which regulates the incurring by the Company of
Indebtedness, including but not limited to laws relating to common contract
carriers or the sale of electricity, gas, steam, water, or other public utility
services. No portion of the proceeds of any Note shall be used by Company in
any manner that might cause the application of such proceeds to violate
Regulation G, Regulation U, Regulation T or Regulation X or any other
regulation of the Board of Governors of the Federal Reserve System.
3.17 NO SUBSIDIARIES. The Company has not formed or acquired any
Subsidiary other than the Realty Companies.
3.18 SOLVENCY. As of the date hereof, and after giving effect to
each transaction contemplated in this Agreement, (a) the aggregate fair market
value of the Company's assets exceed, and will exceed, its liabilities (whether
contingent, subordinated, unmatured, unliquidated, or otherwise), (b) the
Company has, and will have, sufficient cash flow to enable it to pay its debts
as they mature, and (c) the Company has, and will have, a reasonable amount of
capital to conduct its business as presently contemplated. As of the date
hereof, and after giving effect to each transaction contemplated in this
Agreement, (a) the aggregate fair market value of the each Realty Company's
assets exceed, and will exceed, its liabilities (whether contingent,
subordinated, unmatured, unliquidated, or otherwise), (b) each Realty Company
has, and will have, sufficient cash flow to enable it to pay its debts as they
mature, and (c) each Realty Company has, and will have, a reasonable amount of
capital to conduct its business as presently contemplated.
3.19 OWNERSHIP OF THE COMPANY AND EACH REALTY COMPANY. Each of the
Shareholders owns the percentage of capital stock of the Company set forth
below:
23 NOTE AGREEMENT
29
-----------------------------------------------------------------
Shareholder Ownership Interest
-----------------------------------------------------------------
Diversified Financial Systems, Inc. 28.28%
-----------------------------------------------------------------
Diversified Performing Assets, Inc. 7.45%
-----------------------------------------------------------------
Diversified Financial Systems L.P. 0.89%
-----------------------------------------------------------------
SV Asset Partners L.P. 0.51%
-----------------------------------------------------------------
J-Hawk Corporation 12.43%
-----------------------------------------------------------------
WAMCO IX, Ltd. 3.30%
-----------------------------------------------------------------
WAMCO XXII, Ltd. 47.14%
-----------------------------------------------------------------
On the Closing Date, the Shareholders and their transferees will transfer stock
of the Company such that the stock of the Company will be owned 80% by
FirstCity Financial Corporation and 20% by CFSC Capital Corp. II. The REO
General Partner owns a 2% general partnership interest in the REO Affiliate and
the Company owns a 98% limited partnership interest in the REO Affiliate and
100% of the issued and outstanding stock of the REO General Partner. SVD
Realty Asset Corp., a Texas corporation, owns a 2% general partnership interest
in SVD Realty L.P. and J-Hawk Corporation owns a 98% limited partnership
interest in SVD Realty L.P. SOWAMCO XXII of Texas, Inc., a Texas corporation,
owns a 2% general partnership interest in SOWAMCO XXII, Ltd., a Texas limited
partnership, and WAMCO XXII, Ltd., a Texas limited partnership, owns a 98%
limited partnership interest in SOWAMCO XXII, Ltd.
3.20 SERVICE OF PROCESS. The Company hereby appoints CT
Corporation System, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, to be its agent
for service of process in New York and CT Corporation System has accepted such
appointment.
3.21 SECURITIES LAWS. Neither the Company, the Servicer, the Realty
Companies nor anyone acting on behalf of any of them has offered the Notes or
any similar securities of the Company for sale to, or solicited any offer to
buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any Person other than Noteholders purchasing the Notes on the
Closing Date, each of which has been offered the Notes at a private sale for
investment. Neither the Company, Servicer, the Realty Companies nor anyone
acting on behalf of any of them has taken, or will take, any action that would
subject the issuance or sale of the Notes to the registration requirements of
Section 5 of the Securities Act.
3.22 COLLATERAL LOAN SCHEDULE. The information set forth on the
Collateral Loan Schedule with respect to each Collateral Loan is true and
correct.
3.23 NO SETOFF RIGHTS. To the Company's best knowledge, there are
no rights of setoff, counterclaim, recision or other defenses available to the
Account Debtor of any Collateral Loan.
3.24 COMPLIANCE WITH LAWS. To the Company's best knowledge, all
federal, state and local laws, rules and regulations applicable to each
Collateral Loan, including, without limitation those relating to usury, equal
credit opportunity, real estate settlement procedures or disclosure, have been
satisfied or complied with.
3.25 OWNERSHIP OF THE COLLATERAL LOANS. The Company has good and
indefeasible title to each Collateral Loan and is the sole owner of such
Collateral Loan, has full right and authority to pledge such
24 NOTE AGREEMENT
30
Collateral Loan pursuant to the Security Agreement, and is pledging such
Collateral Loan to the Trustee, for the benefit of the Noteholders, free and
clear of any and all liens, claims, encumbrances, participation interests,
equities, pledges, charges or security interests of any nature, other than
Liens in favor of existing lenders to the Shareholders, which Liens will be
released contemporaneously with issuance of the Notes.
3.26 ENFORCEABILITY OF COLLATERAL DOCUMENTS. To the Company's best
knowledge, each promissory note evidencing a Collateral Loan and each other
related Collateral Document, is genuine and is the legal, valid and binding
obligation of the Account Debtor which is a party to such documents, except as
limited by bankruptcy, insolvency or other laws of general application relating
to the enforcement of creditors' rights and general equity principles.
3.27 NO MODIFICATION OR WAIVER. Except as evidenced by a
Collateral Document delivered to the Collateral Custodian, to the Company's
best knowledge, no Account Debtor of any Collateral Loan has been released, no
Collateral Loan has been subordinated and no Collateral Document has been
waived, modified, altered, satisfied or canceled in any respect.
3.28 SURVIVAL OF REPRESENTATIONS, ETC. All representations and
warranties by the Company and the Realty Companies in this Agreement shall
survive delivery of the Notes.
SECTION 4 CONDITIONS PRECEDENT. No Noteholder purchasing Notes on the
Closing Date is obligated to purchase the Notes unless such Noteholder has
received all of the following and the following other conditions have been
satisfied on or before the Closing Date.
4.1 NOTE AGREEMENT. A duly executed Note Agreement, dated on or
before the Closing Date, and all other Note Agreement Documents.
4.2 NOTES. Notes executed by the Company, substantially in the
form of EXHIBIT "A", payable to each such Noteholder in the aggregate amount of
its purchase, each dated the Closing Date.
4.3 DELIVERY OF COLLATERAL.
(a) The Company shall deliver to Collateral Custodian the
following instruments and documents in which the Company has granted
and in which it hereafter grants to the Trustee for the benefit of the
Noteholders a security interest, provided that, except for the note
evidencing each Collateral Loan, such documents and instruments shall
only be required to be delivered to the extent such instruments and
documents exist and were in the possession of a Shareholder or a
custodian for a Shareholder, and provided further, that assignments to
be recorded will be delivered to the Servicer and promptly forwarded
by the Servicer to the Collateral Custodian after having been
recorded:
(i) the original note evidencing each Collateral
Loan (endorsed, accompanied by an allonge, or otherwise assigned to
the Company), endorsed in the name of the Trustee for the benefit of
the Noteholders which endorsement may be on the original note or by
Allonge or, when the original note is unavailable, a lost note
affidavit together with a certified copy of each such note;
25 NOTE AGREEMENT
31
(ii) for each Collateral Loan secured by real
property, the recorded original mortgage or deed of trust securing
such Collateral Loan, together with a duly executed and recorded
assignment (or assignment in recordable form) to each prior holder of
such Collateral Loan, including the applicable Shareholder, and a duly
executed assignment to the Company in recordable form thereof;
(iii) for each Collateral Loan secured by personal
property which can be perfected under the Uniform Commercial Code, as
adopted by the State whose laws govern perfection of such security
interests, a file-stamped copy of the UCC-1 financing statement filed
to secure such Collateral Loan, together with UCC-3 assignment to each
prior holder of such Collateral Loan, including the applicable
Shareholder, and a UCC-3 assignment to the Company in proper form for
recordation in the applicable recording office and for each Collateral
Loan secured by other personal property, appropriate evidence of the
perfection of the security interest in such collateral in favor of the
Company;
(iv) the original guaranties and assignments of
rents, if any, and other instruments and documents, including any
possessory documents, relating to security for and payment of each
Collateral Loan;
(v) for each Collateral Loan secured by real
property, an attorney's opinion or a policy of mortgage title
insurance on American Land Title Association's standard policy form
(revised coverage, most recent form) or on other policy forms as may
be required by applicable laws, statutes, rules, or regulations from a
national title insurance company, in favor of the Company, its
successors and assigns, or its predecessors in interest, insuring the
lien of the mortgage securing the note (subject only to such liens and
encumbrances as are generally acceptable to reputable lending
institutions, mortgage investors and securities dealers and to
Permitted Liens);
(vi) duly executed Collateral Assignments to the
Trustee for the benefit of the Noteholders thereof; and
(vii) a transmittal letter and computer-readable
diskette listing all documents being delivered to Collateral
Custodian.
(b) The Company shall deliver to Servicer all other
documents related to the Collateral Loans, to the extent such
instruments and documents exist and were in the possession of the
Shareholders or a custodian for any Shareholder, including without
limitation the following:
(i) evidence that the premises covered by the
mortgage, deed of trust or other documents securing such Collateral
Loan is insured against fire and other perils for extended coverage
for an amount at least equal to the amount required under SECTION 7.3;
(ii) original copies, or photocopies of surveys
and all other instruments, documents and other papers pertaining to
the Collateral Loan, if any; and
26 NOTE AGREEMENT
32
(iii) other documentation as the Servicer may
reasonably deem proper, including without limitation, all disclosures
required by applicable Truth-in-Lending and other consumer credit
regulations promulgated by any Governmental Authority.
4.4 OFFICER'S CERTIFICATE. Certificates signed by duly authorized
officers of the Company and the REO General Partner stating that (to the best
knowledge and belief of such officer, after reasonable and due investigation
and review of matters pertinent to the subject matter of such certificate):
(a) all of the representations and warranties contained in SECTION 3 and the
other Note Agreement Documents are true and correct as of the Closing Date; and
(b) no event has occurred and is continuing, or would result from the
transactions contemplated herein, which constitutes an Event of Default or
Potential Default.
