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EXHIBIT 10.12
REVOLVING CREDIT LOAN AGREEMENT
BY AND AMONG
FC PROPERTIES, LTD.
AS BORROWER,
AND
NOMURA ASSET CAPITAL CORPORATION,
AS LENDER.
$100,000,000
DATED AS OF MARCH 20, 1998
PREPARED BY ▇▇▇▇▇▇ AND ▇▇▇▇▇, L.L.P.
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TABLE OF CONTENTS
SECTION 1 DEFINITION OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2 THE REVOLVING CREDIT LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.01. Revolving Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.02. Manner of Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.03. Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3 NOTE AND NOTE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.01. Revolving Credit Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.02. Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.03. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.04. Interest Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.05. Calculation of Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.06. Lockbox Account; Distributions of Net Collections;
Distributions of Excess Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.07. Manner and Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.08. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.09. Reserve Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4 SPECIAL PROVISIONS FOR LIBOR RATE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.01. Inadequacy of LIBOR Rate Loan Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.02. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.03. Duration of Alternative Rate Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.04. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.01. Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.02. Authorization and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.03. No Conflicts or Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.04. Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.05. No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.06. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.07. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.08. No Default; Potential Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.09. Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.10. No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.11. Burdensome Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.13. Principal Office, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.14. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.15. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.16. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.17. No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.18. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.19. Ownership of Borrower, Servicer and REO Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.20. Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.21. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.22. Survival of Representations, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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SECTION 6 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.01. Initial Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.02. All Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 7 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.01. Financial Statements, Reports and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.02. Additional Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.03. Payment of Taxes, Impositions and Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 27
7.04. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.05 Maintenance of Existence and Rights; Conduct of Business . . . . . . . . . . . . . . . . . . . . . . 27
7.06. Notice of Default; Notice of Collateral Impairment Event . . . . . . . . . . . . . . . . . . . . . . 27
7.07. Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.08. Compliance with Loan Papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.09. Compliance with Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.10. Operations and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.11. Books and Records; Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.12. Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.13. Authorizations and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.14. Experienced Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.15. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.16. Collection Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.17. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.18. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.20. Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.21. General Indemnity; Environmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.01. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.02. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.03. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.04. Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.05. Alteration of Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.06. Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.07. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.08. Limitation on Sale of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.09. Name, Fiscal Year and Accounting Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.10. Liquidation, Mergers, Consolidations and Dispositions of Substantial Assets . . . . . . . . . . . . 31
8.11. Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.12. No Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.13. Purchase of Substantial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.14. New Places of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.15. Fictitious Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.16. Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.17. Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.18. Disposition of Collateral Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.19. Modification of Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.20. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9 COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.01. Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.02. Lien on REO Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.03. Assignment of Liens; Mortgages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.04. Insurance of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.05. Delivery of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.06. Possession of Collateral Loan Documents; Sale of Collateral . . . . . . . . . . . . . . . . . . . . 35
9.07. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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9.08. Appointment of Collateral Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.09. Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 10 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.02. Remedies Upon Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.03. Performance by Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 11 SECURITIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.01 Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.02 Borrower Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
11.03 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.04 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 12 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.01. Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.02. Accounting Terms and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.03. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.04. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.06. Choice of Law; Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 40
12.07. Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.08. Maximum Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.09. Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.10. Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.11. Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.12. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.13. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12.14. Successors and Assigns; Participations by the Lenders . . . . . . . . . . . . . . . . . . . . . . . 41
12.15. Senior Debt; Borrower Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.16. No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.17. Oral Agreements Ineffective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SCHEDULES AND EXHIBITS
Exhibit A - Form of Note
Exhibit B - Discount Factors
Exhibit C - Permitted Liens
Exhibit D - Borrowing Request
Exhibit E - Affiliate Loan Agreements
Schedule 5.09 Material Agreements
Schedule 5.10 Litigation
Schedule 7.16 Locations of Books and Records
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REVOLVING CREDIT LOAN AGREEMENT
This Revolving Credit Loan Agreement (the "AGREEMENT") is entered into
as of this 20th day of March, 1998, by and among FC PROPERTIES, LTD., a Texas
limited partnership, ("BORROWER") and NOMURA ASSET CAPITAL CORPORATION, a
Delaware corporation ("LENDER").
RECITALS:
Borrower has requested that Lender provide it with a secured loan
facility to be used by Borrower to finance owned Asset Portfolios and
acquisitions of Asset Portfolios and Lender is willing to provide such a
facility to Borrower, upon the terms and subject to the conditions hereinafter
set forth. Accordingly, in consideration of the mutual promises herein
contained and for other valuable consideration, the parties hereto do hereby
agree as follows:
SECTION 1
DEFINITION OF TERMS
1.01. Defined Terms. For purposes of this Agreement, unless the
context otherwise requires the following terms shall have the respective
meanings assigned to them below or in the Section referred to therein.
"ACCOUNT DEBTOR" means, collectively, the "borrower" and each other
obligor, guarantor, or other liable party under a Collateral Loan.
"ADVANCE": Section 2.01(a).
"ADVANCE PERCENTAGE" means, with respect to any Asset Portfolio, the
percentage obtained by dividing (a) the amount of the Advance funded by Lender
to finance such Asset Portfolio by (b) the aggregate Net Present Values of the
Assets constituting such Asset Portfolio or, if an Advance is made hereunder to
acquire an Asset Portfolio, the Net Purchase Price for such Asset Portfolio.
"ADVANCE RATIO" means, as of any date of calculation, a ratio
determined by dividing (a) the aggregate amount of all Advances hereunder by
(b) the sum of (i) the aggregate Net Purchase Prices for all Asset Portfolios
acquired with such Advances plus (ii) the aggregate Net Present Values for all
Owned Asset Portfolios as of the date of the Advance with respect to each Owned
Asset Portfolio.
"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.
"AFFILIATE LOAN AGREEMENTS" means those certain Loan Agreements
referenced on Exhibit "E", attached hereto, each entered into by and between
Lender and an Affiliate of Borrower.
"AFFILIATE LOAN BALANCE" means the aggregate outstanding balance of
all loans, including all accrued and unpaid interest thereon, extended pursuant
to the Affiliate Loan Agreements.
"AGREEMENT" means this revolving credit loan agreement, as it may be
amended, renewed, or extended from time to time.
"ALLOCATED PURCHASE PRICE" means for each Asset in an Asset Portfolio
(including each REO Property owned by Borrower or an REO Affiliate) the amounts
set forth for each such Asset in the Borrowing
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Request submitted in connection with the Advance used to finance such Asset
Portfolio and agreed to by Borrower and Lender.
"ALLONGE" shall mean an endorsement on a separate sheet of paper
accompanying a promissory note and signed by the Borrower, endorsing the note
to the Lender or in blank.
"ALTERNATIVE RATE ADVANCES": Section 4.01.
"APPLICABLE ENVIRONMENTAL LAWS": Section 7.21(b).
"APPROVED BUDGET": Section 7.01(f).
"ASSET" means each individual loan, REO Note, or property comprising
an Asset Portfolio.
"ASSET FILE" means all Collateral Loans and Collateral Loan Documents
assigned to Lender as Collateral for the Obligation, together with all other
documents relating to such Asset to be delivered to the Collateral Custodian,
the Servicer, or Borrower.
"ASSET PORTFOLIO REPORT" means a report, in form and substance
reasonably acceptable to Lender, showing various information concerning each
Asset Portfolio and each Asset included therein, as of the end of the month
preceding delivery of such report, including without limitation, monthly Net
Collections, the outstanding balances of each Collateral Loan, the Net Present
Value of each Asset, settlement information, default status, a calculation
showing the Advance Ratio and the NPV Ratio for each Asset Portfolio and
reflecting that a Collateral Impairment Event has not occurred, and such other
information as the Lender may otherwise request, including any additional
information in the asset status reports routinely prepared by Borrower related
to such Assets.
"ASSET PORTFOLIOS" means one or more pools of:
(a) performing, non-performing, or under-performing
consumer, residential, or commercial loans, and/or
(b) real estate or other assets, including judgments,
acquired in connection with the collection,
foreclosure, restructure, or settlement of
non-performing or under-performing loans, together
with all documents, instruments, certificates, and
other information related thereto.
"ASSET THRESHOLD AMOUNT" means, for each Asset Portfolio, the amount
set forth in the relevant Borrowing Request and approved by Lender.
"ASSIGNMENT AND ACCEPTANCE": Section 12.14(c).
"AUTHORIZED OFFICER" means any of the Chairman, President, Vice
President, Chief Financial Officer, Treasurer, or Assistant Treasurer of any
General Partner, authorized by the Board of Directors of such General Partner
to execute the Loan Papers and to borrow hereunder, on behalf of Borrower and
each REO Affiliate, as applicable.
"BORROWER" means FC Properties, Ltd., a Texas limited partnership.
"BORROWING REQUEST" means a written request for an Advance,
substantially in the form attached hereto as Exhibit "D", which shall (a)
specify (i) the date of such Advance, which shall be a Business Day, (ii) the
aggregate amount of such Advance, (iii) a complete description of the Asset
Portfolio to be acquired with, or financed with, the proceeds of the Advance,
including the net present value of the Original Estimated Value of such Asset
Portfolio and the Allocated Purchase Price for each Asset a part thereof and
(iv) such other information as may be requested by Lender from time to time;
and (b) contain a certification of an
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Authorized Officer as of the date of such Advance certifying as to the matters
set forth in Section 6.02 and certain other matters. Each Borrowing Request
shall be irrevocable and binding on Borrower.
"BUSINESS DAY" means a day on which Lender is open for business in New
York, New York, national banks are not closed in Dallas, Texas and which is a
day for trading by and between banks for dollar deposits in the London
interbank market.
"CAPITALIZED LEASE OBLIGATIONS" means the amount of the obligations of
Borrower under Financing Leases which would be shown as a liability on a
balance sheet of Borrower, prepared in accordance with Generally Accepted
Accounting Principles.
"COLLATERAL" means at any time all Assets and all property then
subject to any Security Agreement in favor of Lender, securing the Obligation,
including, without limitation, all Collateral Loan Documents and accounts and
the proceeds thereof and all the rights and remedies of Borrower or any REO
Affiliate under any Sale Agreement.
"COLLATERAL ASSIGNMENT" means an Assignment of Notes and Liens, and
collectively, all Assignments of Notes and Liens, executed by Borrower in
favor of Lender, as security for the Obligation, each of which Collateral
Assignment is intended to cover all of the Collateral Loans being a part of an
Asset Portfolio and all renewals, modifications, amendments, supplements, and
restatements thereof, which collateral assignment shall be in the form and
substance acceptable to Lender and which Collateral Assignments shall be duly
signed and notarized in accordance with applicable state law and in proper form
for recording, in order to confirm and perfect Lender's Liens in the
Collateral.
"COLLATERAL CUSTODIAN" means Fleet Bank, N.A., a national banking
association, or its successor or other Person agreed upon by Borrower and
Lender.
"COLLATERAL IMPAIRMENT EVENT" means as of any date of calculation,
that the NPV Ratio exceeds the Advance Ratio.
"COLLATERAL LOAN" means each loan included in any Asset Portfolio
financed under this Agreement and which has not been disposed of by Borrower
and each loan evidenced by an REO Note and each and every other loan (or
interest therein) now or at any time hereafter owned by Borrower .
"COLLATERAL LOAN DOCUMENTS" means all promissory notes evidencing
Collateral Loans (including all REO Notes), all mortgages, deeds of trust, 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 9.05 herein.
"COMPLIANCE LETTER" means a letter from KPMG Peat Marwick LLP, or
other independent public accountants of recognized national standing selected
by Borrower and satisfactory to Lender, stating that (a) such firm has reviewed
the calculation of the then current Advance Ratio and NPV Ratio, (b) such
calculations are accurate and comply with the requirements of this Agreement,
and (c) no Collateral Impairment Event exists, and containing such other
information Lender may reasonably request.
"CUSTODIAL AGREEMENT" means the Custodial Agreement in form approved
by Lender by and between the Collateral Custodian, Borrower, Servicer, and
Lender whereby Custodian agrees to act as bailee for the documents evidencing
certain of 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 the rate which is four
percent 4% in excess of the rate then borne by the most recent Advance.
"DEFERRED INTEREST": Section 3.04.
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"DISCRETIONARY PERIOD": Section 2.01.
"DOLLARS" and the "$" symbol shall refer to lawful currency of the
United States of America.
"DUE DILIGENCE REPORTS" means the various written reports,
information, and other materials that Borrower prepared or assembled containing
descriptions and evaluations of the Collateral Loans and Mortgaged Properties
included in a particular Asset Portfolio, and Borrower's assessments and
projections regarding same, or other information regarding such Assets,
including copies of purchase agreements, copies of any appraisals or
environmental site assessments, and the due diligence reports for each such
Asset Portfolio summarizing Borrower's due diligence regarding such Assets and
any Mortgaged Properties.
"EFFECTIVE DATE" means any Business Day designated by Borrower in a
Borrowing Request as the date such Advance is made.
"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 reasonable satisfactory to Lender (either of which
is herein called the "ACCEPTABLE STANDARDS"), which is in all respects
satisfactory to Lender and which has been prepared by a qualified environmental
firm reasonably satisfactory to Lender or, if applicable, other persons allowed
under the Acceptable Standards (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 Lender as to the extent and nature of
the environmental problem caused thereby and the likely costs and duration of
any recommended remediation. Notwithstanding anything to the contrary above
the Acceptable Standards for conducting an Environmental Site Assessment for a
single family residence or multifamily residential property with four (4) or
less units ("Residential 1-4's") shall, absent any known, suspected or
observable environmental risks (other than the potential presence of radon,
lead paint and/or asbestos containing materials), not require the Borrower to
obtain an Environmental Site Assessment which conforms to the ASTM Standard
Procedures for Environmental Site Assessments, E 1527- 93. Unless a known,
suspected, or observable environmental risk exists, the Acceptable Standards
for Residential 1-4's shall be complied with by the Borrower's preparing, or
causing the Servicer to prepare or direct the preparation of, a preliminary
environmental evaluation using a standard evaluation form.
"EQUITY CONTRIBUTION" means, with respect to the acquisition of an
Asset Portfolio, an amount equal to the product of (a) the Net Purchase Price
for such Asset Portfolio, multiplied by (b) a percentage equal to one hundred
percent (100%) less the Advance Percentage for such Asset Portfolio.
"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": Section 10.01.
"EXCESS CASH FLOW": Section 3.06(c).
"FINANCING LEASE" means any lease of property which would be
capitalized on a balance sheet of Borrower or a Subsidiary prepared in
accordance with Generally Accepted Accounting Principles.
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"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" 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 and which are
consistently applied for all periods after the date hereof so as to properly
reflect the financial condition, and the results of operations and changes in
financial position, of Borrower, except that any accounting principle or
practice required to be changed by the said Accounting Principles Board or
Financial Accounting Standards Board (or other appropriate board or committee
of the said Boards) in order to continue as a generally accepted accounting
principle or practice may so be changed.
"GENERAL PARTNERS": Section 5.19.
"GOVERNMENTAL AUTHORITY" means any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency, or other
governmental authority having jurisdiction over Borrower or any REO Affiliate
or any of its business, operations, or properties.
"GUARANTORS" means Properties One, Properties Three, Properties Five,
and Properties Six, and any other Affiliate or Subsidiary which may be at any
time, or from time to time, an REO Affiliate hereunder.
"GUARANTY" means any contract, agreement, or understanding by which
Borrower or any REO Affiliate assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes
liable upon, the obligation of any other Person, or agrees to maintain the net
worth or working capital or other financial condition of any other Person or
otherwise insures any creditor of such other Person against loss, and shall
include, without limitation, the contingent liability of Borrower under any
letter of credit or similar document or instrument.
"HAZARDOUS SUBSTANCE": Section 7.21(b).
"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 Borrower or any REO Affiliate, 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 Borrower or any REO
Affiliate, 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 Borrower, or any
REO Affiliate or (c) Lender'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 Generally Accepted Accounting Principles; (b) all
obligations of such Person in respect of any Guaranty; and (c) all obligations
of such Person in respect of any Capital Lease.
"INDEMNIFIED LIABILITIES": Section 7.21(a).
"INDEMNIFIED PARTIES": Section 7.21(a).
"INITIAL ADVANCE": Section 2.01.
"INITIAL ADVANCE DATE" means March 20, 1998.
"INITIAL COMMITMENT" means $25,158,949.90.
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"INTEREST DETERMINATION DATE" means the day the LIBOR Rate is
redetermined for all Advances and shall be the first Business Day of each
Month.
"INTEREST PAYMENT DATE": Section 3.04.
"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.
"LEASE-UP EXPENSES" means as to any REO Property, (i) all reasonable
and customary leasing commissions, (ii) all reasonable tenant improvement costs
actually paid by Borrower or any REO Affiliate in question with respect to the
leasing of space in such REO Property pursuant to a written lease and (iii) all
capital expenditures actually paid by Borrower or any REO Affiliate in question
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 Lender; all as evidenced by
invoices and such other back-up information as Lender may require.
"LENDER" means Nomura Asset Capital Corporation.
"LIBOR RATE" shall mean, with respect to any Advance hereunder, the
rate of interest determined by Lender at which deposits in dollars for a
one-month period are offered based on information presented on the Telerate
Screen as of 11:00 A.M. (London time) on the day which is two (2) Business Days
prior to the Effective Date of such Advance; provided, that if at least two
such offered rates appear on the Telerate Screen in respect of such one-month
period, the arithmetic mean of all such rates (as determined by Lender) will be
the rate used; provided, further, that if Telerate ceases to provide LIBOR
quotations, such rate shall be the average rate of interest determined by
Lender at which deposits in Dollars are offered for a one-month period by
Citibank, N.A. (or its successor) to Lender in the London interbank market as
of 11:00 A.M. (London time) on the applicable Effective Date. The LIBOR Rate
for each Advance shall be initially established as of the Effective Date of
such Advance and such Advance shall bear interest at such rate through the date
preceding the next succeeding Interest Determination Date. On such Interest
Determination Date, and on each Interest Determination Date thereafter, the
LIBOR Rate shall be recalculated as of such Interest Determination Date as
provided above and the Advance shall bear interest at such LIBOR Rate from such
Interest Determination Date through the day preceding the next succeeding
Interest Determination Date.
"LIBOR RATE ADVANCE" shall mean any principal amount under a Note with
respect to which the interest rate is calculated by reference to the LIBOR
Rate.
"LIEN" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale, or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness, whether
arising by agreement or under any statute or law, or otherwise.
"LOAN PAPERS" means this Agreement, the Note, each Guaranty executed
by an REO Affiliate, the Mortgages, the Collateral Assignments and Allonges for
each Collateral Loan, the Lockbox Agreement, the Custodial Agreement, the
Security Agreements, the Power of Attorney, the Servicing Agreement (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 with respect to this Agreement, and such other
agreements and documents, any amendments or supplements thereto or
modifications thereof) executed or delivered pursuant to the terms of this
Agreement.
"LOCKBOX" means a post office box, or, collectively, post office
boxes, established by Borrower and Lockbox Bank pursuant to the provisions of
Section 3.06 and the Lockbox Agreement for the receipt of payments from an
Asset Portfolio.
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"LOCKBOX ACCOUNT(S)" means a segregated cash collateral account or
accounts maintained with Lockbox Bank and styled "FC Properties, Ltd. Lockbox
Account for the benefit and under the control of Nomura Asset Capital
Corporation, as Lender", which account shall be (a) subject to the provisions
of Section 3.06, and (b) pledged and assigned to Lender as additional security
for the payment, performance and observance of the Obligations.
"LOCKBOX AGREEMENT" means a Lockbox Agreement, executed by and among
Borrower, Lender, Servicer, and Lockbox Bank, in form and substance acceptable
to Lender, and all amendments, modifications, and replacements thereof.
"LOCKBOX BANK" means NationsBank of Texas, Inc., a national banking
association and its successors, in its capacity as a Lockbox Bank under the
Lockbox Agreement or any other national banking association approved by Lender
and party to a lockbox agreement substantially similar to the Lockbox
Agreement. Lender has approved Fleet Bank, N.A., and/or its Affiliates as a
Lockbox Bank.
"LOST NOTE AFFIDAVIT": Section 6.02(g).
"MATERIAL ADVERSE EFFECT" means any circumstance or event which (a)
could have any adverse effect whatsoever upon the validity, performance or
enforceability of any Loan Papers, (b) is or might be material and adverse to
the financial condition or business operations of Borrower, or (c) could impair
the ability of Borrower to fulfill its obligations under the Loan Papers.
"MATURITY DATE" means the earlier of: (a) the day on which Borrower
satisfies in full all of its obligations hereunder and Lender so acknowledges
in writing or (b) June 21, 1999, or such later date as may be agreed upon by
Borrower and Lender pursuant to Section 2.01(b) herein.
"MAXIMUM ADVANCE AMOUNT" means with regard to any Asset Portfolio, an
amount requested by Borrower in a Borrowing Request; provided that such amount
shall be in an amount not more than seventy percent (70%) of (a) in the case of
an Owned Asset Portfolio, the sum of the Net Present Values of the Assets
contained in such Asset Portfolio and (b) in the case of an Asset Portfolio
being acquired, the Net Purchase Price for such Asset Portfolio.
"MAXIMUM RATE" means, on any day, the highest nonusurious rate of
interest (if any) permitted by applicable law on such day.
"MINIMUM RELEASE PRICE" means, with respect to any Asset having an
Allocated Purchase Price of greater than the Asset Threshold Amount, as of any
date of calculation, the greater of (a) the Allocated Purchase Price for such
Asset minus the aggregate Net Collections attributable to date for such Asset
or (b) ninety percent (90%) of the Net Present Value of such Asset; provided,
however, that the Minimum Release Price (i) for any Tract for which Borrower
has established a separate Net Present Value shall be ninety percent (90%) of
such Net Present Value, and (ii) for each other Tract shall be calculated as
the product of (a) the Minimum Release Price for the Asset multiplied by (b) a
percentage obtained by dividing either (A) the acreage or number of lots of the
Tract to be released by (B) the total acreage or number of lots of the
applicable Mortgaged Property. The Minimum Release Price for any Asset having
an Allocated Purchase Price of less than the Asset Threshold Amount for such
Asset Portfolio will be zero.
"MORTGAGE" means any deed of trust or mortgage, (duly acknowledged and
in recordable form) covering a Mortgaged Property executed by Borrower or an
REO Affiliate, as appropriate, granted to Lender to secure repayment of the
Obligation substantially in the form approved by Lender, 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.
"MORTGAGED PROPERTY OR MORTGAGED PROPERTIES" means any and all lots or
parcels of land which Borrower or any REO Affiliate owns on the Closing Date or
which it may hereafter acquire as part of an Asset Portfolio or any Underlying
Real Estate which Borrower or any REO Affiliate may hereafter own as
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a result of a foreclosure or deed-in-lieu of foreclosure or otherwise, and
improvements, fixtures, and personal property located thereon and all other
property referenced in and subject to the Mortgages. The Mortgaged Property is
intended to include all of the above-described real property whether or not a
Mortgage is actually granted or filed.
"NET COLLECTION PROCEEDS" means, with respect to the settlement of an
Asset, all collection proceeds received by Borrower in connection with such
settlement, less all reasonable and customary collection costs actually paid to
unrelated third parties in connection with such settlement.
"NET COLLECTIONS" for any calendar month means an amount equal to (a)
any and all cash proceeds received by Borrower, each REO Affiliate, or the
Servicer with respect to Borrower's ownership, management, and disposition of
any and all Assets in any 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) 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) Net Sales Proceeds from the sale of REO Properties, Collateral Loans,
Mortgaged Property, and other items of Collateral, (v) income from any
Mortgaged Property, (vi) all insurance proceeds and condemnation proceeds,
(vii) all payments received by Borrower from any seller of an Asset Portfolio
pursuant to the applicable Sale Agreement, including all proceeds of Assets
"put back" to such seller, and (viii) all interest, dividends, and other
earnings directly or indirectly paid to Borrower on funds, accounts, and
investments of Borrower, but excluding any escrow deposits paid to Borrower 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 Net Collections received by Borrower until the first to occur of (i)
the payment of such Net Operating Income by the respective Property Manager to
Borrower, the REO Affiliate in question or the Servicer, or (ii) the fifteenth
(15th) day of the next following calendar month.
"NET OPERATING INCOME" shall mean, with respect to each REO Property,
for each Interest Period, the excess of (a) all of Borrower's or the REO
Affiliate's cash receipts related to such REO Property (including all rents and
other revenues but excluding security deposits) over (b) all reasonable and
customary expenses actually paid during such period which, in accordance with
Generally Accepted Accounting Principles, 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 Borrower or the REO
Affiliate to an unrelated third party) and all Lease-Up Expenses paid for such
REO Property during such period.
"NET PRESENT VALUE" means, with respect to any Asset or Tract as of
any day of calculation, the Projected Net Collections for such Asset or Tract
discounted on a monthly basis to arrive at a current time value of all such Net
Collections utilizing the appropriate discount factor for such Asset or Tract
as set forth in Exhibit "B" attached hereto as such Exhibit "B" may be modified
from time to time.
"NET PURCHASE PRICE" means the actual purchase price paid by Borrower
for an Asset Portfolio, excluding any costs or adjustments for legal fees,
travel, due diligence expenses, or other "soft" costs.
"NET SALES PROCEEDS" means, with respect to the sale of any REO
Property, Collateral Loan, or other Collateral, the gross proceeds received
from such sale, less the reasonable and customary closing costs actually paid
to unrelated third parties.
"NOTE" means the Revolving Credit Note executed by Borrower and
delivered pursuant to the terms of this Agreement, together with any renewals,
extensions, or modifications thereof.
"NPV RATIO" means a percentage determined by dividing (a) the
outstanding principal balance, as of any date of calculation, of all Advances
hereunder by (b) the current Net Present Value, provided, however, that the Net
Present Value of any Asset held by Lender as collateral hereunder for more than
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days shall be zero as of any such date of calculation, of all Assets
constituting Collateral as of such calculation date.
"OBLIGATION" means all present and future indebtedness, obligations,
and liabilities of Borrower to Lender, and all renewals and extensions thereof,
or any part thereof, arising pursuant to the Loans and this Agreement or
represented by the Note, and all interest accruing thereon, and 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 Borrower to Lender evidenced or
arising pursuant to any of the other Loan Papers, and all renewals and
extensions thereof, or part thereof.
"OPERATING RESERVE ACCOUNT" means, with respect to each Asset
Portfolio, an interest bearing checking account established by Borrower with
Lockbox Bank, which account shall be (a) funded and disbursed in accordance
with Section 3.06(b)(vii) and Section 3.09 of this Agreement and (b) pledged
and assigned to Lender, for the benefit of Lender, as additional security for
the payment, performance, and observance of the Obligations. Funds on deposit
in the Operating Reserve Account may only be invested in Temporary Cash
Investments.
"ORIGINAL ESTIMATED VALUE" means Borrower's estimate of the gross
proceeds reasonably expected by Borrower to be realized by Borrower from each
Collateral Loan and each other Asset contained in an Asset Portfolio (including
Mortgaged Property) set forth on a Schedule attached to the Borrowing Request
submitted by Borrower in connection with the acquisition of the Asset
Portfolio. The Original Estimated Value is Borrower's best estimate of the
value of such Collateral Loan or other Asset derived after applying Borrower's
ordinary and customary underwriting standards to such Asset Portfolio.
"OTHER TAXES": Section 3.08(b).
"OWNED ASSET PORTFOLIO" means an Asset Portfolio financed hereunder,
the Assets of which are owned by the Borrower prior to the time of the related
Advance.
"PERMITTED LEASE-UP EXPENSES" means all Lease-Up Expenses with respect
to any REO Property which do not exceed, in the aggregate and on a cumulative
basis, the lesser of (a) $100,000 or (b) ten percent (10%) of the Allocated
Purchase Price of the REO Property in question, or such other limit as may be
agreed to in writing by Lender.
"PERMITTED LIENS" means: (a) Liens (if any) granted to the Lender for
the benefit of the Lender to secure Borrower's Obligation hereunder or the
obligations of an REO Affiliate under its Guaranty in favor of Lender; (b)
Liens described on Exhibit C attached hereto; (c) 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; (d) Liens imposed by mandatory provisions of law such
as for materialmen's, mechanics, warehousemen's, and other like Liens arising
in the ordinary course of business, securing Indebtedness whose payment is not
yet due; (e) Liens for taxes, assessments, and governmental charges or levies
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 7.03 hereunder; (f) good faith deposits in
connection with tenders, leases, real estate 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; (g) 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; (h) exceptions affecting title which are shown in an
attorney's title opinion or in a Title Policy included in Borrower's files or
are described with respect to a particular Collateral Loan, Mortgaged Property
or parcel of the Underlying Real Estate in the due diligence reports; (i)
Permitted Prior Liens; or (j) any Liens securing any subordinated indebtedness
of Borrower permitted hereunder.
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"PERMITTED PRIOR LIENS" means Liens upon any Asset (including any REO
Property and Underlying Real Estate) securing payment of a Collateral Loan
existing on the date the Collateral Loan was purchased by Borrower, only to the
extent that such prior Liens are disclosed by Borrower to Lender in the
Borrowing Request.
"PERSON" shall include an individual, a corporation, a joint venture,
a partnership, 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
Borrower for employees of Borrower and/or its Subsidiaries and covered by Title
IV of ERISA, or subject to the minimum funding standards under Section 412 of
the Internal Revenue Code of 1954, as amended.
"PLEDGE OF ACCOUNTS" means the Security Agreement, Assignment of
Deposits and Money Market Instruments in form and substance acceptable to
Lender, executed by Borrower in favor of Lender.