4.5 ORGANIZATIONAL DOCUMENTS. True, correct and complete copies
of the following: (a) the articles of incorporation of the Company, the REO
General Partner and the Servicer, each certified as of a date within ten days
of the Closing Date by the Secretary of State of Texas, (b) the bylaws of, and
appropriate corporate resolutions on behalf of, the Company, the REO General
Partner and the Servicer, each certified as of the Closing Date by the
Secretary of the Company, REO General Partner and Servicer, as applicable, and
(c) the partnership agreement documents forming the Realty Companies.
4.6 RESOLUTIONS. Resolutions of the Company, each Realty General
Partner and the Servicer approving the execution, delivery and performance of
the Note Agreement Documents to which the Company, any Realty Company or the
Servicer, as applicable, is a party and the transactions contemplated herein
and therein, duly adopted by their board's of directors, and accompanied, as
appropriate, by certificates of the secretary of each such corporation that
such resolutions are true and correct, have not been altered or repealed and
are in full force and effect.
4.7 INCUMBENCY CERTIFICATE. A signed certificate of the secretary
of the Company, the REO General Partner and the Servicer which shall certify
the names of the officers of the Company, REO General Partner and Servicer,
respectively, authorized to sign each of the Note Agreement Documents and the
other documents or certificates to be delivered pursuant to the Note Agreement
Documents, together with the true signatures of each such officer. The Trustee
and the Noteholders may conclusively rely on such certificate until it shall
receive a further certificate of the secretary of such corporation canceling or
amending the prior certificate and submitting the signatures of the officers
named in such further certificate.
4.8 CERTIFICATES. Certificates of existence and good standing for
the Company, the REO General Partner and the Servicer issued by the Texas
Secretary of State, each dated within ten (10) days of the Closing Date.
4.9 RECORDABLE DOCUMENTS. UCC financing statements and other
filings or recordings as necessary to perfect the security interest in the
Collateral Loans.
4.10 LIEN SEARCHES. Current UCC lien searches from the Secretary
of State of the State of Texas evidencing that the liens in favor of the
Noteholders upon the Collateral are first priority Liens, subject only to
Permitted Liens.
4.11 INSURANCE. If available, evidence of insurance and loss payee
endorsements required hereunder or other Note Agreement Documents and
certificates or binders of insurance policies evidencing the insurance required
by SECTION 7.3 hereof.
27 NOTE AGREEMENT
33
4.12 RATING AGENCY LETTER. The signed letter from the Rating
Agency confirming its proposed rating for the Notes as of the Closing Date,
which must be rated at least "A2".
4.13 CUSIP NUMBER. A CUSIP Number issued by Standard & Poor's
CUSIP Service Bureau shall have been obtained for the Notes.
4.14 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated by the Note
Agreement Documents and all documents and instruments incident to such
transactions shall be satisfactory to the Noteholders purchasing Notes on the
Closing Date and their special counsel, and such Noteholders and their special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
4.15 OPINION LETTERS. Opinion letters from the Company's legal
counsel, dated the Closing Date, with respect to the issuance and sale of the
Notes, this Note Agreement, the Note Agreement Documents and other related
matters as the Trustee may reasonably request.
4.16 ADDITIONAL INFORMATION. Such other information and documents
as may reasonably be required by the Trustee or the Noteholders, including
without limitation the Asset Portfolio Report reflecting information concerning
the Asset Portfolio accurate as of May 31, 1997.
SECTION 5 AFFIRMATIVE COVENANTS. Until payment in full of the Notes and
the performance of the Obligation, the Company hereby covenants to the Trustee
for the benefit of each Noteholder, that (unless the Trustee as authorized by
Determining Noteholders shall otherwise consent in writing):
5.1 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS. The Company
shall deliver, or (as appropriate) shall ensure the Servicer delivers, to the
Trustee, or in the case of SECTION 5.1(f), to any Noteholder or Qualified
Institutional Buyer, each of the following:
(a) ANNUAL STATEMENTS. As soon as available and in any
event within one-hundred and twenty (120) days after the close of each
fiscal year of the Company (which is currently the calendar year and
which the Company shall not change without giving thirty days prior
written notice to the Trustee), copies of the consolidated balance
sheet of the Company (reflecting REO Property as inventory) as of the
close of such fiscal year and consolidated statements of income and
retained earnings and changes in financial position of the Company for
such fiscal year, in each case setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable detail and
accompanied by an opinion thereon (which shall not be qualified by
reason of any limitation imposed by the Company) of KPMG Peat Marwick
LLP, or of other independent public accountants of recognized national
standing selected by the Company, to the effect that such financial
statements have been prepared in accordance with GAAP consistently
maintained and applied (except for changes in which such accountants
concur) and that the examination of such accounts in connection with
such financial statements has been made in accordance with generally
accepted auditing standards and, accordingly, includes such tests of
the accounting records and such other auditing procedures as were
considered necessary in the circumstances;
(b) QUARTERLY STATEMENTS. As soon as available and in
any event within thirty (30) days after the close of each fiscal
quarter of the Company, copies of the unaudited consolidated balance
sheet of the Company (reflecting REO Property as inventory) as of the
close of such fiscal
28 NOTE AGREEMENT
34
quarter and the consolidated statements of income and retained
earnings and changes in position of the Company for such fiscal
quarter, all in reasonable detail;
(c) AUDIT REPORTS. Promptly upon receipt thereof, one
copy of each written report submitted to the Company by independent
accountants in any annual, quarterly or special audit made, including
without limitation, the Closing Review, it being understood and agreed
that all audit reports which are furnished to the Trustee pursuant to
this SECTION 5.1 shall be treated as confidential, but nothing herein
contained shall limit or impair any Noteholder's right to disclose
such reports to any appropriate Governmental Authority or to use such
information to the extent pertinent to an evaluation of the Obligation
or to enforce compliance with the terms and conditions of this
Agreement, or to take any lawful action which the Noteholder deems
necessary to protect its interests under this Agreement;
(d) COMPLIANCE CERTIFICATE. Within thirty (30) days
after the end of each fiscal quarter of the Company hereafter, a
certificate executed by a Senior Vice President of the Company,
stating that a review of the activities of the Company and the Realty
Companies during such fiscal quarter has been made under his
supervision and that each of the Company and the Realty Companies has
observed, performed and fulfilled each and every obligation and
covenant contained herein and is not in default under any of the same
or, if any such default shall have occurred, specifying the nature and
status thereof;
(e) ASSET PORTFOLIO REPORT. On or before the twentieth
(20th) calendar day of each month, an Asset Portfolio Report (in hard
copy or magnetic media) calculated as of the close of the immediately
prior month for all Collateral Loans, provided however, that the
individual asset status reports for each Collateral Loan shall only be
required to be sent to the Noteholders upon the request for such
information by any Noteholder; and
(f) ADDITIONAL FINANCIAL INFORMATION. Promptly upon
request, to any Noteholder and any Qualified Institutional Buyer to
whom any Note may be offered or sold by such Noteholder, the following
information (which shall be reasonably current): a brief statement of
the nature of the business of the Company; and the Company's most
recent balance sheet and profit and loss and retained earning
statement, and similar financial statements for such a part of the two
preceding fiscal years as the Company has been in operation (such
financial statements should be audited to the extent reasonably
available). The requirement that the information be reasonably
current will be presumed to be satisfied if (a) the balance sheet is
as of a date less than sixteen (16) months before the date of any such
resale, the statements of profit and loss and retained earnings are
for the twelve (12) months preceding the date of such balance sheet,
and if such balance sheet is not as of the date less than six (6)
months before the date of such resale, it shall be accompanied by
additional statements of profit and loss and retained earnings for the
period from the date of such balance sheet to a date less than six (6)
months before the date of such resale; or (b) the statement of the
nature of the Company's business and its products and services offered
is as of the date within twelve (12) months prior to the date of any
such resale.
5.2 ADDITIONAL REPORTS. The Company shall furnish to the Trustee,
as soon as practicable, such other information concerning the Collateral Loans,
or financial condition of the Company as the Trustee or Determining Noteholders
shall reasonably request in form reasonably satisfactory to them. The delivery
of any reports, statements and other information by the Company or Servicer
shall be deemed a
29 NOTE AGREEMENT
35
representation and warranty that the same is true, accurate and complete except
to the extent such reports or statements relate to estimates or projections of
future collections or cashflows related to the Collateral Loans.
5.3 PAYMENT OF TAXES, IMPOSITIONS AND OTHER INDEBTEDNESS. The
Company and the Realty Companies will each pay and discharge (a) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any property belonging to it, and all Impositions in
accordance with its normal and customary standards, and in any event before any
foreclosure action may be completed with respect to any of its assets, (b) all
lawful claims (including claims for labor, materials and supplies), which, if
unpaid, might become a Lien upon any of its property and (c) all of its other
Indebtedness, except as prohibited hereunder.
5.4 FILINGS. The Company and the Realty Companies will each file
all federal, state and local tax returns and other reports that the Company or
any Realty Company is required by law to file and maintain adequate reserves
for the payment of all taxes, assessments, governmental charges, and levies
imposed upon it, its income, or its profits, or upon any assets belonging to
it.
5.5 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS. The
Company and each Realty Company will each preserve and maintain its existence
and all of its rights, privileges and franchises necessary or desirable in the
normal conduct of its business, and conduct its business in an orderly and
efficient manner consistent with good business practices and in accordance with
all applicable laws, rules, regulations and orders of any Governmental
Authority.
5.6 NOTICE OF DEFAULT. The Company and each Realty Company will
each furnish to the Trustee, immediately upon becoming aware of the existence
of any condition or event which constitutes an Event of Default or Potential
Default, a written notice specifying the nature and period of existence thereof
and the action which the Company or such Realty Company, as applicable, is
taking or proposes to take with respect thereto.
5.7 OTHER NOTICES. The Company and each Realty Company will each
promptly notify the Trustee of (i) any Material Adverse Effect, (ii) any
material default under any material agreement, contract or other instrument to
which it is a party or by which any of its properties are bound, or any
acceleration of the maturity of any Indebtedness owing by it, (iii) any
material adverse claim against or affecting it or any of its properties, and
(iv) the commencement of, and any material determination in, any litigation
with any third party or any proceeding before any Governmental Authority
affecting the Company or such Realty Company.
5.8 COMPLIANCE WITH NOTE AGREEMENT DOCUMENTS. The Company and
each Realty Company will each promptly comply, and will cause Servicer to
promptly comply, with any and all covenants and provisions of this Agreement,
the Note, and all other Note Agreement Documents and all other reasonable
requests by the Trustee or Determining Noteholders related to the Notes.