"POOL COLLATERAL IMPAIRMENT EVENT" means as of any date of
calculation, with respect to any specific Asset Portfolio, that the percentage
obtained by dividing (i) the outstanding principal balance of the Advance made
to acquire or finance such Asset Portfolio, including all outstanding Deferred
Interest on such Advance, by (ii) the Net Present Value of the Assets remaining
in such Asset Portfolio, exceeds the Advance Percentage of such Asset
Portfolio.
"POTENTIAL DEFAULT" means an event or condition which but for the
lapse of time or the giving of notice, or both, would constitute a Event of
Default.
"PROJECTED NET COLLECTIONS" means the Net Collections which Borrower
and Servicer reasonably expect to receive from an Asset Portfolio which has
been determined in a manner consistent with Borrower's and Servicer's past
practices taking into consideration Borrower's and Servicer's historical
performance in collecting assets similar to the Collateral.
"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 an REO Property.
"PROPERTY MANAGER" means any Person hired by Servicer to manage an REO
Property.
"PROTECTIVE ADVANCE" shall mean a payment of expenses by Borrower,
Servicer, or any Property Manager which in the reasonable determination of
Borrower, Servicer, or any Property Manager shall be necessary to maintain the
value of any asset securing payment of a Collateral Loan (such expenses shall
include, without limitation, Permitted Lease-Up Expenses, ad valorem taxes,
environmental assessments or inspections, environmental remediation expenses,
insurance expenses, security, deferred maintenance, litigation expenses,
expenses to enforce remedies, and payments on Permitted Liens).
"RCRA": Section 7.21(b).
"REGISTER": Section 12.14(d).
"REGULATORY CHANGE" means the adoption of any applicable law, rule or
regulation, of any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority charged with the administration thereof.
"RELEASED ASSET" shall mean any Collateral, any REO Property, or any
Mortgaged Property or other real property which after the Closing Date is sold,
transferred, reconveyed to a seller under a sale agreement, or otherwise
disposed of by Borrower or an REO Affiliate (whether in the ordinary course of
business or through foreclosure, condemnation or otherwise) to an unrelated
third party or returned to a seller pursuant to and in accordance with the
related sale agreement.
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"RELEASE PRICE" means, with respect to each Asset, an amount equal to
the greater of (a) the Net Sales Proceeds or Net Collection Proceeds received
by Borrower in connection with such Asset or (b) the Minimum Release Price for
such Asset.
"RENTALS" of any Person means, as of any date, the aggregate amount of
the obligations and liabilities (including future obligations and liabilities
not yet due and payable) of such Person to make payments under all leases,
subleases, and similar arrangements for the use of real, personal, or mixed
property, other than leases which are Capital Leases.
"REO AFFILIATES" shall mean (a) Properties One, Properties Three,
Properties Five, and Properties Six, each a Texas limited partnership having as
general partners those entities described in Section 5.19, and (b) any other
entity that is controlled, directly or indirectly, by Borrower, any Affiliate
of Borrower, or any combination thereof and owns or acquires title to any real
property securing a Collateral Loan, and "REO AFFILIATE" shall mean any one of
them.
"REO NOTE" shall mean, as to each REO Property, a demand promissory
note to be delivered by the REO Affiliate which owns the REO Property in
question to Borrower that shall (a) be in a principal amount equal to
ninety-six percent (96%) of the Allocated Purchase Price of the REO Property in
question, (b) require principal and interest payments due thereunder to be paid
not less frequently than the last day of each Interest Period, (c) require
principal and interest payments to be in an amount equal to all Net Operating
Income received by such REO Affiliate with respect to the underlying REO
Property each calendar month, (d) provide that an Event of Default (as such
term is defined in this Agreement) shall constitute an event of default
thereunder permitting the acceleration of all amounts owing thereunder and (e)
in all other respects be in form and substance satisfactory to Lender.
"REO PROPERTY" shall mean any and all real property (together with any
fixtures appurtenant thereto and any improvements thereon) or interest in real
property now or hereafter owned by any REO Affiliate including (a) as of the
Effective Date of any Advance, the real property specifically described on a
schedule attached to the related Borrowing Request and (b) in general, any real
property that has been, or shall be, (i) foreclosed upon by a seller, Borrower,
or any REO Affiliate or (ii) conveyed to any REO Affiliate by a deed in lieu of
foreclosure, all of which shall be deemed to constitute proceeds of the
Collateral.
"REO PROPERTY MORTGAGE" shall mean a Mortgage, in form and substance
acceptable to Lender, pursuant to which a REO Affiliate shall grant to Borrower
a first-priority security interest in the REO Property.
"REO SECURITY DOCUMENTS" shall mean those certain mortgages or deeds
of trust, assignments of leases and rents, security agreements, and appropriate
UCC financing statements, all in form and substance satisfactory to the Lender,
as required by the Lender, for each REO Property, to be executed by each REO
Affiliate in favor of Borrower and pursuant to the terms of which, as security
for the applicable REO Note (and, at Lender's option, the Note), there shall be
(a) granted and conveyed to Borrower Liens upon each REO Property (including,
all personal property associated therewith) owned by such REO Affiliate from
time to time as is described therein and (b) assigned to Borrower all leases
and rents with respect thereto; as the same may be amended, renewed, modified,
extended, or restated from time to time with the prior written consent of
Lender.
"REPORTABLE EVENT" has the meaning assigned to that term in Title IV
of ERISA.
"SALE AGREEMENT" means any purchase and sale agreement entered into
(a) by Borrower pursuant to which Borrower acquires an Asset Portfolio or (b)
by an REO Affiliate pursuant to which the REO Affiliate acquires REO Property.
"SECURITIZATION AGENT" means Nomura Securities International, Inc.
"SECURITIZATION TRANSACTION" means the creation and issuance of
securities evidencing beneficial interests in, or secured by, one or more pools
of mortgage loans.
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"SECURITY AGREEMENT" means a Security Agreement in form and substance
acceptable to Lender, as the same may be modified or amended from time to time,
whereby Borrower grants to Lender, for the benefit of Lender, a security
interest in the Collateral.
"SECURITY DOCUMENTS" means the Collateral Assignments, the Security
Agreement, the Pledge Agreements, the Lockbox Agreement, all Mortgages, and all
other documents or instruments granting a Lien in favor of the Lender as
collateral for the Obligations, 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 FirstCity Servicing Corporation, a Texas
corporation, or any replacement therefor designated pursuant to the terms of
any Servicing Agreement and approved in writing by Lender.
"SERVICING AGREEMENT" shall mean the Servicing Agreement entered into
by Borrower, Servicer, and Lender with respect to servicing the Collateral,
together with all amendments and modifications thereto.
"SETTLEMENT" means, with respect to any Collateral Loan, the
satisfaction of Borrower's claims against the respective Account Debtor in
connection with such Collateral Loan, whether pursuant to a full or discounted
payment.
"STANDARD INDUSTRY PRACTICES" means such due diligence, collateral
control, and collection procedures that are customarily followed by Persons
actively engaged in the business of acquiring distressed assets in a bulk
transaction and managing and disposing of such assets, provided such due
diligence and collateral control and collection procedures shall be at least as
rigorous as Borrower and the REO Affiliates apply in managing and disposing of
their assets.
"SUBSIDIARY" means any corporation of which more than fifty percent
(50%) of the Voting Shares is owned, directly or indirectly, by Borrower.
"TAXES": Section 3.08(a).
"TAX ESCROW ACCOUNT" means a non-interest bearing account established
by Borrower with Lockbox Bank into which the Tax Escrow Payments are to be
deposited.
"TAX ESCROW PAYMENTS" mean all payments made by 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 Borrower with respect to
the Collateral Loans and all net insurance and condemnation proceeds received
by Borrower which are not available to be applied to the outstanding balance
under the Collateral Loan in question but, rather, are required by the
Collateral Loan Documents to be used for purposes of repairing or rebuilding
the real property in question.
"TELERATE SCREEN" means the display designated as Screen 3750 on the
Telerate System or such other screen on the Telerate System as shall display
the London interbank offered rates for deposits in U.S. dollars.
"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. or Fleet Bank,
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 one of the two highest ratings from ▇▇▇▇▇'▇ Investors Service, Inc., or
Standard & Poor's Rating Group; (c) commercial paper which has one of the two
highest ratings from ▇▇▇▇▇'▇ Investors Service, Inc., or Standard & Poor's
Rating Group; (d) eurodollar investments
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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 whose certificates of deposit have one of the two
highest ratings from ▇▇▇▇▇'▇ Investors Service, Inc., or Standard & Poor's
Rating Group, respectively, or, if such institution does not have a commercial
paper rating, a comparable bond rating; (e) any obligations secured by a
pooling of one or more of the foregoing, including repurchase agreements with
NationsBank of Texas, N.A., Fleet Bank, N.A., or other banks which are members
of the Federal Reserve System or a government securities dealers recognized as
primary dealers by the Federal Reserve; and (f) money market funds comprised of
money market instruments rated at least P-1 by ▇▇▇▇▇'▇ Investor Service or at
least A-1 by Standard & Poor's Corporation.
"TERMINATION DATE" means the earliest date on which any of the
following events occurs: (a) March 19, 1999, which date may be extended one or
more times by mutual agreement of Lender and Borrower; (b) the date that Lender
terminates Lender's commitment to lend hereunder, after the occurrence of an
Event of Default; or (c) such earlier date as may be agreed upon in writing by
Borrower and Lender.
"TITLE COMPANY" means a title company or title companies selected by
Borrower and not disapproved by Lender, together with any issuing Lender that
issues all or any part of a Title Policy.
"TITLE POLICY" means a Mortgagee or Loan Policy of Title Insurance
issued and underwritten by a Title Borrower for the benefit of (a) Lender
covering that portion of the Mortgaged Property therein described and insuring
the lien of the Mortgage which covers such portion of the Mortgaged Property,
or (b) Borrower insuring a lien on Underlying Real Estate securing a Collateral
Loan.
"TOTAL COMMITMENT": Section 2.01(a).
"TRACT": means any portion of a Mortgaged Property which is separately
identifiable from other portions of the Mortgaged Property.
"UNDERLYING REAL ESTATE" means the real property, together with all
improvements thereon, which secures any of the Collateral Loans, or any one of
such parcels of real property.
"UTILIZED ADVANCES": Section 2.01(c).
"VOTING SHARES" of any corporation means shares of any class or
classes (however designated) having ordinary voting power for the election of
at least a majority of the members of the Board of Directors (or other
governing bodies) of such corporation, other than shares having such power only
by reason of the happening of a contingency.
1.02. Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the
above-defined meanings when used in the Note or any Loan Papers,
certificate, report or other document made or delivered pursuant to
this Agreement, unless otherwise defined in the Loan Papers or the
context therein shall otherwise require.
(b) Defined terms used herein in the singular shall
import the plural and vice versa.
(c) The words "hereof," "herein," "hereunder" and similar
terms when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
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SECTION 2
THE REVOLVING CREDIT LOANS
2.01. Revolving Loan Commitments.
(a) Subject to the terms and conditions of this
Agreement, Lender agrees to extend to Borrower (i) on the Initial
Advance Date, credit in an amount not not to exceed the Initial
Commitment (the "INITIAL ADVANCE"), and (ii) for the time period
beginning on the day following the Initial Advance Date through the
Termination Date (the "DISCRETIONARY PERIOD") a revolving line of
credit equal to the difference between the Total Commitment and the
Initial Commitment; provided, however, that any Advance requested
during the Discretionary Period will be made at Lenders sole
discretion; and provided further, that any Advance made during the
Discretionary Period may not cause the aggregate of outstanding
Advances to exceed the Total Commitment. "TOTAL COMMITMENT" means as
of any date of determination the amount of $100,000,000 less the
Affiliate Loan Balance as of such date. The amounts advanced
hereunder shall constitute one general obligation of Borrower to
Lender and shall be secured by Lender's security interests and Liens
upon all of the Collateral on a pari passu basis and by a Guaranty
from each REO Affiliate.
Within the limits of this Section 2.01, and during the
Availability Period, Borrower may borrow, prepay, pursuant to Section
3.03 hereof, and reborrow under this Section 2.01. Each advance
(including the Initial Advance) made by Lender hereunder is referred
to herein as an "ADVANCE." The Initial Advance shall be made in an
amount not to exceed the Initial Commitment, and each Advance
thereafter shall be in an amount not to exceed the Maximum Advance
Amount. A portion of any Advance may be used to make loans to REO
Affiliates, each such loan to be evidenced by an REO Note, for the
purpose of acquiring REO Property included in such Asset Portfolio.
All Advances shall be used by Borrower for the purpose of
financing the acquisitions by Borrower or its REO Affiliates of Asset
Portfolios unless otherwise agreed in writing by Lender.
(b) Termination Date; Maturity Date. Lender and Borrower
may mutually agree to extend the Termination Date of the revolving
line of credit for an additional twelve- (12) month period; provided,
however, that Lender shall have no obligation to extend the
Termination Date, such decision being at Lender's sole discretion, and
provided further, that any such agreement to extend shall be in
writing and signed by Lender and Borrower. Borrower must request such
an extension in writing at least ninety (90) days prior to the
Termination Date and Lender shall respond to such request within five
(5) business days of receipt thereof. In the event Lender notifies
Borrower that the Facility will not be extended, the Obligation shall
be due and payable in full ninety (90) days following the Termination
Date (the "MATURITY DATE").
(c) Non-Utilization Fee. In addition to the payments
provided for in Section 3 hereof, Borrower shall pay to Lender on
September 19, 1998, a non-utilization fee in the amount of one-half of
one percent (.5%) of an amount equal to (i) $100,000,000 less (ii) the
aggregate amount of all Advances made hereunder and under the
Affiliate Loan Agreements through September 19, 1998 (the "UTILIZED
ADVANCES"), provided, however, that such non-utilization fee shall not
be due and payable in the event that either (i) the amount of the
Utilized Advances exceeds $50,000,000 or (ii) no Advance is made
hereunder.
(d) Records of Loans and Payments. Lender is hereby
authorized, but is not required, to record the date and principal
amount of each Advance and each repayment of an Advance on the
schedule attached to the Note.
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2.02. Manner of Advance.
(a) Borrowing Request. Each request by Borrower to
Lender for an Advance under Section 2.01 hereof (a "BORROWING
REQUEST") shall specify, among other information, the aggregate amount
of such requested Advance, the requested date of such Advance, and the
wiring instructions pursuant to which the Advance should be disbursed.
Borrower shall furnish to Lender the Borrowing Request at least three
(3) Business Days prior to the Effective Date for such Advance (which
must be a Business Day). Any such Borrowing Request shall be in the
form attached hereto as Exhibit "D". Each requested Advance shall be
in an aggregate principal amount of at least $1,000,000 or any greater
integral multiple of $1,000.