5.9 COMPLIANCE WITH MATERIAL AGREEMENTS AND ORGANIZATIONAL
DOCUMENTS. The Company and each Realty Company will each comply and will cause
Servicer to comply, in all material respects with all material agreements,
indentures, mortgages or documents binding on it or affecting its properties or
business and all corporate, partnership and other organizational documents
forming and governing the Company and the Realty Companies.
30 NOTE AGREEMENT
36
5.10 OPERATIONS AND PROPERTIES. The Company and each Realty
Company will each act prudently and in accordance with Standard Industry
Practices in managing or operating its assets, properties, businesses and
investments. The Company will keep, and with respect to REO Property, each
Realty Company will keep, in good working order and condition, ordinary wear
and tear excepted, all of its assets and properties which are necessary to the
conduct of its business and cause the Underlying Collateral and REO Property to
be maintained in at least as good a condition as they existed on the Closing
Date, ordinary wear and tear excepted, and will make, or ensure Servicer makes,
such Protective Advances as may be required to do so; provided that neither
Company, Servicer, nor any Realty Company shall be required to make any such
Protective Advance where it is not in the best interest of the Company, any
Realty Company or the Noteholders to make any such repairs or payments and the
failure to do so is consistent with Standard Industry Practices.
5.11 BOOKS AND RECORDS; ACCESS. The Company and each Realty
Company will each give any Representative of the Trustee or any Noteholder
access during all business hours to, and permit such representative to examine,
copy or make excerpts from, any and all books, records and documents in the
possession of the Company and each Realty Company and relating to its affairs,
and to inspect any of the properties of the Company or each Realty Company.
The Company and each Realty Company will each maintain complete and accurate
books and records of its transactions in accordance with good accounting
practices.
5.12 COMPLIANCE WITH LAW. The Company and each Realty Company will
each comply with all applicable laws, rules, regulations, and all orders of any
Governmental Authority applicable to it or any of its property, business
operations or transactions, a breach of which could have a Material Adverse
Effect on the Company's or such Realty Company's financial condition, business
or credit. The Company and each Realty Company will each keep and maintain its
assets and any REO Property in material compliance with, and shall not cause or
permit any of the same to be in violation of, any Applicable Environmental
Laws.
5.13 AUTHORIZATIONS AND APPROVALS. The Company and each Realty
Company will each promptly obtain, from time to time at its own expense, all
such governmental licenses, authorizations, consents, permits and approvals as
may be required to enable it to comply with its obligations hereunder and under
the other Note Agreement Documents.
5.14 FURTHER ASSURANCES. The Company and each Realty Company will
make, execute or endorse, and acknowledge and deliver or file or cause the same
to be done, all such vouchers, invoices, notices, certifications and additional
agreements, undertakings, conveyances, deeds of trust, mortgages, transfers,
assignments, financing statements or other assurances, and take any and all
such other action, as the Trustee or Determining Noteholders may, from time to
time, deem reasonably necessary or proper in connection with this Agreement or
any of the other Note Agreement Documents, the obligations of the Company or
the Realty Companies hereunder or thereunder, or for better assuring and
confirming unto the Noteholders all or any part of the security for any of such
obligations, or for granting to the Trustee, for the benefit of the
Noteholders, any security for the Obligation which the Trustee or Determining
Noteholders may request from time to time, or for facilitating collection of
the Collateral hereunder.
5.15 COLLECTION EFFORTS. The Company will ensure the Servicer, on
behalf of the Company, exercises collection efforts with respect to the
Collateral Loans as is consistent with sound business practice and in
accordance with applicable law. The Company will ensure the Servicer at all
times complies with
31 NOTE AGREEMENT
37
Standard Industry Practices and Servicer's past procedures related to
collateral control, collection and reporting procedures with respect to all
Collateral Loans. The Company's principal office shall at all times be
maintained at the location indicated in SECTION 3.13 and the Company's books,
records and files related to the Collateral Loans shall at all times be
maintained at the Servicer's offices set forth on SCHEDULE 2 attached hereto.
The Company shall maintain all files related to the Collateral Loans in a
reasonably prudent manner.
5.16 MANAGEMENT. The Company will give the Noteholders prompt
notice of (a) all senior management changes and (b) any substantial material
change in the Company's management structure or personnel contemplated by the
Company.
5.17 RECORDS. The Company and/or Servicer will maintain complete
and accurate records and files pertaining to each Collateral Loan delivered to
the Trustee or the Collateral Custodian, and retain such records and files
together with all Collateral Documents, in the possession of the Company and/or
Servicer, in restricted access secure facilities reasonably safe from loss or
destruction.
5.18 GRANT OF SPECIFIC LIENS. The REO Affiliate will (except as to
property located in New York or Florida, unless requested to by the Trustee),
at any time it acquires Underlying Collateral through a foreclosure, or
deed-in- lieu of foreclosure, execute an REO Note and Mortgage and grant to the
Company a first priority lien in such REO Property, subject only to Permitted
Liens, to secure payment of the REO Note and all other obligations of the REO
Affiliate to the Company, which REO Note and lien shall immediately be assigned
to the Trustee and delivered to the Collateral Custodian as additional
Collateral under the Security Documents.
5.19 ANCILLARY AGREEMENTS. The Company and each Realty Company
will fully comply with, and perform all of the terms of the Lockbox Agreements,
the Servicing Agreement, and the other Note Agreement Documents applicable to
it.
5.20 DISPOSITION OF COLLATERAL LOANS. The Company, Servicer, and
the Realty Companies will only dispose of Collateral Loans, or otherwise settle
the amount owed on any Collateral Loan, for amounts which constitute a
maximization of the rate of return on such Collateral Loans.
5.21 GENERAL INDEMNITY; ENVIRONMENTAL INDEMNITY
(a) The Company and each Realty Company, each hereby
agrees to indemnify, protect, and hold the Trustee and the Noteholders
and their parents, subsidiaries, directors, officers, employees,
representatives, agents, successors, assigns, affiliates and attorneys
(collectively, with their successors and assigns, the "INDEMNIFIED
PARTIES") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses (including, without limitation, attorneys'
fees and legal expenses whether or not suit is brought and settlement
costs), and disbursements of any kind or nature whatsoever which may
be imposed on, incurred by, or asserted against any of the Indemnified
Parties, in any way relating to or arising out of the Note Agreement
Documents or any of the transactions contemplated therein or the
performance or exercise of any rights or remedies thereunder
(collectively, the "INDEMNIFIED LIABILITIES") to the extent that any
of the Indemnified Liabilities results, directly or indirectly, from
any claim made (whether or not in connection with any legal action,
suit, or proceeding) by or on behalf of any person or entity other
than the Company, the
32 NOTE AGREEMENT
38
Realty Companies, the partners of the Company or their affiliates,
INCLUDING MATTERS ARISING OUT OF THE ORDINARY NEGLIGENCE OF THE
INDEMNIFIED PARTIES, BUT EXCLUDING MATTERS ARISING OUT OF THE FRAUD,
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTIES;
provided, however, that the Trustee and the Noteholders shall not be
indemnified against any claim resulting from any action taken by the
Trustee and the Noteholders with respect to any Collateral subsequent
to the foreclosure upon such Collateral by the Trustee and the
Noteholders. The provisions of and undertakings and indemnification
set forth in this paragraph shall survive the satisfaction and payment
of the Obligation and termination of this Agreement.
(b) Each Realty Company agrees to promptly pay and
discharge when due all debts, claims, liabilities and obligations with
respect to any clean-up measures necessary for it to comply with
Applicable Environmental Laws affecting the REO Property it owns,
provided that, with respect to any single tract or parcel of real
property, the Realty Company owning such property shall not be
required to take such action if failure to take such action would not
have a Material Adverse Effect on its financial condition or would
not, in the reasonable opinion of the Trustee, have the potential for
creating any liability or claim against the Trustee or the
Noteholders. The Company and each Realty Company each hereby agree to
indemnify, protect, and hold each of the Indemnified Parties harmless
from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, proceedings,
costs, expenses (including, without limitation, all reasonable
attorneys' fees and legal expenses whether or not suit is brought),
and disbursements of any kind or nature whatsoever which may at any
time be imposed on, incurred by, or asserted against Indemnified
Parties, with respect to or as a direct or indirect result of any
violation, or claimed violation of, any Applicable Environmental Laws
by such Realty Company or the Company; or with respect to or as a
direct or indirect result of such Realty Company's or the Company's
generation, manufacture, production, storage, release, threatened
release, discharge, disposal of a Hazardous Substance at, on or about
any REO Property owned by such Realty Company, Underlying Collateral
or any property of the Company or such Realty Company or which secures
any indebtedness owed to the Company, including, without limitation,
(a) all damages related to any such use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal,
or presence, or (b) the costs of any required or necessary
environmental investigation, monitoring, repair, cleanup, or
detoxification and the preparation and implementation of any closure,
remedial, or other plans; and provided, however, that the Indemnified
Parties shall not be indemnified against any claim resulting from any
action taken by the Indemnified Parties with respect to any Collateral
or REO Property subsequent to the foreclosure upon such Collateral or
REO Property by the Indemnified Parties. The provisions of and
undertakings and indemnification set forth in this paragraph shall
survive the satisfaction and payment of the Obligation and termination
of this Agreement. It shall not be a defense to the covenant of the
Company or the Realty Companies to indemnify that the act, omission,
event or circumstance did not constitute a violation of any Applicable
Environmental Law at the time of its existence or occurrence. The
provisions of this SECTION 5.21 shall survive the repayment of the
Notes. In the event of the transfer of the Notes or any portion
thereof, the Noteholders shall continue to be benefited by this
indemnity agreement with respect to the period of such holding of the
Notes.
33 NOTE AGREEMENT
39
The Company will reimburse each Indemnified Party for all expenses
(including reasonable fees and disbursements of counsel) as they are incurred
by such Indemnified Party in connection with investigating, preparing for or
defending any action (or enforcing this Agreement, or any of the other Note
Agreement Documents). The Company agrees that it will not settle or compromise
or consent to the entry of any judgment in any pending or threatened action in
respect of which indemnification has been sought hereunder (whether or not an
Indemnified Party is a party therein) unless the Company has given the Trustee
reasonable or prior written notice thereof and obtained an unconditional
release of each Indemnified Party from all liability arising therefrom.
SECTION 6 NEGATIVE COVENANTS. Until payment in full of the Notes and
the performance of the Obligation, the Company hereby covenants to the Trustee
for the benefit of each Noteholder, that (unless the Trustee as authorized by
Determining Noteholders shall otherwise consent in writing):
6.1 LIMITATION ON INDEBTEDNESS. Neither the Company nor any
Realty Company will incur, create, contract, waive, assume, have outstanding,
guarantee or otherwise be or become, directly or indirectly, responsible for
any Indebtedness, except (a) Indebtedness of the Company arising out of this
Agreement and Indebtedness of the Realty Companies contemplated by this
Agreement, (b) liabilities for taxes and assessments incurred in the ordinary
course of business, (c) obligations under the Servicing Agreement, (d) current
amounts payable or accrued of other claims (other than for borrowed funds or
purchase money obligations or transactions which are equivalent thereto)
incurred in the ordinary course of business, provided that all such
liabilities, accounts and claims shall be promptly paid and discharged when due
or in conformity with customary trade terms, (e) contingent liabilities arising
out of endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business, or (f) the REO Notes.
6.2 NEGATIVE PLEDGE. Neither the Company nor any Realty Company
will create or suffer to exist any mortgage, pledge, security interest,
conditional sale, Lien or other title retention agreement, charge, encumbrance
or other Lien (whether such interest is based on common law, statute, other law
or contract) upon any of its property or assets, now owned or hereafter
acquired, except for Permitted Liens.
6.3 LIMITATION ON INVESTMENTS. Neither the Company nor any Realty
Company will make or have outstanding any Investments in any Person, except for
the Company's ownership of the REO Affiliate and Temporary Cash Investments.
6.4 ALTERATION OF MATERIAL AGREEMENTS. Neither the Company nor
any Realty Company will consent to or permit any alterations, amendments,
modifications, releases, waivers or terminations of any material agreement to
which it is a party which could result in a Material Adverse Effect.
6.5 CERTAIN TRANSACTIONS. Neither the Company nor any Realty
Company will enter into any transaction with, or pay any management fees to,
any Affiliate; provided, however, that the Company or the Realty Companies may
enter into the Servicing Agreement and transactions evidenced by the REO Notes.
6.6 ISSUANCE OF SHARES. Neither the Company nor any Realty
Company will issue, sell or otherwise dispose of, any stock or partnership
interests, as applicable.
34 NOTE AGREEMENT
40
6.7 LIMITATION ON SALE OF PROPERTIES. Neither the Company nor any
Realty Company will sell, assign, convey, exchange, lease or otherwise dispose
of any of its properties, rights, assets or business, whether now owned or
hereafter acquired, except in the ordinary course of its business and for a
fair consideration, and in such event shall immediately pay such proceeds into
one of the Lockbox Accounts to be applied pursuant to SECTION 2.5.
6.8 NAME, FISCAL YEAR AND ACCOUNTING METHOD. Neither the Company
nor any Realty Company will change its name, fiscal year or method of
accounting.
6.9 LIQUIDATION, MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF
SUBSTANTIAL ASSETS. Neither the Company nor any Realty Company will dissolve
or liquidate, or become a party to any merger or consolidation unless the
Company shall be the surviving entity of its property or assets or business.
6.10 LINES OF BUSINESS. Neither the Company nor any Realty Company
will directly or indirectly, engage in any business other than as permitted by
Article III of the Articles of Incorporation of the Company and ARTICLE III of
each Partnership Agreement forming each Realty Company.
6.11 NO AMENDMENTS. The Company will not amend its Articles of
Incorporation and no Realty Company will amend its partnership agreement.
6.12 PURCHASE OF SUBSTANTIAL ASSETS. The Company will not
purchase, lease or otherwise acquire part or all or substantially all of the
assets of any other Person except for the acquisition of the Asset Portfolio
and the foreclosure of Underlying Collateral and other Collateral securing the
Collateral Loans.
6.13 NEW PLACES OF BUSINESS. Neither the Company nor any Realty
Company will transfer its principal place of business or chief executive
office, except upon at least 60 days prior written notice to the Trustee and
after the delivery to the Trustee of financing statements in form satisfactory
to the Trustee to perfect or continue the perfection of the Trustee's Liens and
security interests contemplated hereby.
6.14 FICTITIOUS NAMES. Neither the Company nor any Realty Company
will use any fictitious name or "d/b/a" except as may be required in any state
to conduct business within such state, in which case the Company, or such
Realty Company will use a name as similar to the Company or such Realty
Company, as possible.
6.15 MARGIN STOCK. The Company will not own, purchase or acquire
(or enter into any contract to purchase or acquire) any "margin security" as
defined by any regulation of the Federal Reserve Board as now in effect or as
the same may hereafter be in effect.
6.16 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except in material
compliance with applicable Governmental Requirements (including all Applicable
Environmental Laws), neither the Company nor any Realty Company will use,
generate, manufacture, produce, store, release, discharge, or dispose of on,
under, or about any of its real property or transport to or from any of its
real property any Hazardous Substance, or allow any other Person or entity to
do so.
35 NOTE AGREEMENT
41
SECTION 7 COLLATERAL
7.1 SECURITY. The Company agrees to secure the Obligation to the
Noteholders by the pledge of, and the granting of a first priority perfected
security interest in the Collateral Loans which shall come into the possession,
custody or control of the Collateral Custodian, the Company or Servicer, and a
perfected security interest in additional collateral more fully described in
the Security Documents including, without limitation, (a) all cash, securities,
notes or other instruments deposited by the Company in any cash collateral
account securing the Company's obligations hereunder, including without
limitation the Tax Escrow Accounts and the Property Accounts for the Asset
Portfolio, the Lockbox Accounts, the Liquidity Reserve Account and the
Operating Reserve Account, (b) all interest of the Company in any documents
relating to the acquisition and ownership of the Asset Portfolio, including
without limitation, the Loan Contribution Agreements and (c) cash and non-cash
proceeds of the foregoing. Payment of the Obligation will be additionally
secured by each Partner of each Realty Company granting to the Trustee, for the
benefit of the Noteholders, a security interest in its Partnership interest and
related rights under the Partnership Agreement forming such Realty Company.
Promptly after receipt, the Company shall arrange for the recordation by the
Servicer of each assignment delivered pursuant to SECTION 4.3(a)(ii) hereof.
7.2 LIEN ON REO PROPERTIES. Each REO Property shall be owned by
one of the Realty Companies, it being understood that the Company shall not
take title to any REO Property. Following the Closing Date, all new REO
Property shall be acquired by the REO Affiliate. Immediately upon the
acquisition of title to an REO Property by the REO Affiliate, the REO Affiliate
will execute and deliver to the Company an REO Note (which shall be endorsed by
the Company to Trustee for Noteholders, and delivered to the Collateral
Custodian), security instruments granting to the Company a Lien on such REO
Property, except as otherwise provided in SECTION 5.18. The Company will
execute and deliver to the Trustee, a Collateral Assignment pursuant to which
the Company shall assign to Trustee for Noteholders, as security for the
Obligation, all of the Company's rights under such REO Note and REO Security
Documents. The Company (at its own expense) shall promptly record such
security instruments, REO Security Documents and any related assignment(s) of
lien with such filing offices as may be required by the Trustee to perfect and
record the Trustee's interests in such REO Property or as may be required by
the Servicer to perfect and record the Company's interests in such REO
Property. Prior to the taking of title to any REO Property by the REO
Affiliate, the Company shall provide Servicer with an Environmental Site
Assessment with respect to such REO Property or an update of any Environmental
Site Assessment previously delivered to Servicer, and the Company shall have
received Servicer's written acknowledgment that the results thereof are
acceptable to Servicer. To secure the prompt payment and performance to the
Noteholders of the Obligation, the Company shall execute the Collateral
Assignments, assigning to the Trustee for the benefit of the Noteholders, all
of the Liens securing the repayment of the Asset Portfolio and the obligations
secured thereby.
7.3 INSURANCE OF COLLATERAL. The Company and the Realty Companies
each agrees to maintain and pay for, or cause to be maintained and paid for,
insurance upon all Collateral covering casualty, hazard, public liability and
such other risks and in such amounts and with such insurance companies as is
customary. Neither the Company nor any Realty Company shall change the type or
extent of insurance existing on the Closing Date without the written permission
of Servicer. If the Company or any Realty Company fails to provide and pay for
such insurance, the Servicer shall, at the Company's or such Realty Company's
expense, as applicable, procure the same in accordance with the Servicing
Agreement.
36 NOTE AGREEMENT
42
7.4 POSSESSION OF COLLATERAL DOCUMENTS; SALE OF COLLATERAL. So
long as the Collateral Documents are in existence:
(a) Prior to the occurrence of an Event of Default or
Potential Default, the Servicer may agree to permit, from time to
time, the temporary withdrawal by the Servicer, pursuant to a trust
receipt executed by the Servicer, of specified notes evidencing
Collateral Loans, pledged to the Trustee for the benefit of the
Noteholders as collateral security for the Obligation, for a period
not to exceed eighteen (18) days from the date of such withdrawal
(unless such notes have been placed in the possession of an attorney,
as custodian for the Trustee, in which case such notes may be held by
such attorney in excess of such eighteen (18) day period),which
withdrawal shall be for the sole purpose of permitting the Company to
amend and/or correct errors in such notes and thereby enhance the
ultimate sale of such notes and for other purposes more particularly
described in the Custodial Agreement.
(b) Notwithstanding anything to the contrary contained
herein, the Trustee for the benefit of the Noteholders shall continue
to have a valid, perfected, first priority security interest and lien
in each Collateral Loan and related note delivered to the Company or
any qualified investor, until payment of the full purchase price
therefor has been made to the Noteholders.
7.5 POWER OF ATTORNEY. Without limiting any other rights and
remedies available to the Noteholders hereunder, each of the Company and each
Realty Company hereby appoints the Trustee as the Company's and such Realty
Company's attorney-in-fact, with full power of substitution, for the purpose of
carrying out the provisions of this Agreement or any Note Agreement Document
and taking any action and executing in the name of the Company or such Realty
Company, without recourse to the Company or such Realty Company, any document
or instrument, which the Trustee may deem necessary or advisable to accomplish
the purposes hereof and of any Note Agreement Document (including, without
limitation, perfecting or protecting the liens on and security interests in any
Collateral) which appointment is coupled with an interest and is irrevocable.