Each Borrowing Request shall be irrevocable and binding on
Borrower and, in respect of the Advance specified in such Borrowing
Request, Borrower shall indemnify Lender against any cost, loss or
expense incurred by Lender as a result of any failure to fulfill, on
or before the date specified for such Advance, the conditions to such
Advance set forth herein.
(b) Funding. On the Effective Date of an Advance
specified in the Borrowing Request, subject to satisfaction of the
applicable conditions precedent set forth herein, Lender shall
initiate a wire or other transfer of immediately available funds in
the manner set forth in the Borrowing Request and subject to the terms
and conditions hereof. Lender may deduct from the amount of the
Advance so transferred the amount of fees and expenses to be paid to
Lender as provided for in this Agreement. If Lender chooses not to
withhold such fees and expenses from the funding amount, Borrower
shall pay the amount of such fees and expenses immediately upon
presentation of an invoice by Lender.
2.03. Interest Rate. The unpaid principal of each Advance shall
bear interest from the Effective Date of such Advance until paid at a rate per
annum which shall be equal to the lesser of (a) the Maximum Rate or (b) either
(i) for each day during which the outstanding balance of the Utilized Advances
is less than $50,000,000, the sum of the LIBOR Rate in effect from time to
time, plus two and one-half percent (2.5%) or (ii) for each day during which
the outstanding balance of the Utilized Advances is greater than or equal to
$50,000,000, the sum of the LIBOR Rate in effect from time to time, plus two
and one-quarter percent (2.25%). All past due principal of, and to the extent
permitted by applicable law, interest on, the Note shall bear interest until
paid at the lesser of (a) the Default Rate or (b) the Maximum Rate.
SECTION 3
NOTE AND NOTE PAYMENTS
3.01. Revolving Credit Note. The Advances made by Lender shall be
evidenced by a revolving credit note (the "NOTE") of Borrower, which Note shall
(a) be dated the date hereof, (b) be in an amount equal to $100,000,000, (c) be
payable to the order of Lender at the office of Lender, (d) bear interest in
accordance with Section 2.03 hereof, and (e) be in the form of Exhibit "A"
attached hereto with blanks appropriately completed in conformity herewith.
Notwithstanding the principal amount of the Note as stated on the face thereof,
the amount of principal actually owing on the Note at any given time shall be
the aggregate of all Advances theretofore made to Borrower hereunder, less all
payments of principal theretofore actually received hereunder, by Lender.
Lender is authorized, but not required, to endorse on the schedule attached to
the Note appropriate notations evidencing the date and amount of each Advance
as well as the amount of each payment made by Borrower hereunder.
3.02. Principal Payments. The unpaid principal amount of the Note
shall be due and payable from distributions of Net Collections and Excess Cash
Flow, as set forth in Section 3.06 herein. All unpaid principal, together with
accrued-but-unpaid interest on the Note, shall be due and payable in full on
the Maturity Date notwithstanding the amount of Net Collections and Excess Cash
Flow collected and distributed theretofore.
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3.03. Prepayments.
(a) Optional Prepayments. Borrower may, without premium
or penalty, upon three (3) Business Days prior written notice to
Lender, prepay the principal of the Note then outstanding, in whole or
in part, at any time or from time to time; provided, however, that
each prepayment of less than the full outstanding principal balance of
the Note shall be in an amount not less than $1,000,000 or an integral
multiple thereof.
(b) Mandatory Prepayments Upon the Occurrence of
Collateral Impairment Event. Upon the occurrence of a Collateral
Impairment Event, Borrower shall immediately pay to Lender, as a
prepayment on the Note, an amount such that, after giving effect to
such payment, the Advance Ratio exceeds the NPV Ratio.
(c) Mandatory Prepayments from Net Collections. In
addition to the foregoing, Borrower shall make payments on the
outstanding principal balance of the Note from distributions of Net
Collections and Excess Cash Flow, required by Sections 3.06(b) and
3.06(c) hereunder.
(d) General Prepayment Provisions. Any prepayment of the
Note hereunder shall be (i) made together with interest accrued
(through the date of such prepayment) on the principal amount prepaid,
and (ii) applied first to accrued interest and then to principal.
3.04. Interest Payments Interest on the unpaid principal amount of
each Advance shall be payable monthly as it accrues on the tenth (10th) day of
each month hereafter, commencing April 10, 1998, and at the Maturity Date (each
such date an "INTEREST PAYMENT DATE"). Interest payable on each Interest
Payment Date shall be all interest accrued and unpaid through the last day of
the month preceding the Interest Payment Date. In the event that the amount of
accrued and unpaid interest on the Loan payable on any Interest Payment Date
exceeds the Net Collections available on such Interest Payment Date, payment of
such excess amount of interest (the "DEFERRED INTEREST") may be deferred for a
period of up to three months; provided, however, that the outstanding principal
balance of the Loan plus the amount of Deferred Interest hereunder shall never
exceed the Total Commitment and; provided further, that the Deferred Interest
shall not be permitted if, after giving effect to such Deferred Interest, a
Collateral Impairment Event exists. All such Deferred Interest shall bear
interest at the rate provided for herein, to the extent permitted by applicable
law, and shall not be deemed past-due until the Interest Payment Date three
months following the Interest Payment Date such Deferred Interest was
originally due.
3.05. Calculation of Interest Rates. Interest on the unpaid
principal outstanding under the Note shall be calculated on the basis of the
actual days elapsed in a year consisting of 360 days.
3.06. Lockbox Account; Distributions of Net Collections;
Distributions of Excess Cash Flow.
(a) Lockbox Account. All Net Collections shall be
directed to and deposited into the Lockbox Account and shall be
accounted for and tracked on an Asset Portfolio basis. Any payments
or other proceeds of Collateral received by Borrower shall be deemed
received by Borrower in trust for the owner or beneficiary of the
Lockbox Account and shall be forthwith deposited by Borrower,
immediately upon receipt, into the Lockbox Account in the form
received, duly endorsed by Borrower for deposit into the Lockbox
Account.
(b) Distributions of Net Collections. On each Interest
Payment Date, the Net Collections with respect to an Asset Portfolio
will be withdrawn from the Lockbox Account and applied in the
following priorities:
(i) First, (A) to transfer out of the Lockbox
Account any funds that do not constitute Net Collections and
that were erroneously deposited to the Lockbox Account and (B)
to transfer any Tax Escrow Payments related to such Asset
Portfolio received from Account Debtors to the appropriate Tax
Escrow Account in an amount requested by the
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Servicer, which amount shall represent the total amount of Tax
Escrow Payments related to such Asset Portfolio paid into the
Lockbox Account prior to such Interest Payment Date to the
extent not previously deposited in the Tax Escrow Account;
(ii) Second, to the payment to Lender of all
accrued and unpaid interest on the Advance made to acquire
such Asset Portfolio;
(iii) Third, to the payment to Lender of any
Deferred Interest existing as of such Interest Payment Date,
including any Deferred Interest arising after giving effect to
distributions of Net Collections attributable to all Asset
Portfolios on such Interest Payment Date;
(iv) Fourth, to the payment of any fees and
expenses then due and payable to Lender under this Agreement
or any of the other Loan Papers, and to payment of fees and
expenses due to the Lockbox Bank and the Collateral Custodian;
(v) Fifth, to the payment to the Servicer of any
servicing fees then due to the Servicer with respect to such
Asset Portfolio pursuant to the terms of the Servicing
Agreement;
(vi) Sixth, to the payment of any Protective
Advances made by Borrower, or Servicer with respect to such
Asset Portfolio, provided such payment is not otherwise
prohibited hereunder or subject to Lender's approval;
(vii) Seventh, unless such payment is prohibited
hereunder, to the payment to NationsBank of Texas, N.A., for
deposit into the Operating Reserve Account maintained for such
Asset Portfolio, of such amount as may be requested by
Borrower in connection with such Asset Portfolio, provided
such payment shall not exceed (A) three percent (3%) of the
Net Purchase Price of such Asset Portfolio until expense
budgets for such Asset Portfolio are agreed upon by Borrower
and Lender and (B) thereafter, the budgeted expenses for such
Asset Portfolio; and
(viii) Eighth, the balance to be paid to Lender, to
be applied as principal payments on the Loan; provided,
however, that if, on such Interest Payment Date, no Pool
Collateral Impairment Event exists, such portion of the
balance shall be paid to Lender until the NPV Ratio for such
Asset Portfolio, is less than seventy percent (70%).
(c) Distributions of Excess Cash Flow. Any Net
Collections with respect to an Asset Portfolio remaining after making
all of the foregoing disbursements shall constitute "EXCESS CASH FLOW"
and shall be distributed on each Interest Payment Date as follows:
(i) First, to the payment to Lender, (as a
principal payment) in an amount equal to the greater of: (A)
seventy percent (70%) of Excess Cash Flow; and (B) the product
of multiplying (1) the Excess Cash Flow and (2) a percentage
obtained by adding (a) the NPV Ratio calculated for such Asset
Portfolio, and (b) ten percent (10%); and
(ii) Second, provided no Event of Default,
Potential Default, or Collateral Impairment Event has occurred
and is continuing, to Borrower in the amount of the remaining
balance of Excess Cash Flow with such distribution limited
such that the NPV Ratio will not be higher than the ratio
existing after the prior month's distributions.
Notwithstanding the foregoing, if an Event of Default or a material Potential
Default shall have occurred and be continuing, or if a Collateral Impairment
Event exists, all Net Collections shall be distributed as Lender
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shall direct, and Lender shall be entitled to withdraw and apply all Net
Collections and all amounts on deposit in the Lockbox Account, the Operating
Reserve Account and the Property Accounts to pay down amounts outstanding
hereunder and under the Note.
3.07. Manner and Application of Payments. All payments of principal
of, and interest on, the Note to or for the account of Lender shall be made by
Borrower to Lender before 12:00 noon (New York Time), by wire transfer in
Dollars at Lender's principal lending office in New York. Should the principal
of, or any installment of the principal or interest on, the Note, or any
Non-Utilization Fee, become due and payable on a day other than a Business Day,
the maturity thereof shall be extended to the next succeeding Business Day and
interest shall be payable with respect to such extension. All payments made on
the Note shall be credited, to the extent to the amount thereof, in the
following manner: (a) first, against the amount of interest accrued and unpaid
on the Note as of the date of such payment; and (b) second, as a prepayment of
outstanding Advances under the Note.
3.08. Taxes.
(a) Any and all payments by Borrower hereunder or under
the Note shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges,
or withholdings, and all liabilities with respect thereto (hereinafter
referred to as "TAXES"), excluding, in the case of Lender, taxes
imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which Lender is organized or is or
should be qualified to do business, or any political subdivision
thereof and, in the case of Lender, taxes imposed on its income, and
franchise taxes imposed on it by the jurisdiction of Lender's lending
office or any political subdivision thereof. If Borrower shall be
required by law to deduct any taxes (i.e., such taxes, liens, imposts,
deductions, charges, withholdings, and liabilities for which Borrower
is responsible under the preceding sentence) from or in respect of any
sum payable hereunder or under the Note to Lender, (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 3.08), Lender receives an amount equal
to the sum it would have received had no such deductions been made,
(ii) Borrower shall make such deductions and (iii) Borrower shall pay
the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made
hereunder or under the Loan Papers or from the execution, delivery, or
registration of, or otherwise with respect to, this Agreement or the
other Loan Papers (hereinafter referred to as "OTHER TAXES").
(c) Borrower will indemnify Lender 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 3.08) paid by Lender 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 Lender
makes written demand therefor.
(d) Within 30 days after the date of any payment of
Taxes, Borrower will furnish to Lender, at its address referred to
herein, the original or a certified copy of a receipt evidencing
payment thereof.
(e) Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and obligations of
Borrower contained in this Section 3.08 shall survive the payment in
full of principal and interest hereunder and under the other Loan
Papers.
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3.09. Reserve Funds. Borrower shall establish an account with the
Lockbox Bank (the "OPERATING RESERVE ACCOUNT") to deposit cash available for
distribution under Section 3.06(b)(vii) for the sole purposes of (a) making
Protective Advances, (b) funding property improvement expenses, and (c) funding
Permitted Lease-Up Expenses with respect to REO Property. The Operating
Reserve Account will be established for Borrower and pledged to Lender pursuant
to a Security Agreement, Assignment of Deposits and Money Market Instruments in
form and substance acceptable to Lender (the "PLEDGE OF ACCOUNTS").
SECTION 4
SPECIAL PROVISIONS FOR LIBOR RATE ADVANCES
4.01. Inadequacy of LIBOR Rate Loan Pricing. If with respect to any
LIBOR Rate Advance, Lender determines that, by reason of circumstances
affecting the interbank eurodollar market generally, deposits in Dollars (in
the applicable amounts) are not being offered to Lender in the interbank
eurodollar market then Lender shall forthwith give notice thereof to Borrower,
whereupon until Lender notifies Borrower that the circumstances giving rise to
such suspension no longer exist, (a) the obligation of Lender to make LIBOR
Rate Advances shall be suspended and (b) Borrower shall either (i) repay in
full the then-outstanding principal amount of the LIBOR Rate Advances, together
with accrued interest thereon, or (ii) convert such LIBOR Rate Advances to
Advances bearing a comparable alternative interest rate as reasonably
determined by Lender (the "ALTERNATIVE RATE ADVANCES").
4.02. Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation
or administration thereof, or compliance by Lender with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for
Lender to make, maintain, or fund LIBOR Rate Advances, and Lender is so
notified, Lender shall give notice thereof to Borrower. Upon receipt of such
notice, Borrower shall immediately either (a) repay in full the then
outstanding principal amount of the LIBOR Rate Advances, together with accrued
interest thereon, or (b) convert such LIBOR Rate Advances to Alternative Rate
Advances.
4.03. Duration of Alternative Rate Advances. If notice has been
given pursuant to Section 4.02 requiring the LIBOR Rate Advances to be repaid
or converted, then unless and until Lender notifies Borrower that the
circumstances giving rise to such repayment no longer apply, all Advances shall
be Alternative Rate Advances. If Lender notifies Borrower that the
circumstances giving rise to such repayment no longer apply, Borrower may
thereafter select Advances to be LIBOR Rate Advances in accordance with Section
2.03 of this Agreement.
4.04. Increased Costs. If any Governmental Authority, central bank,
or other comparable authority, shall at any time impose, modify, or deem
applicable any requirement or any other condition affecting Lender's Advances
hereunder, the Note or its obligation to make LIBOR Rate Advances, and the
result of any of the foregoing is to increase the cost to Lender of making or
maintaining its LIBOR Rate Advances, or to reduce the amount of any sum
received or receivable by Lender under this Agreement, or under the Note, by an
amount deemed by Lender to be material, then, within five (5) days after demand
by Lender, Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such increased cost or reduction. Lender will
promptly notify Borrower of any event of which it has knowledge, occurring
after the date hereof, which will entitle Lender to compensation pursuant to
this Section 4. A certificate of Lender claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. If Lender
demands compensation under this Section, then Borrower may at any time upon
notice to Lender, either (i) repay in full the then outstanding LIBOR Rate
Advances, together with accrued interest thereon to the date of prepayment or
(ii) convert such LIBOR Rate Advances to Alternative Rate Advances in
accordance with the provisions of this Loan Agreement.
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SECTION 5
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans hereunder, Borrower represents and
warrants to Lender that:
5.01. Organization and Good Standing. Borrower (i) is a limited
partnership duly organized and validly existing under the laws of the State of
Texas, (ii) 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, where the
failure to qualify could have a Material Adverse Effect, (iii) has the power
and authority to own its properties and assets and to transact the business in
which it is engaged, (iv) is or will be qualified in those states wherein it
proposes to transact business in the future where the failure to qualify could
have a Material Adverse Effect, and (v) has not been known as or used any
corporate, fictitious, or trade names in the past. Each REO Affiliate (i) is a
limited partnership duly organized and validly existing under the laws of the
State of Texas, (ii) 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 where
the failure to qualify could have a Material Adverse Effect, (iii) has the
power and authority to own its properties and assets and to transact the
business in which it is engaged, (iv) is or will be qualified in those states
wherein it proposes to transact business in the future where the failure to
qualify could have a Material Adverse Effect, and (v) has not been known as or
used any corporate, fictitious, or trade names in the past. The chief
executive office and principal place of business of the Borrower and each REO
Affiliate is at the address identified as Borrower's address in Section 12.05.
5.02. Authorization and Power. Borrower, Servicer, and each REO
Affiliate have the power and requisite authority to execute, deliver, and
perform this Agreement, the Note, and the other Loan Papers to which they are a
party; Borrower, Servicer and each REO Affiliate are duly authorized to and all
necessary action has been taken to authorize Borrower, Servicer, and each REO
Affiliate to execute, deliver, and perform such Loan Papers and such Persons
are and will continue to be duly authorized to perform this Agreement, the
Note, and such other Loan Papers to which they are a party.
5.03. No Conflicts or Consents. Neither the execution and delivery
of this Agreement, the Note, or the other Loan Papers, 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 Borrower or any REO Affiliate is subject or any judgment,
license, order, or permit applicable to Borrower or any REO Affiliate, or any
indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument to which Borrower or any REO Affiliate is a party or by which
Borrower or any REO Affiliate may be bound, or to which Borrower or any REO
Affiliate may be subject, or violate any provision of the partnership agreement
of Borrower or any REO Affiliate. 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 Borrower or any REO Affiliate of
the Loan Papers to which it is a party or to consummate the transactions
contemplated hereby or thereby.
5.04. Enforceable Obligations. This Agreement, the Note, and the
other Loan Papers are the legal and binding obligations of Borrower and each
REO Affiliate, as applicable, 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.
5.05. No Liens. Except for Permitted Liens, all of the properties
and assets of Borrower and each REO Affiliate are free and clear of all
mortgages, liens, encumbrances, and other adverse claims of any nature and
Borrower and each REO Affiliate have and will have good and indefeasible title
to their respective properties and assets.
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5.06. Financial Condition. Borrower has delivered to Lender copies
of the most recent consolidated balance sheet of Borrower, if any, and the
related consolidated statements of income, stockholders' equity and changes in
financial position for the year ended on such date, certified by KPMG Peat
Marwick L.L.P., independent certified public accountants; such financial
statements are true and correct, fairly present the financial condition of
Borrower as of such date, and have been prepared in accordance with Generally
Accepted Accounting Principles applied on a basis consistent with that of prior
periods; as of the date hereof, there are no obligations, liabilities or
indebtedness (including contingent and indirect liabilities and obligations or
unusual forward or long-term commitments) of Borrower which are (separately or
in the aggregate) material and are not reflected in such financial statements;
no changes having a Material Adverse Effect have occurred in the financial
condition or business of Borrower since December 31, 1997.
5.07. Full Disclosure. There is no material fact that Borrower has
not disclosed to Lender which could have a Material Adverse Effect on the
properties, business, prospects, or condition (financial or otherwise) of
Borrower, Servicer, or each REO Affiliate. Neither the financial statements
referred in Section 5.06 hereof, nor any certificate or statement delivered
herewith or heretofore by Borrower to Lender in connection with negotiations of
this Agreement, nor any statements, reports, or other documents or information
delivered to Lender pursuant to this Agreement, the Loan Papers, or the
Servicing Agreement, contains any untrue statement of a material fact or omits
to state any material fact necessary to keep the statements contained herein or
therein from being misleading, inaccurate, incomplete, or incorrect.
5.08. No Default; Potential Default. No event has occurred and is
continuing which constitutes an Event of Default or Potential Default.
5.09. Material Agreements. Schedule 5.09 attached hereto contains a
list of all material agreements (including without limitation all agreements
which, if breached, could directly or indirectly result in a Material Adverse
Effect but excluding the Loan Papers) of Borrower and each REO Affiliate.
Neither Borrower nor any REO Affiliate is in default in any material respect
under any loan agreement, indenture, mortgage, security agreement, or other
material agreement or obligation to which it is a party or by which any of its
properties is bound.
5.10. No Litigation. Except as described on Schedule 5.10, there
are no actions, suits or legal, equitable, arbitration, or administrative
proceedings pending, or to the knowledge of Borrower threatened, against
Borrower or any REO Affiliate or any of their respective assets that would, if
adversely determined, result in a Material Adverse Effect.
5.11. Burdensome Contracts. Neither Borrower nor any Subsidiary is
a party to, or bound by, any contract which has a Material Adverse Effect on
the business, operations, or financial condition of Borrower or any Subsidiary.
5.12. Taxes. All tax returns required to be filed by Borrower and
each REO Affiliate in any jurisdiction have been filed and all taxes (including
mortgage recording taxes), assessments, fees, and other governmental charges
upon Borrower or any REO Affiliate 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, except for Permitted Liens. There is no proposed tax
assessment against Borrower or any REO Affiliate and there is no basis for such
assessment.
5.13. Principal Office, Etc. The principal office, chief executive
office and principal place of business of Borrower is at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇. Borrower maintains its principal
records and books at such address.
5.14. ERISA. No Plan exists.
5.15. Compliance with Law. Each of Borrower, Servicer, and each REO
Affiliate has duly complied with, and its assets, business operations, and
leaseholds are in compliance in all material respects
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with, the provisions of all federal, state, and local laws, rules, regulations,
and orders (including, without limitation, Applicable Environmental Laws)
applicable to Borrower, Servicer, or any REO Affiliate, as the case may be, and
their respective assets or the conduct of their respective businesses and they
each 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 the Loan Papers. Neither Borrower nor
any of the REO Property or the Underlying Real Estate is in material violation
of any Applicable Environmental Law or subject to any existing, pending or
overtly threatened investigation by any Governmental Authority under any
Applicable Environmental Law. To the best knowledge of Borrower, no Hazardous
Substance (a) has been disposed of or released on any of REO Property or the
Underlying Real Estate or (b) is located thereon. No REO Property, Underlying
Real Estate, or any property adjoining any REO Property or Underlying Real
Estate is being used, or, to Borrower'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 Real Estate. The foregoing provisions of this
Section 5.15 are subject to the following qualifications: (a) the use by the
owners of any Underlying Real Estate 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 5.15 and (b) such representations are
subject to the exception of (i) with respect to Borrower, all matters disclosed
to Lender in writing before the date of this Agreement and (ii) with respect to
any Assets, all matters disclosed to Lender in writing before the date of
acquisition of such Asset.
5.16. Government Regulation. Borrower is not subject to regulation
under the Public Utility Holding Borrower 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 Borrower 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.
5.17. No Subsidiaries. Borrower has not formed or acquired any
Subsidiary.
5.18. Solvency. As of the date hereof, and after giving effect to
each transaction contemplated in a Borrowing Request, (a) the aggregate fair
market value of Borrower's assets exceed, and will exceed, its liabilities
(whether contingent, subordinated, unmatured, unliquidated, or otherwise), (b)
Borrower has, and will have, sufficient cash flow to enable it to pay its debts
as they mature, and (c) Borrower has, and will have, a reasonable amount of
capital to conduct its business as presently contemplated.
5.19. Ownership of Borrower, Servicer and REO Affiliate. FirstCity
Commercial Corporation, a Texas corporation ("FIRSTCITY") and CFSC Capital
Corp. II, a Delaware corporation ("CFSC"), own a 49.5% and 50% limited
partnership interest in Borrower respectively. FC Assets Corp., a Texas
Corporation ("FC CORP") owns 0.5% general partnership interest in Borrower. FC
Corp is the wholly-owned subsidiary of FirstCity. Borrower owns or will own a
99.5% limited partnership interest in FC Properties One, Ltd., a Texas limited
partnership ("PROPERTIES ONE"), FC Properties Three, Ltd., a Texas limited
partnership ("PROPERTIES THREE"), FC Properties Five, Ltd., a Texas limited
partnership ("PROPERTIES FIVE"), and FC Properties Six, Ltd., a Texas limited
partnership ("PROPERTIES SIX"). FC Assets One Corp., a Texas corporation
("ASSETS ONE"), owns a 0.5% general partnership interest in Properties One. FC
Assets Three Corp., a Texas corporation ("ASSETS THREE"), owns a 0.5% general
partnership interest in Properties Three. FC Assets Five Corp., a Texas
corporation ("ASSETS FIVE"), owns a 0.5% general partnership interest in
Properties Five. FC Assets Six Corp., a Texas corporation ("ASSETS SIX"), owns
a 0.5% general partnership interest in Properties Six. Each of Assets One,
Assets Three, Assets Five, and Assets Six are the wholly-owned subsidiaries of
FC Assets.
5.20. Service of Process. Borrower has appointed CT Corporation
System to be its agent for service of process in New York and CT Corporation
System has accepted such appointment.
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5.21. Representations and Warranties. Each Borrowing Request shall
constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrower that no Event of Default
exists and that all representations and warranties contained in this Section 5
or in any other Loan Paper are true and correct at and as of the date of such
Borrowing Request and as of the date the Advance is to be made.
5.22. Survival of Representations, Etc. All representations and
warranties by Borrower herein shall survive delivery of the Note and the making
of the Loans, and any investigation at any time made by Lender shall not
diminish Lender's right to rely on such representations and warranties.
SECTION 6
CONDITIONS PRECEDENT
6.01. Initial Advances. The obligation of Lender to make its
initial Advance hereunder is subject to the condition precedent that, on or
before the date of such Advance, Lender shall have received the following, each
dated as of the date of such Advance, in form and substance satisfactory to
Lender:
(a) Revolving Credit Note; Loan Papers. A duly executed
Note, drawn to the order of Lender, in the form of Exhibit "A"
attached hereto with appropriate insertions, together with the other
Loan Papers, duly executed and delivered by the parties thereto and,
where applicable, duly acknowledged and in recordable form;
(b) Opinion of Counsel. The favorable, written opinions
of (i) counsel to Borrower, each General Partner, each REO Affiliate,
and the Servicer regarding Borrower, each General Partner, each REO
Affiliate, the Servicer, the Loan Papers, and the transactions
contemplated by the Loan Papers; (ii) counsel satisfactory to Lender
qualified in such jurisdiction(s) as Lender deems appropriate to the
effect that Lender's security interest in the Collateral Loans
acquired with the proceeds of the initial Advance is perfected by
possession of the notes held by Lender or the Collateral Custodian and
that the recording of an assignment of mortgage is not necessary to
perfect such security interest; and (iii) such other opinions as
Lender may reasonably request;
(c) Officer's Certificate. A certificate signed by a
duly authorized officer of FC Assets on behalf of the Borrower, in
form and substance reasonably satisfactory to Lender 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): (i) all of the representations and
warranties contained in Section 5 hereof, and the other Loan Papers
are true and correct as of the Effective Date of such Advance; and
(ii) no event has occurred and is continuing, or would result from the
Advance, which constitutes an Event of Default or Potential Default;
(d) Organizational Documents. True, correct, and
complete copies of the following in form and substance reasonably
satisfactory to Lender: the partnership certificates of Borrower and
each REO Affiliate; a copy of the partnership agreements of Borrower
and each REO Affiliate; articles of incorporation and bylaws of each
General Partner; all such documents to be certified as of the Closing
Date by the appropriate general partner or corporate officer, as
applicable, together with appropriate partnership and corporate
resolutions on behalf of the partners of Borrower and each REO
Affiliate and the boards of directors of the General partners; and
certificates of existence and good standing from the Secretary of
State of the State of Texas or Delaware, as applicable, relating to
the continuing existence of Borrower, any such REO Affiliate and the
General Partner;
(e) Resolutions of General Partners. Resolutions of each
General Partner approving the execution, delivery, and performance of
this Agreement, the Note, and the other Loan Papers and the
transactions contemplated herein and therein, on behalf of Borrower
and each REO Affiliate, as applicable, duly adopted by such General
Partner's board of directors and accompanied by a certificate of the
secretary of each such General Partner that such resolutions are true
and
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correct, have not been altered or repealed, and are in full force and
effect all in form and substance reasonably satisfactory to Lender;
(f) Incumbency Certificate. A signed certificate of the
secretary of each General Partner which shall certify the names of the
officers of Borrower and each REO Affiliate, as applicable, authorized
to sign each of the Loan Papers and the other documents or
certificates to be delivered pursuant to the Loan Papers by Borrower
or any REO Affiliate, together with the true signatures of each such
officer. Lender may conclusively rely on such certificate until it
shall receive a further certificate of the secretary of any General
Partner canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate;
(g) Certificates. Certificates of existence and good
standing for Borrower, each General Partner, and each REO Affiliate,
issued by the Texas Secretary of State, and certificates of
qualification and good standing (or other similar instruments) for
Borrower, each General Partner, and each REO Affiliate, issued by the
Secretary of State of each State wherein Borrower, each General
Partner, and each REO Affiliate, as applicable, is qualified to do
business as a foreign corporation, each dated within ten (10) days of
the initial Advance;
(h) Recordable Documents. UCC financing statements and
other filings or recordings required by Lender;
(i) Lien Searches. Current lien searches evidencing that
the liens of Lender, upon the Collateral are first and prior Liens,
subject only to Permitted Liens;
(j) Insurance. If available, evidence of insurance and
loss payee endorsements required hereunder or other Loan Papers and
certificates or binders of insurance policies evidencing the insurance
required by Section 9.04 hereof and/or endorsements naming Lender as
loss payee, all at Borrower's cost and expense;
(k) Additional Information. Such other information and
documents as may reasonably be required by Lender and Lender's
counsel.