Upon the occurrence of a Potential Default or an Event of Default, each of the
Company and the Realty Companies hereby authorizes the Trustee in its
discretion at any time and from time to time to exercise such Power of
Attorney, including without limitation (a) completing any Collateral Assignment
which heretofore was, or hereafter at any time may be, executed and delivered
by the Company or the Realty Companies to the Trustee so that such assignment
describes a mortgage which is security for any Collateral Loan now or hereafter
at any time constituting Collateral and recording the same, and (b) completing
any other assignment or endorsement that was delivered in blank hereunder or
pursuant to the terms hereof.
7.6 APPOINTMENT OF COLLATERAL CUSTODIAN. Contemporaneously
herewith, the Trustee and the Noteholders have appointed Fleet National Bank,
as Collateral Custodian (the "COLLATERAL CUSTODIAN") pursuant to the Custodial
Agreement for the purpose of exercising any rights, and performing any duties,
of the Trustee with respect to Collateral hereunder, including without
limitation, the rights and duties described in this SECTION 7, to the extent
set forth in the Custodial Agreement. The Company shall deliver to the
Collateral Custodian all Collateral Loans and all requests for release of
Collateral Loans shall be made by the Servicer to the Collateral Custodian
(with a copy of each such request being simultaneously delivered to the
Servicer) and the Trustee. There shall be no change in the identity of the
Collateral Custodian without (a) 30 days prior written notice having been sent
to Trustee and (b) the Trustee having received a letter from the Rating Agency
indicating that the change will not result in the downgrading or withdrawal of
the rating then assigned to any Note.
37 NOTE AGREEMENT
43
7.7 RELEASES. The Trustee shall release the Liens and security
interests related to each Collateral Loan upon payment into a Lockbox Account
of all Portfolio Collections with respect to the disposition, settlement or
sale of such Collateral Loan, as indicated by written notice from the Servicer
to the Trustee.
SECTION 8 EVENTS OF DEFAULT
8.1 EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any
one or more of the following events (herein collectively called "EVENTS OF
DEFAULT") shall occur and be continuing:
(a) the Company shall fail to pay when due, any principal
of, or interest on, or Make-Whole Amount, if any, on the Notes, and
such failure shall continue for two Business Days following the due
date, or shall fail to make any payment to a Lockbox Account required
by SECTION 8.4;
(b) the Company shall fail to pay when due any fee,
expense or other payment required hereunder and such fee, expense or
other payment shall remain unpaid for three (3) days following
delivery by the Trustee to the Company of written notice of such
failure;
(c) any representation or warranty made or deemed made by
the Company, the Realty Companies or the Servicer under this
Agreement, or any of the other Note Agreement Documents, or in any
certificate or other writing furnished to the Trustee or Noteholders
pursuant hereto or in connection herewith, other than those made
pursuant to SECTIONS 3.22 through 3.27 hereof, shall prove to be
untrue or inaccurate in any material respect as of the date on which
such representation or warranty is made;
(d) default shall occur in the performance of any of the
covenants or agreements of the Company or the Realty Companies
contained in SECTION 6 herein;
(e) default shall occur in the performance of any of the
other covenants or agreements of the Company or the Realty Companies
contained herein or any of the other Note Agreement Documents and such
default is not remedied within thirty (30) days after the occurrence
thereof;
(f) default shall occur in the payment of any
Indebtedness of the Company in excess of $100,000 or default shall
occur in respect of any note, loan agreement or credit agreement
relating to any such Indebtedness and such default shall continue for
more than the period of grace, if any, specified therein; or any such
Indebtedness shall become due before its stated maturity by
acceleration of the maturity thereof or shall become due by its terms
and shall not be promptly paid or extended;
(g) any of the Note Agreement Documents shall cease to be
legal, valid, binding agreements enforceable against any party
executing the same in accordance with the respective terms thereof or
shall in any way be terminated or become or be declared ineffective or
inoperative or shall in any way whatsoever cease to give or provide
the respective liens, security interest, rights, titles, interest,
remedies, powers or privileges intended to be created thereby;
38 NOTE AGREEMENT
44
(h) the Company, any Realty General Partner or any Realty
Company shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian, intervenor or liquidator of itself or of
all or a substantial part of its assets, (ii) file a voluntary
petition in bankruptcy or admit in writing that it is unable to pay
its debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) file a petition or answer seeking
reorganization of an arrangement with creditors or to take advantage
of any bankruptcy or insolvency laws, (v) file an answer admitting the
material allegations of, or consent to, or default in answering, a
petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or (vi) take corporate action for the purpose
of effecting any of the foregoing;
(i) an involuntary petition or complaint shall be filed
against the Company, any Realty General Partner or any Realty Company
seeking bankruptcy or reorganization of the Company, such Realty
General Partner or such Realty Company or the appointment of a
receiver, custodian, trustee, intervenor or liquidator of the Company,
such Realty General Partner or such Realty Company, or all or
substantially all of its respective assets, and such petition or
complaint shall not have been dismissed within 60 days of the filing
thereof; or an order, order for relief, judgment or decree shall be
entered by any court of competent jurisdiction or other competent
authority approving a petition or complaint seeking reorganization of
the Company, any Realty General Partner or any Realty Company or
appointing a receiver, custodian, trustee, intervenor or liquidator of
the Company, any Realty General Partner, or any Realty Company, or of
all or substantially all of its respective assets, and such order,
judgment or decree shall continue unstayed and in effect for a period
of thirty (30) days;
(j) any final judgment(s) for the payment of money in
excess of the sum of $100,000 in the aggregate shall be rendered
against the Company or any Realty Company and such judgment or
judgments shall not be satisfied or discharged at least ten (10) days
prior to the date on which any of its assets could be lawfully sold to
satisfy such judgment;
(k) the Company or any Realty Company creates a Plan;
(l) there shall occur any change in the condition
(financial or otherwise) of the Company or any Realty Company or its
assets which, in the reasonable opinion of the Trustee, has a Material
Adverse Effect;
(m) Servicer defaults in the performance of its
obligations under the Servicing Agreement, and such default is not
cured on or before the earlier of ten (10) days following (i)
knowledge by the Company of such default, or (ii) receipt by the
Company of notice of such default or any of the events described in
SECTION 1.12(e) of the Servicing Agreement shall occur and be
continuing, even though the duties of the then- appointed Servicer may
not have been terminated; or
(n) there shall occur any change in the ownership of the
Company, Servicer, any Realty General Partner, or any Realty Company.
39 NOTE AGREEMENT
45
8.2 REMEDIES UPON EVENT OF DEFAULT; APPLICATION OF PAYMENTS.
(a) If an Event of Default shall have occurred and be
continuing, then the Determining Noteholders may, and the Trustee at
the request and direction of the Determining Noteholders shall,
exercise any one or more of the following rights and remedies, and any
other rights or remedies provided in any of the Note Agreement
Documents or otherwise available at law or equity, as the Determining
Noteholders in their sole discretion may deem necessary or
appropriate: (a) declare the principal of, and all interest then
accrued on, and Make-Whole Amount, if any, on the Notes and any other
liabilities hereunder (together with any costs, liabilities or
expenses of exercising its rights and remedies hereunder or under any
Note Agreement Document) to be forthwith due and payable, whereupon
the same shall forthwith become due and payable without presentment,
demand, protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind all of which the
Company hereby expressly waives, anything contained herein or in the
Notes to the contrary notwithstanding, (b) reduce any claim to
judgment, and/or (c) without notice of default or demand, pursue and
enforce any of the Trustee's or Noteholders' rights and remedies under
the Note Agreement Documents, or otherwise provided under or pursuant
to any applicable law or agreement, including without limitation all
of the rights and remedies of a secured party under the Security
Documents or under the Uniform Commercial Code adopted in the State of
New York, all of which rights and remedies shall be cumulative, and
none of which shall be exclusive; provided, however, that if any Event
of Default specified in SECTIONS 8.1(h) and (i) shall occur, the
principal of, and all interest on, the Notes and other liabilities
hereunder shall thereupon become due and payable concurrently
therewith, without any further action by the Noteholders and without
presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or other notice of any
kind, all of which the Company hereby expressly waives.
(b) Notwithstanding anything to the contrary set forth in
SECTION 2.5 hereof, in the event the Notes become due and payable in
full, whether upon maturity or upon acceleration following an Event of
Default, all amounts received by the Trustee for payment to the
Noteholders, including all Portfolio Collections and any proceeds
received from foreclosure, liquidation or other disposition of the
Collateral shall be applied in the following order of priority:
(i) first, to payment of all fees and expenses of
the Trustee and legal counsel to the Noteholders incurred in
connection with collecting payments on the Notes and enforcing
the rights of the Trustee and the Noteholders under the Note
Agreement Documents including without limitation all expenses
incurred in foreclosing upon the Collateral, provided however,
that for purposes of this clause (i) fees and expenses of
legal counsel to the Noteholders shall be limited to fees and
expenses of a single counsel appointed by the Determining
Noteholders;
(ii) second, to payment of the outstanding Notes
as follows: (a) first, to accrued unpaid interest and (b)
second to any outstanding principal;
(iii) third, to payment of the Make-Whole Amount,
if any, on all Notes:
(iv) fourth, to payment of any remaining unpaid
Obligation; and
(v) fifth, the balance, if any remaining after
the full and final payment of the Obligation, to the Company.
40 NOTE AGREEMENT
46
8.3 PERFORMANCE BY THE NOTEHOLDERS. Should the Company or any
Realty Company fail to perform any covenant, duty or agreement contained herein
or in any of the Note Agreement Documents, the Trustee or Determining
Noteholders may, at their option, after reasonable notice to the Company and
the Realty Companies of such failure, perform or attempt to perform such
covenant, duty or agreement on behalf of the Company or the Realty Companies.
In such event, the Company shall, at the request of the Trustee or Determining
Noteholders, promptly pay any amount expended by the Trustee or Determining
Noteholders in such performance or attempted performance to the Trustee at its
principal office in Irvine, California, together with interest thereon at the
highest lawful rate from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly understood that neither the
Trustee nor the Noteholders shall assume any liability or responsibility for
the performance of any duties of the Company hereunder or under any of the Note
Agreement Documents or other control over the management and affairs of the
Company.