6.02. All Advances. The obligation of Lender to make any Advance
under this Agreement to acquire an Asset Portfolio (including the initial
Advance) shall be subject to the following additional conditions precedent:
(a) No Defaults; No Potential Defaults; No Collateral
Impairment Event; Maximum Advance Amount. As of the date of such
Advance there exists no Potential Default, Event of Default, or
Collateral Impairment Event, and the Advance does not exceed the
Maximum Advance Amount;
(b) Compliance with Loan Agreement. Borrower, each REO
Affiliate, and Servicer shall have performed and complied with all
agreements and conditions contained herein or in any Loan Paper which
are required to be performed or complied with by Borrower, each REO
Affiliate, or Servicer before or at the date of such Advance;
(c) No Material Adverse Effect. As of the Effective Date
of such Advance, no Material Adverse Effect has occurred in the
business or financial condition of Borrower or Servicer;
(d) Borrowing Request. In the case of any Advance,
Lender shall have received from FC Assets, a Borrowing Request three
(3) Business Days prior to the Effective Date of such Advance, signed
by an Authorized Officer of FC Assets, all of the statements of which
shall be true and correct, certifying that, as of the date thereof,
(i) the amount of the requested Advance does not exceed the Maximum
Advance Amount for the Asset Portfolio to be acquired with the
proceeds of such Advance, (ii) all of the representations and
warranties of Borrower and Servicer contained in
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this Agreement and each of the Loan Papers (including all computations
of Net Present Values based on the Projected Net Collections figures
set forth on the most recent Asset Portfolio Report delivered to
Lender) executed by Borrower are true and correct, (iii) no event has
occurred and is continuing, or would result from the Advance, which
constitutes an Event of Default or Potential Default, (iv) no
Collateral Impairment Event has occurred and is continuing, nor will
the Advance result in a Collateral Impairment Event or Pool Collateral
Impairment Event, (v) the purchase of the Assets included in the Asset
Portfolio being financed with the Advance was underwritten by Borrower
in accordance with its established underwriting requirements, (vi) the
Assets included in the Asset Portfolio being financed with the Advance
are of a type previously financed by Borrower, or an Affiliate of
Borrower, with Lender or, if not, are assets which have been
specifically approved by Lender for inclusion in the Asset Portfolio,
and (vii) such other facts as Lender may reasonably request;
(e) Representations and Warranties. The representations
and warranties contained in Section 5 hereof shall be true in all
respects on the date hereof, on the date of each Borrowing Request and
on the date of making of such Advance, with the same force and effect
as though made on and as of such dates;
(f) Bankruptcy Proceedings. No proceeding or case under
the United States Bankruptcy Code shall have been commenced by or
against Borrower or any REO Affiliate;
(g) Collateral. With respect to the Asset Portfolio to
be acquired with such Advance, Lender or the Collateral Custodian
shall have confirmation of the existence and possession by Borrower of
each note evidencing a Collateral Loan (or in the case of a lost note,
a "LOST NOTE AFFIDAVIT" (herein so called) provided to Borrower
pursuant to the terms of a Sale Agreement by the sellers), it being
understood that Borrower shall deliver to Lender or the Collateral
Custodian, (i) within one (1) Business Day of the Effective Date
related to such Asset Portfolio, (A) the originally executed REO Notes
and promissory notes evidencing each of the Account Debtor's
obligations to repay the Collateral Loans, endorsed in blank by
Allonge, or on the face of the notes themselves, as such notes may
have been amended, supplemented, or otherwise modified as of the date
of delivery or (B) Lost Note Affidavits, if appropriate, (ii) within
fourteen (14) days after the Effective Date related to such Asset
Portfolio, fully and originally executed copies of Collateral
Assignments of the Collateral Loan Documents, and (iii) within
twenty-one (21) days after the Effective Date related to such Asset
Portfolio, fully and originally executed copies of all other
Collateral Loan Documents related to such Asset Portfolio, all of the
statements set forth in any Borrowing Request are true and correct as
of the date the same is received by Lender and as of the date of
Advance;
(h) Equity Investments/Subordinated Loan. Lender shall
have received evidence that, upon the funding of the Advance
requested, the Equity Contribution, if applicable, shall have been
paid in full (as a result of equity investments in Borrower). At the
sole discretion of Lender, the equity investment related to the
acquisition of an Asset Portfolio may be funded, in whole or in part,
by additional Indebtedness of Borrower or an Affiliate of Borrower,
subordinated in right of payment to the payment of the Obligation
pursuant to a subordination agreement executed in favor of Lender, and
in form and substance acceptable to Lender in its sole discretion;
(i) Consents. All consents, waivers, acknowledgments,
releases, terminations, and other agreements and documents from third
persons which Lender may reasonably deem necessary or desirable in
order to permit, protect and perfect its security interest in and
liens upon the Assets being acquired or to effectuate the provisions
or purposes of this Agreement and the other Loan Papers, including,
without limitation, all bailee notifications and acknowledgments of
security interests, shall have been properly received;
(j) Due Diligence Reports. Lender or the Collateral
Custodian shall have received with respect to each Asset being
acquired by Borrower with the proceeds of the Advance, copies of the
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Due Diligence Reports and any additional information, report, or
documentation that may be reasonably requested by Lender or its
counsel.
(k) Purchase Documentation. Unless the Asset Portfolio
being financed with the Advance is an Owned Asset Portfolio, Lender
shall have received certified copies of all documentation related to
Borrower's acquisition of the Asset Portfolio (including the Sale
Agreement, any assignments to Borrower related thereto and the related
closing statement) and the REO Affiliate's acquisition of title to REO
Property together with evidence that all such documents (including the
applicable Sale Agreement) have been duly authorized, executed, and
delivered by the parties thereto, provided that to the extent any such
documents are being executed and delivered on the Effective Date,
Borrower shall deliver forms of all such documents on or prior to the
Effective Date with the original documents to be delivered within
three Business Days following the Effective Date; and
(l) Security Documents. Lender shall have received such
additional Security Documents as Lender may reasonably require to
ensure that Lender receives valid liens in all of the Assets in such
Asset Portfolio.
SECTION 7
AFFIRMATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Note and the performance of the Obligation,
Borrower agrees that (unless Lender shall otherwise consent in writing):
7.01. Financial Statements, Reports and Documents. Borrower shall
deliver, or as appropriate shall ensure Servicer delivers, to Lender each of
the following:
(a) Quarterly Statements. As soon as available, and in
any event within forty-five (45) days after the end of each quarterly
fiscal period of each fiscal year of Borrower, copies of the balance
sheet of Borrower (reflecting REO Property as inventory), as of the
end of such fiscal period, and statements of income and retained
earnings and changes in financial position of Borrower for that
quarterly fiscal period and for the portion of the Fiscal Year ending
with such period, in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all
in reasonable detail, and certified by the chief financial officer of
FC Assets as being true and correct and as having been prepared in
accordance with Generally Accepted Accounting Principles, subject to
year-end audit and adjustments;
(b) 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 Borrower, copies of the balance sheet of Borrower
(reflecting REO Property as inventory) as of the close of such fiscal
year and statements of income and retained earnings and changes in
financial position of Borrower 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
Borrower) of KPMG Peat Marwick L.L.P., or of other independent public
accountants of recognized national standing selected by Borrower and
satisfactory to Lender, to the effect that such financial statements
have been prepared in accordance with Generally Accepted Accounting
Principles 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. A Compliance Letter signed by such accountants shall
accompany each such opinion;
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(c) Audit Reports. Promptly upon receipt thereof, one
copy of each written report submitted to Borrower by independent
accountants in any annual, quarterly or special audit made, it being
understood and agreed that all audit reports which are furnished to
Lender pursuant to this Section 7.01 shall be treated as confidential,
but nothing herein contained shall limit or impair Lender'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 Lender deems
necessary to protect its interests under this Agreement;
(d) Compliance Certificate. Within thirty (30) days
after the end of each fiscal quarter of Borrower hereafter, a
certificate executed by the chief financial officer or chief executive
officer of each General Partner, stating that a review of the
activities of Borrower and each REO Affiliate, as applicable, during
such fiscal quarter has been made under his supervision and that
Borrower and each REO Affiliate 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. As soon as practicable, and
in any event within twenty-five (25) calendar days after the end of
each month, an Asset Portfolio Report calculated as of the close of
such month for all Assets;
(f) Budgets. Borrower will deliver to Lender, within
ninety (90) days of the acquisition of any Asset Portfolio, as part of
an Asset Portfolio Report, a budget for each Asset comprising such
Asset Portfolio, reflecting the Projected Net Collections for each
such Asset. Lender shall have the right to review and approve each
such budget and each such "APPROVED BUDGET" (herein so called), as
modified and updated from time to time as provided for herein, shall
be the basis for calculating the Net Present Value of such Asset for
purposes of determining the occurrence of a Collateral Impairment
Event or Pool Collateral Impairment Event. Thereafter, Borrower shall
deliver to Lender, with each Asset Portfolio Report, a revised budget
and revised Net Present Value for each Asset with (i) an Allocated
Purchase Price equal to or greater than $100,000.00, and (ii) a
revised Net Present Value less than ninety percent (90%) or greater
than one hundred and ten percent (110%) of the previously budgeted Net
Present Value of such Asset. Lender will have ten (10) days to
approve the revised budget. If Lender has not responded within ten
(10) Business Days after receipt of the modified Net Present Values,
the modified Net Present Values and revised budgets will be deemed to
be approved by Lender. If Lender does not approve any revised budget,
Borrower and Lender shall attempt to agree upon an acceptable revised
budget. If no such agreement is reached within twenty (20) days after
receipt of the modified Net Present Value and revised budget, the Net
Present Value of such Asset shall be adjusted as Lender, in its sole
discretion, shall reasonably deem appropriate. Prior to Lender
accepting Borrower's initial budget for each Collateral Loan and each
REO Property, the present value of the Original Estimated Value
attached to the related Borrowing Request, discounted at the related
discount rate for such Asset, will be used as the Net Present Value.
7.02. Additional Reports. Furnish to Lender, as soon as
practicable, such other information concerning the Assets, business,
properties, or financial condition of Borrower as Lender shall reasonably
request in form reasonably satisfactory to Lender. The delivery of any
reports, statements, and other information by Borrower or Servicer shall be
deemed a 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 Assets.
7.03. Payment of Taxes, Impositions and Other Indebtedness.
Borrower will pay and discharge and will cause each REO Affiliate to 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 Borrower's assets, (b) all lawful claims (including claims
for
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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.
7.04. Filings. Borrower will file all federal, state, and local tax
returns and other reports that Borrower 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; and will cause each REO Affiliate to file all federal,
state, and local tax returns and other reports that such REO Affiliate is
required by law to file and to 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.
7.05 Maintenance of Existence and Rights; Conduct of Business.
Borrower will preserve and maintain its corporate 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.
7.06. Notice of Default; Notice of Collateral Impairment Event.
Borrower will furnish to Lender, 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 Borrower is taking or proposes to take
with respect thereto. Borrower will furnish to Lender, immediately upon
becoming aware of the existence of a Collateral Impairment Event or a Pool
Collateral Impairment Event, a written notice of such Collateral Impairment
Event or Pool Collateral Impairment Event, as applicable, showing the
calculations related thereto.
7.07. Other Notices. Borrower will promptly notify Lender of (a)
any Material Adverse Effect, (b) any material default under any material
agreement, contract, or other instrument to which it, or any REO Affiliate, is
a party or by which any of its properties are bound, or any acceleration of the
maturity of any Indebtedness owing by Borrower or the REO Affiliate, (c) any
material adverse claim against or affecting Borrower or any of its properties
or the REO Affiliate or any of the REO Properties, and (d) the commencement of,
and any material determination in, any litigation with any third party or any
proceeding before any Governmental Authority affecting Borrower or the REO
Affiliate.
7.08. Compliance with Loan Papers. Borrower will promptly comply,
and will cause Servicer and each REO Affiliate to promptly comply, with any and
all covenants and provisions of this Agreement, the Note and all other of the
Loan Papers and other reasonable requests by Lender related to the Loan.
7.09. Compliance with Material Agreements. Borrower will comply,
and will cause Servicer and each REO Affiliate to comply, in all material
respects with all material agreements, indentures, mortgages, or documents
binding on it or affecting its properties or business.
7.10. Operations and Properties. Borrower and each REO Affiliate
will act prudently and in accordance with Standard Industry Practices and the
applicable rules and standards of the local Governmental Authority in managing
and operating its assets, properties, business, and investments, and in making
improvements to, or undertaking construction thereon. Borrower will keep, and
with respect to REO Property will ensure each REO Affiliate keeps, 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 Real Estate and REO Property to be maintained in at least as good a
condition as they existed on the date of acquisition of the Collateral Loan or
REO Property by Borrower or REO Affiliate, ordinary wear and tear excepted, and
will make, or ensure Servicer makes, such Protective Advances as may be
required to do so.
7.11. Books and Records; Access. Borrower and each REO Affiliate
will give any representative of Lender 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 Borrower or any REO Affiliate
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and relating to its affairs, and to inspect any of the properties of Borrower.
Borrower and each REO Affiliate will maintain complete and accurate books and
records of its transactions in accordance with good accounting practices.
7.12. Compliance with Law. Borrower will comply with, and will
cause each REO Affiliate to 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 Borrower's or any REO Affiliate's
financial condition, business, or credit. Borrower will 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.
7.13. Authorizations and Approvals. Borrower will promptly obtain,
from time to time at its own expense, and will ensure each REO Affiliate
obtains, 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 Loan Papers.
7.14. Experienced Management. Borrower will at all times hire and
retain management and supervisory personnel adequate for the proper management,
supervision and conduct of its properties, business and operation.
7.15. Further Assurances. Borrower will, and will ensure each REO
Affiliate 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 Lender may, from time to
time, deem reasonably necessary or proper in connection with this Agreement or
any of the other Loan Papers, the obligations of Borrower hereunder or
thereunder, or for better assuring and confirming unto Lender all or any part
of the security for any of such obligations, or for granting to Lender any
security for the Obligation which Lender may request from time to time, or for
facilitating collection of the Collateral hereunder.
7.16. Collection Efforts. Borrower will exercise collection efforts
with respect to the Collateral Loans as is consistent with sound business
practice. Borrower will at all times comply with Standard Industry Practices
and Borrower's past procedures related to due diligence, collateral control,
collection, and reporting procedures with respect to all Collateral Loans.
Borrower's principal office shall at all times be maintained at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇ and Borrower's books, records,
and files related to the Collateral Loans (including, without limitation, the
Due Diligence Reports) shall at all times be maintained at the Servicer's
offices set forth on Schedule 7.16 attached hereto. Borrower shall maintain
all files related to the Collateral Loans in a reasonably prudent manner.
7.17. Management. Borrower will give Lender prompt notice of (a)
all senior management changes and (b) any substantial material change in
Borrower's management structure or personnel contemplated by Borrower.
7.18. Records. Borrower will maintain complete and accurate
records and files pertaining to each Collateral Loan delivered to Lender or the
Collateral Custodian, and retain such records and files together with all
Collateral Loan Documents, in the possession of Borrower, in restricted access
secure facilities reasonably safe from loss or destruction.