8.4 BREACH OF CERTAIN REPRESENTATIONS AND WARRANTIES; BREACH OF
COLLATERAL DOCUMENT DELIVERY REQUIREMENTS. In the event (i) of a breach of any
of the representations and warranties made by the Company and the Realty
Companies pursuant to SECTIONS 3.22 through 3.27 hereof which has a Material
Adverse Effect or (ii) the Company fails to deliver any of the Collateral
Documents required to be delivered hereunder (other than the notes evidencing
the Collateral Loans) or the assignments or transfer documents required to be
delivered pursuant to SECTION 4.3(a), by the dates required hereunder, the
Company shall have sixty days after becoming aware of any breach to cure such
breach and 180 days after the Closing Date to deliver such Collateral
Documents, assignments or transfer documents. In the event the Company is
unable to cure such breach or deliver such Collateral documents, assignments or
transfer documents and a Shareholder has not cured the breach or repurchased
the Collateral Loan in question for the Purchase Price, the Company will be
obligated to make a payment to a Lockbox Account in the amount of the Purchase
Price for the Collateral Loan which is the subject of the breach of warranty or
for which all of the Collateral Documents, assignments or transfer documents
have not been delivered as required hereunder. The Lien on such Collateral
Loan shall be released by the Trustee as directed by the Company following any
such payment in full. Any such repurchase of a Collateral Loan by a
Shareholder or payment by the Company of the Notes as a result of any such
breach or failure to deliver Collateral Documents shall not result in payment
of a Make-Whole Amount.
SECTION 9 TRUSTEE
9.1 TRUSTEE.
(a) APPOINTMENT. Each Noteholder by purchasing its
Notes, appoints the Trustee (including, without limitation, each
successor Trustee in accordance with this SECTION 9) as its nominee
and agent to act in its name and on its behalf (and the Trustee and
each such successor accepts that appointment): (i) to take any action
that it properly requests under the Note Agreement Documents (subject
to the concurrence of the Noteholders as may be required under the
Note Agreement Documents); (ii) to be the secured party, mortgagee,
beneficiary, recipient, and similar party in respect of any collateral
for the benefit of the Noteholders; (iii) to promptly distribute to it
all information, requests, documents, and other items received from
the Company under the Note Agreement Documents; (iv) unless otherwise
provided in this Agreement, to promptly distribute to it its ratable
part of each payment or prepayment (whether voluntary, as proceeds of
collateral upon or after foreclosure, as proceeds of insurance
thereon, or otherwise) in accordance with the terms of the Note
Agreement Documents; and (v) to deliver to the appropriate Persons
requests,
41 NOTE AGREEMENT
47
demands, approvals, and consents received from it. However, the
Trustee may not be required to take any action that exposes it to
personal liability or that is contrary to any Note Agreement Document
or applicable Governmental Requirement and the Trustee shall not be
required to respond to any request for approval provided for hereunder
without the consent of Determining Noteholders or Noteholders, as
appropriate.
(b) SUCCESSOR. The Trustee may assign all of its rights
and obligations as the Trustee under the Note Agreement Documents to
any of its Affiliates, with recourse, which Affiliate shall then be
the successor Trustee under the Note Agreement Documents, provided
that, unless the Determining Noteholders consent to such assignment,
the Trustee shall remain liable for all of its obligations hereunder
and under the Servicing Agreement. The Trustee may also voluntarily
resign and shall resign upon the request of Determining Noteholders
for cause (i.e., the Trustee is continuing to fail to perform its
responsibilities as the Trustee under the Note Agreement Documents).
If the initial or any successor Trustee ever ceases to be a party to
this Agreement or if the initial or any successor Trustee ever resigns
(whether voluntarily or at the request of Determining Noteholders),
then Determining Noteholders shall (which, if no Event of Default or
Potential Default exists, is subject to the Company's approval that
may not be unreasonably withheld) appoint the successor Trustee. If
Determining Noteholders fail to appoint a successor Trustee within 30
days after the resigning Trustee has given notice of resignation or
Determining Noteholders have removed the resigning Trustee, then the
resigning Trustee may, on behalf of the Noteholders, appoint a
successor Trustee, which must be a commercial bank having a combined
capital and surplus of at least $100,000,000 (as shown on its most
recently published statement of condition), and a rating of "A" or
higher by Standard & Poor's or Moody's. In either case, prior to the
successor Trustee becoming Trustee under this agreement, the existing
Trustee must have received a letter from the Rating Agency indicating
that the change will not result in the downgrading or withdrawal of
the rating then assigned to any Note. Upon its acceptance of
appointment as successor Trustee, the successor Trustee succeeds to
and becomes vested with all of the rights of the prior Trustee, and
the prior Trustee is discharged from its duties and obligations of the
Trustee under the Note Agreement Documents, and each Noteholder shall
execute the documents that any Noteholder, the resigning or removed
Trustee, or the successor Trustee reasonably request to reflect the
change. After any Trustee's resignation or removal as the Trustee
under the Note Agreement Documents, the provisions of this section
inure to its benefit as to any actions taken or not taken by it while
it was the Trustee under the Note Agreement Documents.
9.2 DELEGATION OF DUTIES; RELIANCE. The Noteholders may perform
any of their duties or exercise any of their rights under the Note Agreement
Documents by or through the Trustee, and the Noteholders and the Trustee may
perform any of their duties or exercise any of their rights under the Note
Agreement Documents by or through their respective Representatives. The
Trustee, the Noteholders, and their respective Representatives (a) are entitled
to rely upon (and shall be protected in relying upon) any written or oral
statement believed by it or them to be genuine and correct and to have been
signed or made by the proper Person and, with respect to legal matters, upon
opinion of counsel selected by the Trustee or that Noteholder (but nothing in
this CLAUSE (a) permits the Trustee to rely on (i) oral statements if a writing
is required by this agreement or (ii) any other writing if a specific writing
is required by this agreement), (b) are entitled to deem and treat each
Noteholder as the owner and holder of its portion of the Obligation for all
purposes until, written notice of the assignment or transfer is given to and
received by the Trustee (and any request, authorization, consent, or approval
of any Noteholder is conclusive and binding on each subsequent holder,
assignee, or transferee of that Noteholder's portion of the Obligation
42 NOTE AGREEMENT
48
until that notice is given and received), (c) are not deemed to have notice of
the occurrence of an Event of Default unless a responsible officer of the
Trustee, who handles matters associated with the Note Agreement Documents and
transactions thereunder, has actual knowledge or the Trustee has been notified
by a Noteholder or the Company, and (d) are entitled to consult with legal
counsel (including counsel for the Company), independent accountants, and other
experts selected by the Trustee and are not liable for any action taken or not
taken in good faith by it in accordance with the advice of counsel,
accountants, or experts.
9.3 LIMITATION OF TRUSTEE'S LIABILITY.
(a) EXCULPATION. Neither the Trustee nor any of its
Affiliates or Representatives will be liable for any action taken or
omitted to be taken by it or them under the Note Agreement Documents
in good faith and believed by it or them to be within the discretion
or power conferred upon it or them by the Note Agreement Documents or
be responsible for the consequences of any error of judgment (except
for fraud, negligence, or willful misconduct).
(b) INDEMNITY. The Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Agreement
or any of the other Note Agreement Document at the request or
direction of any of the Noteholders pursuant to this Agreement, unless
such Noteholders shall have offered to the Trustee reasonable security
or indemnity against the costs, expenses and liabilities which might
be incurred by it in compliance with such request or direction. If
the Trustee requests instructions from the Noteholders, or Determining
Noteholders, as the case may be, with respect to any act or action in
connection with any Note Agreement Document, the Trustee is entitled
to refrain (without incurring any liability to any Person by so
refraining) from that act or action unless and until it has received
instructions. In no event, however, may the Trustee or any of its
Representatives be required to take any action that it or they
determine could incur for it or them criminal or onerous civil
liability. Without limiting the generality of the foregoing, no
Noteholder has any right of action against the Trustee as a result of
Trustee's acting or refraining from acting under this agreement in
accordance with instructions of Determining Noteholders.
(c) RELIANCE. The Trustee is not responsible to any
Noteholder, and each Noteholder represents and warrants that it has
not relied upon the Trustee in respect of, (i) the creditworthiness of
the Company and the risks involved to that Noteholder, (ii) the
effectiveness, enforceability, genuineness, validity, or the due
execution of any Note Agreement Document (except by the Trustee),
(iii) any representation, warranty, document, certificate, report, or
statement made therein (except by the Trustee) or furnished thereunder
or in connection therewith, (iv) the adequacy of any collateral now or
hereafter securing the Obligation or the existence, priority, or
perfection of any Lien now or hereafter granted or purported to be
granted on the collateral under any Note Agreement Document, or (v)
observation of or compliance with any of the terms, covenants, or
conditions of any Note Agreement Document on the part of the Company.
9.4 EVENT OF DEFAULT. The Trustee is entitled to refrain from
taking any action (without incurring any liability to any Person for so acting
or refraining) unless and until it has received instructions from Determining
Noteholders and may take action without the direction of Determining
Noteholders only if no Material Adverse Effect could reasonably be expected to
result from such action. In actions with respect to the Company's property,
the Trustee is acting for the ratable benefit of each Noteholder.
43 NOTE AGREEMENT
49
9.5 COLLATERAL MATTERS.
(a) Each Noteholder authorizes and directs the Trustee to
enter into the Note Agreement Documents and agrees that any action
taken by the Trustee concerning any Collateral (with the consent or at
the request of Determining Noteholders) in accordance with any Note
Agreement Document, that Trustee's exercise (with the consent or at
the request of Determining Noteholders) of powers concerning the
Collateral in any Note Agreement Document, and that all other
reasonably incidental powers are authorized and binding upon all the
Noteholders.
(b) The Trustee is authorized on behalf of all the
Noteholders, without the necessity of any notice to or further consent
from any Noteholder, from time to time before an Event of Default or
Potential Default, to take any action with respect to any Collateral
or Note Agreement Documents related to Collateral that may be
necessary to perfect and maintain perfected the Trustee's Liens upon
the Collateral.
(c) The Trustee has no obligation whatsoever to any
Noteholder or to any other Person to assure that the Collateral exists
or is owned by the Company or is cared for, protected, or insured or
has been encumbered or that the Trustee's Liens have been properly or
sufficiently or lawfully created, perfected, protected, or enforced or
are entitled to any particular priority.
(d) If an Event of Default (of which the Trustee has
knowledge) has occurred and is continuing, the Trustee shall exercise
such of the rights and powers vested in it by the Note Agreement
Documents, and use the same degree of care in its exercise, as a
prudent person would exercise or use under the circumstances in the
conduct of its own affairs.