7.19. Grant of Specific Liens. Borrower will, at any time
Underlying Real Estate is foreclosed upon by Borrower, grant to Lender a Lien
upon such Underlying Real Estate, subject only to Permitted Liens and, if the
foreclosed Underlying Real Estate or the note secured by the Underlying Real
Estate being foreclosed upon has been conveyed to an REO Affiliate, Borrower
will obtain an REO Note following the assignment to the REO Affiliate, and will
ensure the REO Affiliate grants (a) to Lender, a second priority lien, securing
its Guaranty obligations and (b) to Borrower a first priority lien securing the
REO Note, in such Underlying Real Estate, following the foreclosure; provided,
however, that with respect to any such Underlying Real
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Estate located in New York or Florida, the deeds of trust or mortgages granting
such liens shall only be filed of record upon the request of Lender.
7.20. Ancillary Agreements. Borrower will fully comply with, and
perform (or cause Servicer to perform, as the case may be), all of the terms of
the Lockbox Agreement, the Servicing Agreement, and the other Loan Papers.
7.21. General Indemnity; Environmental Indemnity
(a) Borrower hereby agrees to indemnify, protect, and
hold Lender and its parent, 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 Loan Papers 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,INCLUDING
MATTERS ARISING OUT OF THE ORDINARY NEGLIGENCE OF THE INDEMNIFIED
PARTIES, BUT EXCLUDING MATTERS ARISING OT OF THE FRAUD, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTIES; provided,
however, that Lender shall not be indemnified against any claim
resulting from any action taken by Lender with respect to any
Collateral subsequent to the foreclosure upon such Collateral by
Lender or for any material breach of Lender's obligations hereunder.
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) Borrower agrees to promptly pay and discharge when
due all debts, claims, liabilities, and obligations with respect to
any clean-up measures necessary for Borrower to comply with Applicable
Environmental Laws affecting Borrower, the Mortgaged Property, the REO
Property, and the Underlying Real Estate, provided that, with respect
to any single tract or parcel of real property, Borrower shall not be
required to take such action if failure to take such action would not
have a Material Adverse Effect on the financial condition of Borrower
or any REO Affiliate or would not, in the reasonable opinion of
Lender, have the potential for creating any liability or claim against
Lender. Borrower hereby agrees 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 Borrower; or with respect to or as a
direct or indirect result of Borrower's generation, manufacture,
production, storage, release, threatened release, discharge, disposal
of a Hazardous Substance at, on or about any REO Property, Mortgaged
Property, Underlying Real Estate or any property of Borrower or which
secures any indebtedness owed to Borrower, 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; provided, however, that Lender shall not be
indemnified against any claim resulting from any action taken by
Lender with respect to any Collateral or REO Property subsequent to
the foreclosure upon such Collateral or REO Property by Lender. 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 Borrower
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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 terms "HAZARDOUS SUBSTANCE" and
"RELEASE" shall have the meanings specified in the Superfund
Amendments and Reauthorization Act of 1986 ("▇▇▇▇"), and the terms
"SOLID WASTE" and "DISPOSED" shall have the meanings specified in the
Resource Conservation and Recovery Act of 1976 ("RCRA"); provided,
however, to the extent that any other applicable laws of the United
States of America or political subdivision thereof establish a meaning
for "hazardous substance," "release," "solid waste," or "disposed"
which is broader than that specified in either ▇▇▇▇ or RCRA, such
broader meaning shall apply. As used in this Agreement, "APPLICABLE
ENVIRONMENTAL LAW", shall mean and include the singular, and
"APPLICABLE ENVIRONMENTAL LAWS" shall mean and include the collective
aggregate of the following: Any law, statute, ordinance, rule,
regulation, order or determination of any Governmental Authority
affecting Borrower or any REO Affiliate pertaining to hazardous
substances 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 ("CERCLA"), 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, and any federal, state or municipal laws, ordinances,
regulations, or law which may now or hereafter require removal of
asbestos or other hazardous wastes from any property of Borrower or
any REO Affiliate or impose any liability on Lender related to
asbestos or other hazardous wastes in any property of Borrower or any
REO Affiliate. The provisions of this Section 7.21 shall survive the
repayment of the Note. In the event of the transfer of the Note or
any portion thereof, Lender or any subsequent holder of the Note and
any participants shall continue to be benefited by this indemnity
agreement with respect to the period of such holding of the Note.
Borrower 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 Loan
Papers). Borrower 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 Borrower has given Lender reasonable or prior
written notice thereof and obtained an unconditional release of each
Indemnified Party from all liability arising therefrom.
SECTION 8
NEGATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Note and the performance of the Obligation,
Borrower agrees that (unless Lender shall otherwise consent in writing):
8.01. Limitation on Indebtedness. Borrower will not, and will
ensure each REO Affiliate does not, incur, create, contract, waive, assume,
have outstanding, guarantee or otherwise be or become, directly or indirectly,
responsible for any Indebtedness, except (a) Indebtedness arising out of 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, (f) Indebtedness of
Borrower or each REO Affiliate as reflected in the most recent financial
statements of Borrower delivered to Lender; (g) subordinated indebtedness
approved by Lender in accordance with Section 6.02(h) herein and (h) the REO
Notes.
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8.02. Negative Pledge. Borrower will not, and will ensure each REO
Affiliate does not, 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 or Permitted Prior Liens.
8.03. Prepayments. Borrower will not, and will ensure each REO
Affiliate does not, directly or indirectly pay any subordinated indebtedness
permitted hereunder prior to the date on which such subordinated indebtedness
is due and payable in accordance with the terms thereof and will not directly
or indirectly make any payment of any subordinated indebtedness which would
violate the terms of the subordination agreement applicable to such
subordinated indebtedness.
8.04. Limitation on Investments. Borrower will not, and will ensure
each REO Affiliate does not, make or have outstanding any Investments in any
Person, except for Borrower's ownership of REO Affiliates, Temporary Cash
Investments, and such other "cash equivalent" investments as Lender may from
time to time approve.
8.05. Alteration of Material Agreements. Borrower will not, and
will ensure each REO Affiliate does not, 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.
8.06. Certain Transactions. Borrower will not, and will ensure each
REO Affiliate does not, enter into any transaction with, or pay any management
fees to, any Affiliate; provided, however, that Borrower or any REO Affiliate
may enter into the Servicing Agreement and transactions evidenced by the REO
Notes and may enter into any other transaction with Affiliates provided
payments to such Affiliates under such transaction is limited to Borrower's pro
rata share of Excess Cash Flow received pursuant to Section 3.06(c).
8.07. Issuance of Shares. Borrower will not, and will ensure each
REO Affiliate does not, issue, sell, or otherwise dispose of, any shares of its
capital stock or other securities, or rights, warrants, or options to purchase
or acquire any shares or securities.
8.08. Limitation on Sale of Properties. Borrower will not, and will
ensure each REO Affiliate does not, 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 the Lockbox Account to be applied pursuant to Section 3.06.
8.09. Name, Fiscal Year and Accounting Method. Borrower will not,
and will ensure each REO Affiliate does not, change its name, fiscal year, or
method of accounting.
8.10. Liquidation, Mergers, Consolidations and Dispositions of
Substantial Assets. Borrower will not, and will ensure each REO Affiliate does
not, dissolve or liquidate, or become a party to any merger or consolidation
unless Borrower or the REO Affiliate, as applicable, shall be the surviving
entity of its property or assets or business; provided, however, that the
foregoing shall not operate to prevent a merger of any Person into the
Borrower; provided, however, that Borrower shall be the surviving or continuing
corporation and, after giving effect to such merger or consolidation: (a)
Borrower or shall be in full compliance with the terms of this Agreement; and
(b) the management of Borrower shall be substantially unchanged.
8.11. Lines of Business. Borrower will not, and will ensure each
REO Affiliate does not, directly or indirectly, engage in any business other
than those in which it is presently engaged, or discontinue any of its existing
lines of business or substantially alter its method of doing business.
8.12. No Amendments. Borrower will not and will ensure each REO
Affiliate does not, amend its partnership agreement.
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8.13. Purchase of Substantial Assets. Borrower will not, and will
ensure each REO Affiliate does not, purchase, lease, or otherwise acquire all
or substantially all of the assets of any other Person except for the
acquisition of the Asset Portfolios and foreclosure of Underlying Real Estate
and other Collateral securing the Collateral Loans.
8.14. New Places of Business. Borrower will not, and will ensure
each REO Affiliate does not, transfer its principal place of business or chief
executive office, except upon at least sixty (60) days prior written notice to
Lender and after the delivery to Lender of financing statements in form
satisfactory to Lender to perfect or continue the perfection of the Lender's
Liens and security interests contemplated hereby.
8.15. Fictitious Names. Borrower will not, and will ensure each REO
Affiliate does not, use any fictitious name or "d/b/a".
8.16. Margin Stock. Borrower 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 unless, prior to any such purchase or
acquisition or entering into any such contract, Lender shall have received an
opinion of counsel satisfactory to Lender to the effect that such purchase or
acquisition will not cause this Agreement to violate Regulations G, T, U, or X
or any other regulation of the Federal Reserve Board then in effect.
8.17. Compliance with Environmental Laws. Except in material
compliance with applicable laws (including all Applicable Environmental Laws),
Borrower will not, and with respect to the REO Property will ensure that each
REO Affiliate will not, 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.
8.18. Disposition of Collateral Loans. Company will not dispose of,
or permit Servicer to dispose of, a Collateral Loan or otherwise settle the
amount owed on any Collateral Loan, or permit any REO Affiliate to dispose of
any REO Property, for an amount which is less than the Minimum Release Price.
8.19. Modification of Ancillary Agreements. Borrower will not, and
will ensure each REO Affiliate does not, attempt to amend, modify, or terminate
any of the Loan Papers without Lender's written consent.
8.20. Certain Payments. Borrower will not make any payment under
the Servicing Agreement at any time any Event of Default exists hereunder or if
such payment would cause an Event of Default hereunder.
SECTION 9
COLLATERAL
9.01. Security. Borrower agrees to secure the Obligation to Lender
by the pledge of, and the granting of a first priority perfected security
interest in the Collateral more fully described in the Security Documents,
including, without limitation (a) the Collateral Loans and Collateral Loan
Documents (including, as a result of a Collateral Assignment, the REO Notes and
REO Property) which shall come into the possession, custody, or control of the
Collateral Custodian, Borrower, or Servicer, (b) the Mortgaged Property, (c)
all cash, securities, notes, or other instruments deposited by Borrower in any
cash collateral account securing Borrower's obligations hereunder, including
without limitation the Tax Escrow Accounts and the Property Accounts for each
Asset Portfolio, the Lockbox Account, and the Operating Reserve Account, (d)
all interest of Borrower in any documents relating to the acquisition and
ownership of the Asset Portfolios, including without limitation all related
purchase agreements, to the extent such rights are assignable, and (e) cash and
non-cash proceeds of the foregoing. Payment of the Obligation will be
unconditionally guaranteed by each Guarantor and each Guarantor will secure the
guaranteed obligations by a second priority lien in REO Property owned by such
Guarantor.
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9.02. Lien on REO Properties. Each REO Property shall be owned by
an REO Affiliate, it being understood that Borrower shall not take title to any
REO Property. Immediately upon the acquisition of title to an REO Property by
an REO Affiliate, Borrower (a) will cause such REO Affiliate to execute and
deliver to Borrower an REO Note (which shall be endorsed by Borrower to Lender,
and delivered to the Collateral Custodian), security instruments granting to
Lender a second priority Lien on such REO Property or, in cases where such REO
Property shall then be subject to Permitted Prior Liens, a Lien subject only to
such Permitted Prior Liens and REO Security Documents granting to Borrower a
first priority Lien on such REO Property subject only to Permitted Prior Liens,
and (b) will execute and deliver to Lender a Collateral Assignment which shall
be in form and substance satisfactory to Lender, pursuant to which Borrower
shall collaterally assign to Lender, as security for the Obligation, all of
Borrower's rights under such REO Note and REO Security Documents. Borrower (at
its own expense) shall record such security instruments, REO Security
Documents, and any related assignment(s) of lien with such filing offices as
may be required by Lender to perfect and record Borrower's and Lender's
respective interests in such REO Property. Prior to the taking of title to any
REO Property by an REO Affiliate, Borrower shall provide Lender with an
Environmental Site Assessment with respect to such REO Property or an update of
the Environmental Site Assessment which was delivered to Lender in connection
with the closing of the loan, and Borrower shall have received Lender's written
acknowledgment that the results thereof are acceptable to Lender. In addition,
for any REO Property with an Allocated Purchase Price in excess of $250,000,
upon Lender's request, Borrower shall be obligated, at Borrower's expense, to
provide for Lender's benefit such additional documentation as Lender would
ordinarily require in connection with real estate collateral, including,
without limitation, the following: an MAI appraisal performed in accordance
with applicable law and sound banking practices, a title certificate or, if
requested by the Lender, a Title Policy in an amount and issued by an insurer
reasonably satisfactory to Lender, a current survey, and policies of liability,
hazard, and casualty insurance naming Lender as an additional insured,
mortgagee, and loss payee, all in amounts and issued by insurers reasonably
satisfactory to Lender.
9.03. Assignment of Liens; Mortgages.
(a) To secure the prompt payment and performance to
Lender of the Obligation, Borrower shall execute the Collateral
Assignments, collaterally assigning to Lender all of the Liens
securing the repayment of the Asset Portfolios and the obligations
secured thereby, to the extent that such Liens exist with respect to
an Asset in an Asset Portfolio.
(b) If Borrower or any REO Affiliate shall foreclose upon
any Underlying Real Estate, Borrower or such REO Affiliate, as
appropriate, shall execute and deliver to Lender a Mortgage (duly
acknowledged and in recordable form) granting to Lender a
first-priority Lien upon such Underlying Real Estate, subject only to
Permitted Liens. In order to evidence the Lien on such real property,
such documents shall be recorded, at the expense of Borrower, with
such filing offices as may be required by Lender.
9.04. Insurance of Collateral. Borrower agrees to maintain and
pay for, or cause to be maintained and paid for, insurance upon all Collateral
(other than Collateral Loans or property securing any Collateral Loan, except
as provided in the last sentence of this Section 9.04) covering casualty,
hazard, public liability, and such other risks and in such amounts and with
such insurance companies as shall be reasonably satisfactory to Lender;
provided, however, that Borrower shall not be required to maintain casualty or
hazard coverage in excess of an amount equal to 110% of the Allocated Purchase
Price with respect to each Asset (or such greater amount as may be required by
Lender, from time to time, at the end of any calendar quarter but in no event
for an amount in excess of the replacement cost of such item of Collateral).