(e) Noteholders irrevocably authorize the Trustee, at its
option and in its discretion, to release any Noteholder Lien upon any
Collateral (i) in accordance with SECTION 7.7, (ii) constituting
property being disposed of as permitted under any Note Agreement
Document, (iii) constituting property in which the Company did not own
any interest at the time the Lien was granted or at any time after
that, (iv) consisting of an instrument evidencing Indebtedness pledged
to the Trustee (for the benefit of the Noteholders), if the underlying
Indebtedness has been paid in full, (v) if approved, authorized, or
ratified in writing by the Determining Noteholders, or (vi) upon
payment of the Obligation in full. Upon request by the Trustee at any
time, the Determining Noteholders shall confirm in writing Trustee's
authority to release particular types or items of Collateral under
this CLAUSE (e).
9.6 LIMITATION OF LIABILITY. No Noteholder will incur any
liability to any other Noteholder except for acts or omissions in bad faith,
and neither the Trustee nor any Noteholder will incur any liability to any
other Person for any act or omission of any other Noteholder.
9.7 RELATIONSHIP OF THE NOTEHOLDERS. The Note Agreement Documents
do not create a partnership or joint venture among the Trustee and the
Noteholders or among the Noteholders.
9.8 BENEFITS OF AGREEMENT. None of the provisions of this section
inure to the benefit of the Company or any other Person except the Trustee and
the Noteholders. Therefore, neither the Company nor any other Person is
responsible or liable for, entitled to rely upon, or entitled to raise as a
defense -- in any manner whatsoever -- the failure of the Trustee or any
Noteholder to comply with these provisions.
44 NOTE AGREEMENT
50
SECTION 10 MISCELLANEOUS
10.1 MODIFICATION.
(a) REQUIREMENTS. This Agreement, the Notes and the
other Note Agreement Documents may be amended, and the observance of
any term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the
Company, the Trustee and the Determining Noteholders except that (a)
no amendment or waiver of any of the provisions of SECTION 2.1, 2.2,
2.3, 2.4, 2.5, 3, 4, 8.1(a), 8.1(b), OR 10.1(a) hereof, or any defined
term (as it is used therein), will be effective as to any Noteholder
unless consented to by such Noteholder in writing, and (b) no such
amendment or waiver may, without the written consent of the holder of
each Note at the time outstanding affected thereby, (i) subject to the
provisions of SECTION 8.2 relating to acceleration, change the amount
or time of any prepayment or payment of principal of, or reduce the
rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (ii) change the
definition of "Determining Noteholders" or percentage of the principal
amount of the Notes the holders of which are required to consent to
any such amendment or waiver, or (iii) amend this SECTION 10.1(a).
(b) SOLICITATION. The Company will forward to the
Trustee, who will provide each Noteholder (irrespective of the amount
of Notes then owned by it), sufficient information, sufficiently far
in advance of the date a decision is required, as directed by the
Company, to enable such holder to make an informed and considered
decision with respect to any proposed amendment, waiver or consent in
respect of any of the provisions hereof, or of the Notes or any other
Note Agreement Document. The Company will forward to the Trustee and,
to the extent within its possession, the Trustee will deliver executed
or true and correct copies of each amendment, waiver or consent
effected pursuant to the provisions of this SECTION 10 to each holder
of outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of, the
requisite holders of Notes.
(c) PAYMENT. The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any
security, to any Noteholder as consideration for or as an inducement
to the entering into by any Noteholder or any waiver or amendment of
any of the terms and provisions hereof or of any of the Note Agreement
Documents unless such remuneration is concurrently paid, or security
is concurrently granted, on the same terms, ratably to each holder of
Notes then outstanding even if such holder did not consent to such
waiver or amendment.
(d) BINDING EFFECT, ETC. Any amendment or waiver
consented to as provided in this SECTION 10.1 applies equally to all
holders of Notes and is binding upon them and upon each future holder
of any Note and upon the Company without regard to whether such Note
has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Potential Default or Event of Default not expressly amended
or waived or impair any right consequent thereon. No course of
dealing between the Company and any Noteholder nor any delay in
exercising any rights hereunder or under any Note shall operate as a
waiver of any rights of any such Noteholder.
45 NOTE AGREEMENT
51
(e) NOTES HELD BY COMPANY, ETC. Solely for the purpose
of determining whether the holders of the requisite percentage of the
aggregate principal amount of Notes then outstanding approved or
consented to any amendment, waiver or consent to be given under this
Agreement, the Notes or the other Note Agreement Documents, or have
directed the taking of any action provided herein, in the Notes or in
the other Note Agreement Documents to be taken upon the direction of
the holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly owned
by the Company or any of its Affiliates shall be deemed not to be
outstanding.
Unless the Determining Noteholders agree in writing to waive the
condition specified in this sentence, no such modifications, consents,
amendments or waivers discussed in this SECTION 10.1 shall be deemed effective
unless the Trustee shall have received a letter from the Rating Agency
indicating that the modifications, consents, amendments, or waivers in question
will not result in the downgrading or withdrawal of the rating then assigned to
any Note.
10.2 ACCOUNTING TERMS AND REPORTS. All accounting terms not
specifically defined in this Agreement shall be construed in accordance with
GAAP. All financial reports furnished by the Company to the Noteholders
pursuant to this Agreement shall be prepared on the same basis as those
prepared by the Company in prior years and shall be the same financial reports
as those furnished to the Company's officers and directors. All financial
projections furnished by the Company to the Noteholders pursuant to this
Agreement shall be prepared in such form and such detail as shall be
satisfactory to the Determining Noteholders.
10.3 WAIVER. No failure to exercise, and no delay in exercising,
on the part of the Noteholders, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
further exercise thereof or the exercise of any other right. The rights of the
Noteholders hereunder and under the Note Agreement Documents shall be in
addition to all other rights provided by law. No modification or waiver of any
provision of this Agreement, the Notes or any Note Agreement Documents, nor
consent to departure therefrom, shall be effective unless in writing and no
such consent or waiver shall extend beyond the particular case and purpose
involved. No notice or demand given in any case shall constitute a waiver of
the right to take other action in the same, similar or other instances without
such notice or demand.
10.4 PAYMENT OF FEES AND EXPENSES. The Company agrees to pay all
costs and expenses (including, without limitation, the reasonable attorneys'
fees of the Noteholders' and the Trustee's legal counsel) incurred by the
Trustee and by the Noteholders in connection with (a) the preservation and
enforcement of the Noteholders' rights under this Agreement, the Notes, and the
other Note Agreement Documents, and (b) the negotiation, preparation, execution
and delivery of any and all amendments, modifications and supplements to this
Agreement, the Notes or the other Note Agreement Documents. In addition, the
Company shall pay all fees of the Trustee previously agreed to by the Company.
10.5 NOTICES.
(a) Except as otherwise expressly provided herein, all
notices, requests and demands and other communications to or upon a party
hereto shall be in writing, and shall be deemed to have been validly served,
given or delivered (a) if sent by certified or registered mail against receipt,
three (3) Business Days after deposit in the mail, postage prepaid, or, if
earlier, when delivered against receipt, (b)
46 NOTE AGREEMENT
52
if sent by telecopier, when transmitted with sender's confirmation of
successful transmission, or (c) if sent by any other method, upon actual
delivery, in each case addressed as follows: (i) if to the Trustee, at Bankers
Trust Company of California, N.A., 0 Xxxx Xxxxx, 00xx Xxxxx, Xxxxxx,
Xxxxxxxxxx, 00000, ATTN: Bosque 7.66% Notes, Telecopier: (000) 000-0000; (ii)
if to the Noteholders, at their address shown in the Register; (iii) if to the
Company or the Realty Companies, at:
0000 Xxxxxxxx Xxxxx
P. O. Xxx 0000
Xxxx, Xxxxx 00000-0000
ATTN: Xxxx X. Xxxxxxxxxx
Telecopier: (000) 000-0000
with courtesy copies to:
J-HAWK CORPORATION
0000 Xxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxx, Xxxxx 00000-0000
ATTN: Xxxx X. Xxxxxxxxxx
Telecopier: (000) 000-0000
and
CFSC Capital Corp. II
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000-0000
ATTN: Xxxxxxx X. Xxxxxx
Telecopier: (000) 000-0000
and (iv) if to the Rating Agency, at:
Xxxxx'x Investors Service, Inc.
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Telecopier: (000) 000-0000
or to such other address as each party may designate for itself by like notice
given in accordance with this SECTION 10.5; provided, however, that any notice
received by the Noteholders after 3:00 p.m. on any day from the Company or any
other Person shall be deemed for the purposes of such section to have been
given by such Person on the next succeeding Business Day and provided further,
that the failure to deliver any courtesy copies provided for in this SECTION
10.5 shall have no effect on the validity or effectiveness of any such notice,
request, demand or other communication. Any notices or documents required to
be delivered or mailed by the Trustee to any Rating Agency shall be given on a
reasonable efforts basis and only as a matter of courtesy and accommodation and
the Trustee shall have no liability for failure to deliver such notice or
document to any Rating Agency. In addition, the failure to give such notice to
any Rating
47 NOTE AGREEMENT
53
Agency shall not affect any other rights or obligations created hereunder, and
shall not under any circumstances constitute an Event of Default.
(b) The Trustee shall promptly provide notice to the
Rating Agency and Noteholder with respect to each of the following of which a
responsible officer of the Trustee has actual knowledge:
(i) any material change or amendment to this
Agreement or any other Note Agreement Documents;
(ii) the occurrence of any Event of Default that
has not been cured;
(iii) the resignation or termination of the
Servicer, the Trustee, the Collateral Custodian, the Lockbox
Bank or the Additional Lockbox Bank and the appointment of any
successor thereto;
(iv) any change in the location of any Lockbox
Account, Liquidity Reserve Account or Operating Reserve
Account; and
(v) the final payment to the Noteholders.
(c) The Trustee shall promptly deliver to the Rating
Agency, at the addresses set forth above, a copy of each statement, report and
certificate received by it pursuant to SECTIONS 5.1(a), (b), (c), AND (d). The
Trustee shall also provide such other information as the Rating Agency shall
reasonably request and which the Trustee can reasonably provide, at no cost to
the Rating Agency.
(d) Notwithstanding anything to the contrary set forth
herein or in any of the Note Agreement Documents, all notices, documents or
other deliveries required to be made to the Noteholders hereunder or under any
of the other Note Agreement Documents by (i) the Company or (ii) any Affiliate
of the Company a party to any such document, shall be made to the Trustee. The
Trustee will be responsible for providing (within four (4) Business Days
following receipt thereof by the Trustee) copies of such documents, notices and
other deliveries to each Noteholder.
10.6 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. The Note Agreement Documents are being delivered and consummated and
the Company's and the Realty Companies' duties hereunder are performable in the
State of Texas. The Note Agreement Documents (other than those containing a
contrary express choice of law provision) shall be construed in accordance with
the laws of Texas applicable to contracts made and performed in Texas. Any
suit, action or proceeding against the Company or the Realty Companies with
respect to this Agreement, the Note or any judgment entered by any court in
respect thereof, may be brought in the courts of the State of Texas, County of
Dallas, or in the United States courts located in the State of Texas as the
Trustee in its sole discretion may elect and the Company and the Realty
Companies, each hereby submits to the non-exclusive jurisdiction of such courts
for the purpose of any such suit, action or proceeding. The Company and each
Realty Company, each hereby irrevocably and unconditionally waives (a) any
objections which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement, the
Notes or any other Note Agreement Document brought in the courts located in the
State of Texas and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in any
inconvenient forum, and (b) to the maximum extent not prohibited by law, any
right
48 NOTE AGREEMENT
54
it may have to claim or recover on any legal action or proceeding related
hereto, any special, exemplary, punitive or consequential damages. THE COMPANY
AND EACH REALTY COMPANY, EACH HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF, OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER NOTE AGREEMENT DOCUMENTS AND THE
RIGHT TO BRING ANY ACTION IN COURTS LOCATED IN ANY STATE OTHER THAN TEXAS.
10.7 INVALID PROVISIONS. If any provision of any Note Agreement
Document is held to be illegal, invalid or unenforceable under present or
future Governmental Requirements during the term of this Agreement, such
provision shall be fully severable; such Note Agreement Document shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of such Note Agreement Document; and the remaining
provisions of such Note Agreement Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Note Agreement Document. Furthermore,
in lieu of each such illegal, invalid or unenforceable provision shall be added
as part of such Note Agreement Document a provision mutually agreeable to the
Company and the Trustee as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
In the event the Company and the Trustee are unable to agree upon a provision
to be added to the Note Agreement Document within a period of ten (10) Business
Days after a provision of the Note Agreement Document is held to be illegal,
invalid or unenforceable, then a provision acceptable to the Noteholders as
similar in terms to the illegal, invalid or unenforceable provision as is
possible and be legal, valid and enforceable shall be added automatically to
such Note Agreement Document. In either case, the effective date of the added
provision shall be the date upon which the prior provision was held to be
illegal, invalid or unenforceable.
10.8 MAXIMUM INTEREST RATE. Regardless of any provision contained
in any of the Note Agreement Documents, the Noteholders shall never be entitled
to receive, collect or apply as interest on the Notes any amount in excess of
the Maximum Rate.
10.9 OFFSET. The Company hereby grants to the Noteholders the
right of offset, to secure repayment of the Notes, upon any and all moneys,
securities or other property of the Company and the proceeds therefrom, now or
hereafter held or received by or in transit to the Noteholders, from or for the
account of the Company, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, and also upon any and all deposits (general or
special) and credits of the Company, and any and all claims of the Company
against the Noteholders at any time existing.
10.10 MULTIPLE COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same agreement, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
10.11 ENTIRETY. The Note Agreement Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof and thereof.
10.12 HEADINGS. Section headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
49 NOTE AGREEMENT
55
10.13 SURVIVAL. All representations and warranties made by the
Company herein shall survive the closing and the delivery of this Agreement and
the Notes.
10.14 REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
(a) SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns; provided
that (i) neither the Company, Servicer, nor any Realty Company shall,
directly or indirectly, assign or transfer, or attempt to assign or
transfer, any of its rights, duties or obligations under this
Agreement or any of the Note Agreement Documents without the express
prior written consent of the Determining Noteholders, and provided
further that no Noteholder may assign, sell or transfer all or any
portion of any Note to any Person other than to a United States
person.
(b) REGISTRATION OF NOTES. The Trustee shall keep at its
office a register (a "REGISTER") for the registration and registration
of transfers of Notes. The name and address of each holder of one or
more Notes, each transfer thereof and the name and address of each
transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in
whose name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and neither the
Company nor the Trustee shall be affected by any notice or knowledge
to the contrary. The Register shall be available for inspection by the
Noteholders at any reasonable time and from time to time upon
reasonable prior notice.
(c) TRANSFER AND EXCHANGE OF NOTES. Upon surrender of
any Note at the office of the Trustee for registration of transfer or
exchange (and in the case of a surrender for registration of transfer,
duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Note or his attorney duly
authorized in writing and accompanied by the address for notices of
each transferee of such Note or part thereof), and upon compliance
with the provisions of SECTION 2.1(c), including receipt by the
Company and the Trustee of (i) adequate assurances (by opinion of
counsel for each transferee other than a Qualified Institutional Buyer
and by a certificate in the form attached hereto as EXHIBIT F from an
authorized officer of any transferee, satisfactory to the Company and
the Trustee, that exemptions from the registration requirements of the
Securities Act and applicable state securities laws are available, and
(ii) adequate assurances (by a certificate from an authorized officer
of any transferor satisfactory to the Company and the Trustee) that
the transferor is a United States person, the Company shall execute
and deliver, at the Company's expense (except as provided below), one
or more new Notes (as requested by the holder thereof) in exchange
therefor, in an aggregate principal amount equal to the unpaid
principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be
substantially in the form of EXHIBIT A. Each such new Note shall be
dated and bear interest from the date to which interest shall have
been paid on the surrendered Note or dated the date of the surrendered
Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes.
Notes shall not be transferred in denominations of less than $100,000,
provided that if necessary to enable the registration of transfer by a
holder of its entire holding of Notes, one Note may be in a
denomination of less than $100,000.
50 NOTE AGREEMENT
56
(d) REPLACEMENT OF NOTES. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of any Note, and (i) in the
case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is
a nominee for, a Noteholder purchasing Notes on the Closing Date or
another holder of a Note with a minimum net worth of at least
$100,000,000, such Person's own unsecured agreement of indemnity shall
be deemed to be satisfactory), or (ii) in the case of mutilation, upon
surrender and cancellation thereof, the Company at its own expense
shall execute and deliver, in lieu thereof, a new Note, dated and
bearing interest from the date to which interest shall have been paid
on such lost, stolen, destroyed or mutilated Note or dated the date of
such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
10.15 SENIOR DEBT. The Indebtedness of the Company hereunder and
under the Notes and all of the Obligation is intended to be and shall be senior
to any subordinated indebtedness of the Company or any other Indebtedness of
the Company secured by a Lien on any portion of the Collateral (the foregoing
shall not in any way imply the Noteholders' consent to any such subordinate
debt or Liens which are not otherwise permitted by this Agreement). The Notes
and any other amounts advanced to or on behalf of the Company or any other
Person pursuant to the terms of this Agreement or any other Note Agreement
Document shall never be in a position subordinate to any Indebtedness of the
Company owing to any other Person, except with the knowledge and written
consent of the Noteholders.
10.16 NO THIRD PARTY BENEFICIARY. The parties do not intend the
benefits of this Agreement to inure to any third party other than the
Noteholders, nor shall this Agreement be construed to make or render the
Noteholders liable to any materialman, supplier, contractor, subcontractor,
purchaser or lessee of any property owned by the Company, or for debts or
claims accruing to any such persons against the Company. Notwithstanding
anything contained herein or in the Notes, or in any other Note Agreement
Document, or any conduct or course of conduct by any or all of the parties
hereto, before or after signing this Agreement or any of the other Note
Agreement Documents, neither this Agreement nor any other Note Agreement
Document shall be construed as creating any right, claim or cause of action
against the Noteholders, or any of their officers, directors, agents or
employees, in favor of any materialman, supplier, contractor, subcontractor,
purchaser or lessee of any property owned by the Company, nor to any other
person or entity other than the Company.
10.17 ORAL AGREEMENTS INEFFECTIVE. THE NOTE AGREEMENT DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES, AND THE SAME MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
51 NOTE AGREEMENT
57
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
Bosque Asset Corp. BOSQUE ASSET CORP.,
X.X. Xxx 0000 as the Company
Xxxx, Xxxxx 00000-0000
Telecopy No. 817/756-7032
Attention: Xxxx X. Xxxxxxxxxx By: /s/ XXXX X. XXXXXXXXXX
----------------------------------------------------------
Xxxx X. Xxxxxxxxxx, Executive Vice President
Bosque Investment Realty Partners BOSQUE INVESTMENT REALTY PARTNERS, L.P.
X.X. Xxx 0000
Xxxx, Xxxxx 0000-0000 By: BOSQUE INVESTMENT REALTY CORP.,
Telecopy No. 817/756-7032 its general partner
Attention: Xxxx X. Xxxxxxxxxx
By: /s/ XXXX X. XXXXXXXXXX
----------------------------------------------
Xxxx X. Xxxxxxxxxx, Executive Vice President
SOWAMCO XXII, Ltd. SOWAMCO XXII, LTD.
X.X. Xxx 0000
Xxxx, Xxxxx 0000-0000 By: SOWAMCO XXII OF TEXAS, INC.,
Telecopy No. 817/756-7032 its general partner
Attention: Xxxx X. Xxxxxxxxxx
By: /s/ XXXX X. XXXXXXXXXX
----------------------------------------------
Xxxx X. Xxxxxxxxxx, Executive Vice President
SVD Realty, L.P. SVD REALTY, L.P.
X.X. Xxx 0000
Xxxx, Xxxxx 0000-0000 By: SVD REALTY ASSET CORP.,
Telecopy No. 817/756-7032 its general partner
Attention: Xxxx X. Xxxxxxxxxx
By: /s/ XXXX X. XXXXXXXXXX
----------------------------------------------
Xxxx X. Xxxxxxxxxx, Executive Vice President
Bankers Trust Company of California, N.A. BANKERS TRUST COMPANY OF CALIFORNIA,
3 Park Plaza, 16th Floor N.A., as Trustee
Xxxxxx, Xxxxxxxxxx 00000
By: /s/ XXXX XXXXXXXXXX
-------------------------------------------------------
Name: Xxxx Xxxxxxxxxx
------------------------------------------------
Title: Assistant Secretary
-----------------------------------------------
SIGNATURE PAGE NOTE AGREEMENT