Notwithstanding any of the foregoing, Borrower may elect to maintain and pay
for one or more multi-property policies in lieu of individual insurance
policies for each property. Any such multi-property policy (a) will be, for
each property covered thereby, in the amount required for such property
hereunder; (b) shall be in a total amount in all respects satisfactory to
Lender and (c) shall provide coverage for public liability in an amount not
less than $5,000,000; provided, however, that Lender shall have the right to
require a separate insurance policy on any REO Property owned by an REO
Affiliate for more than six months. Borrower shall deliver the certified
copies of any policies maintained pursuant to this Section 9.04 to Lender
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with satisfactory endorsements naming Lender as loss payee and as mortgagee
pursuant to a standard mortgagee clause. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than
30 days prior written notice to Lender in the event of cancellation of the
policy for any reason whatsoever. If Borrower fails to provide and pay for
such insurance, Lender may, at Borrower's expense, procure the same, but shall
not be required to do so. Borrower agrees to deliver to Lender, promptly as
rendered, true copies of all reports made in any reporting forms to insurance
companies. Without limiting Borrower's obligation under this Section 9.04 to
purchase and maintain additional or different insurance coverages in the
future, Lender shall notify Borrower, within ten (10) Business Days of receipt
of all copies of insurance policies maintained by Borrower, whether the
coverages represented by such policies are satisfactory to Lender for purposes
of this Section 9.04. Borrower or Servicer (a) shall promptly notify Lender of
the failure of any Account Debtor under a Collateral Loan to maintain the
insurance coverage required under such Collateral Loan and (b) if requested by
Lender, shall make or shall ensure Servicer makes, a Protective Advance to
procure the required coverage.
9.05. Delivery of Collateral.
(a) Borrower shall deliver to Collateral Custodian within
the time frame specified in Section 6.02, the following instruments
and documents, to the extent that such instruments and documents exist
with respect to the Assets in each Asset Portfolio, in which Borrower
has granted and in which it hereafter grants to Lender a security
interest, all of which shall be in form and substance acceptable to
and approved by Lender:
(i) the original mortgage note evidencing each
Collateral Loan (properly endorsed to Borrower), duly endorsed in
blank which endorsement may be on the original mortgage note or by
Allonge or, when the original mortgage note is unavailable, a Lost
Note Affidavit together with a certified copy of each such note;
(ii) the recorded original mortgage securing each
Collateral Loan, together with a duly executed assignment in
recordable form thereof;
(iii) the original guaranties, assignments of
rents, to the extent existing with respect to any Asset in any Asset
Portfolio, and other instruments and documents, including any
possessory documents, relating to security for and payment of each
Collateral Loan, together with duly executed assignments thereof;
(iv) 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 Borrower insuring the
lien of the mortgage securing the mortgage note as a first and prior
lien (subject only to such liens and encumbrances as are generally
acceptable to reputable lending institutions, mortgage investors and
securities dealers and to Permitted Prior Liens) to the extent such
policy is provided by a seller under a Sale Agreement or Borrower,
exercising reasonable judgment, determines to purchase such a title
policy;
(v) a transmittal letter listing all documents
being delivered to Collateral Custodian;
(b) Borrower shall deliver to the Servicer all other
documents related to the Collateral Loans, including without
limitation the following:
(i) evidence satisfactory to Lender that any
premises covered by any mortgage securing such Collateral Loan is
insured against fire and other perils for extended coverage for an
amount at least equal to the full insurable value of such premises
(Lender reserves the right to obtain (or require Borrower to obtain) a
loss payable endorsement in its favor if it so desires);
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(ii) upon request of Lender, if any, original
copies, or photocopies of surveys and all other instruments,
documents, and other papers pertaining to the Collateral Loan; and
(iii) other documentation as Lender may reasonably
deem proper, including without limitation, all disclosures required by
applicable Truth-in-Lending and other consumer credit regulations
promulgated by a Governmental Authority.
The documents listed in Section 9.05(a)(i) through (v) and Section 9.05(b)(i)
through (iii) are now collectively referred to herein as the "COLLATERAL LOAN
DOCUMENTS."
9.06. Possession of Collateral Loan Documents; Sale of Collateral.
Notwithstanding the foregoing, Collateral Loans which have subsequently been
delivered to Collateral Custodian shall continue to be valued subject to the
conditions and during the time periods described below, and so long as the
Collateral Loan Documents are in existence, notwithstanding the fact that such
Collateral Loan Documents have been subsequently delivered by Lender or
Collateral Custodian to Borrower or Servicer:
(a) Prior to the occurrence of an Event of Default or
Potential Default, Lender may agree to permit, from time to time, the
temporary withdrawal by Borrower, pursuant to a trust receipt executed
by Borrower, of specified notes evidencing Collateral Loans, pledged
to Lender as collateral security for the Obligation, for a period not
to exceed eighteen (18) days from the date of such withdrawal, which
withdrawal shall be for the sole purpose of permitting Borrower to
amend and/or correct errors in such notes and thereby enhance the
ultimate sale value of such notes and for other purposes more
particularly described in the Collateral Custodian Agreement.
(b) Notwithstanding anything to the contrary contained
herein, Lender shall continue to have a valid, perfected, first
priority security interest and lien in each Collateral Loan and
related note delivered to Borrower or any qualified investor, until
payment of the full purchase price therefor has been made to Lender as
described in this Section 9.06. If such mortgage note is not returned
to the Lender or Lender's agent or bailee, within eighteen (18) days
after Lender's release of possession thereof, then such Asset shall be
deemed to have no Net Present Value for purposes of calculating a Pool
Collateral Impairment Event.
For purposes of this Section 9.06, calculation of the eighteen
(18) day period shall include the initial date of release of such
Collateral Loan by Lender.
9.07. Power of Attorney. Without limiting any other rights and
remedies available to Lender hereunder, Borrower hereby appoints Lender as
Borrower's attorney-in-fact, with full power of substitution, for the purpose
of carrying out the provisions of this Agreement or any Loan Paper and taking
any action and executing in the name of Borrower, without recourse to Borrower,
any document or instrument, which Lender may deem necessary or advisable to
accomplish the purposes hereof and of any Loan Paper (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, Borrower hereby authorizes Lender 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 Borrower to Lender 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.
9.08. Appointment of Collateral Custodian. Contemporaneously
herewith, Lender has appointed Fleet National Bank as a collateral custodian
(the "COLLATERAL CUSTODIAN") pursuant to the Custodial Agreement entered into
by and among such Collateral Custodian, Borrower, Servicer, and Lender for the
purpose of exercising any rights, and performing any duties, of Lender with
respect to Collateral hereunder, including without limitation, the rights and
duties described in this Section 9, to the extent set forth in the Custodial
Agreement. Borrower shall deliver to such Collateral Custodian all Collateral
and all requests for
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release of Collateral shall be made by Borrower to the Collateral Custodian
(with a copy of each such request being simultaneously delivered to Lender).
9.09. Releases. Lender shall release the Liens and security
interests related to each Released Asset upon payment into the Lockbox Account
of the applicable Release Price for such Released Asset. In the event of a
sale of REO Property or a specific tract, the Minimum Release Price for such
REO Property or tract will, notwithstanding the principal amount of the REO
Note delivered by each REO Affiliate to Borrower in connection with such REO
Property or tract, be equal to the greater of (a) all Net Sales Proceeds
received by any REO Affiliate with respect to such REO Property or tract or (b)
the Minimum Release Price for such REO Property or tract, calculated as if
Borrower owned the REO Property or tract and no REO Note existed.
SECTION 10
EVENTS OF DEFAULT
10.01. 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) Borrower shall (i) fail to pay when due any principal
of, or interest on, the Note or (ii) fail to pay when due any fee,
expense, or other payment required hereunder (other than any payments
required by Section 3.03(b) herein) and such fee, expense, or other
payment shall remain unpaid for three (3) days following delivery by
Lender to Borrower of written notice of such failure;
(b) Borrower shall fail to make payments required by
Section 3.03(b) herein and
(i) shall fail to provide Lender with a written
plan detailing the actions Borrower proposes to take
to remedy the Collateral Impairment Event within
seventy-two (72) hours after receipt by Borrower of
written notice of the occurrence of a Collateral
Impairment Event; or
(ii) in the event Lender, in its sole discretion,
rejects Borrowers' plans for remedying the Collateral
Impairment Event, such failure shall continue for
fourteen (14) days following receipt by Borrower of
written notice of the Collateral Impairment Event; or
(iii) such failure shall continue for thirty (30)
days following receipt by Borrower of written notice
of the occurrence of a Collateral Impairment Event.
(c) any representation or warranty made under this
Agreement, or any of the other Loan Papers, or in any certificate or
statement furnished or made to Lender pursuant hereto or in connection
herewith or with the Loans hereunder, 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 Borrower contained in Section 6.02(g) or
Section 8 herein;
(e) default shall occur in the performance of any of the
other covenants or agreements of Borrower or any REO Affiliate
contained herein or any of the other Loan Papers and such default is
not remedied within thirty (30) days after the occurrence thereof;
(f) default shall occur in the payment of any material
Indebtedness of Borrower 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
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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 Loan Papers shall cease to be legal,
valid, and 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;
(h) Borrower, any General Partner, or any REO Affiliate
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 Borrower, any General Partner, or any REO Affiliate seeking
bankruptcy or reorganization of Borrower, any General Partner, or any
REO Affiliate or the appointment of a receiver, custodian, trustee,
intervenor, or liquidator of Borrower, any General Partner, or any REO
Affiliate, 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 Borrower, any General Partner, or any REO Affiliate
or appointing a receiver, custodian, trustee, intervenor, or
liquidator of Borrower, any General Partner, or any REO Affiliate, 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 $500,000 in the aggregate shall be rendered
against Borrower or any REO Affiliate 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) Borrower creates a Plan;
(l) there shall occur any change in the condition
(financial or otherwise) of Borrower or any REO Affiliate or its
assets which, in the reasonable opinion of Lender, has a Material
Adverse Effect;
(m) Borrower or any REO Affiliate shall breach any of its
obligations under any Sale Agreement which, in the reasonable opinion
of Lender, has a Material Adverse Effect;
(n) any note (or replacement note) evidencing a
Collateral Loan delivered to Borrower or any Investor under Section
9.06 herein shall fail to be returned to Collateral Custodian within
the time limits provided for in Section 9.06 unless such Collateral
Loan has been released as provided for herein and payment of the
Release Price has been received by Lender;
(o) Servicer defaults in the performance of its
obligations under any servicing agreement, including, without
limitation, the Servicing Agreement, and such default is not cured on
or before the earlier of ten (10) days following (i) knowledge by
Borrower of such default or (ii) receipt by Borrower of notice of such
default; or
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(p) there shall occur any change in the ownership of
Borrower, Servicer, or any REO Affiliate.
10.02. Remedies Upon Event of Default. If an Event of Default shall
have occurred and be continuing, then Lender may exercise any one or more of
the following rights and remedies, and any other rights or remedies provided in
any of the Loan Papers or otherwise available at law or equity, as Lender in
its sole discretion may deem necessary or appropriate: (a) terminate Lender's
commitment to lend hereunder, (b) declare the principal of, and all interest
then accrued on, the Note and any other liabilities hereunder (together with
any costs, liabilities or expenses of exercising its rights and remedies
hereunder or under any Loan Paper) 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 Borrower hereby expressly
waives, anything contained herein or in the Note to the contrary
notwithstanding, (c) reduce any claim to judgment, and/or (d) without notice of
default or demand, pursue, and enforce any of Lender's rights and remedies
under the Loan Papers, 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 10.01(h)
and (i) shall occur, the principal of, and all interest on, the Note and other
liabilities hereunder shall thereupon become due and payable concurrently
therewith, and Lender's obligations to lend shall immediately terminate
hereunder, without any further action by Lender 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 Borrower hereby expressly
waives.
10.03. Performance by Lender. Should Borrower fail to perform any
covenant, duty, or agreement contained herein or in any of the Loan Papers,
Lender may, at its option, after reasonable notice to Borrower of such failure,
perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Lender, promptly
pay any amount expended by Lender in such performance or attempted performance
to Lender at its principal office in New York, New York, 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 Lender
shall not assume any liability or responsibility for the performance of any
duties of Borrower hereunder or under any of the Loan Papers or other control
over the management and affairs of Borrower.
SECTION 11
SECURITIZATION
11.01 OPTION. From time to time, Borrower, or an Affiliate of
Borrower reasonably acceptable to Lender, may securitize and/or sell the Assets
in one or more Securitization Transactions upon terms and conditions reasonably
acceptable to Borrower or such Affiliate. Borrower hereby grants to
Securitization Agent the option and the right, but not the obligation, pursuant
to underwriting agreements and/or placement agency agreements in form and
substance reasonably satisfactory to Securitization Agent or its designee and
Borrower and its designee, for the Securitization Agent or its designee to act
as lead underwriter on a rotational basis or as co-underwriter or placement
agent with respect to each such Securitization Transaction. In no event shall
the Securitization Agent or any such designee be obligated to purchase
Securities sold through such Securitization Transactions.
11.02 BORROWER COOPERATION. In connection with any Securitization
Transaction, Borrower agrees that (i) the Assets which are the subject of such
Securitization Transaction shall conform to the historical underwriting
procedures used by Borrower and Borrower's Affiliates and (ii) Borrower shall
cooperate with all reasonable requirements and due diligence requests of the
Securitization Agent or its designee, any rating agencies, credit enhancers,
and master and special servicers necessary to facilitate the issuance of the
related Securities, including, if Borrower is using the Securitization Agent's
Shelf
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Registration Statement, the entering into of a mortgage loan purchase and sale
agreement in form and substance reasonably satisfactory to the Lender.
11.03 FEES. In the event Securitization Agent or its designee acts
as underwriter and/or placement agent in connection with any Securitization
Transaction, Borrower shall pay, or cause to be paid to Securitization Agent a
percentage (to be mutually agreed upon by Securitization Agent or such designee
and Borrower based upon the then prevailing competitive market rates) of the
initial principal amount of each Security issued pursuant to such
Securitization Transactions.
11.04 INFORMATION. Borrower hereby covenants and agrees that it
will represent and warrant that all information to be provided by it or any of
its Affiliates in connection with any Securitization Transaction shall be true,
correct and complete. Borrower shall enter into such agreements and provide
such certificates, opinions and other documents as Securitization Agent or its
designee may reasonably deem necessary or appropriate in connection with any
such Securitization Transaction, including without limitation, an
indemnification agreement satisfactory to Lender or its designee pursuant to
which Securitization Agent, such designee, Securitization Agent's Affiliates,
and their respective officers, directors, agents, and employees shall be
indemnified for all liabilities, losses, damages, judgments, costs, and
expenses resulting from a breach of the representation, warranty, and agreement
set forth in the immediately preceding sentence.
SECTION 12
MISCELLANEOUS
12.01. Modification. All modifications, consents, amendments, or
waivers of any provision of any Loan Paper, or consent to any departure by
Borrower therefrom, shall be effective only if the same shall be in writing and
concurred in by Lender and then shall be effective only in the specific
instance and for the purpose for which given.
12.02. Accounting Terms and Reports. All accounting terms not
specifically defined in this Agreement shall be construed in accordance with
Generally Accepted Accounting Principles consistently applied on the basis used
by Borrower in prior years. All financial reports furnished by Borrower to
Lender pursuant to this Agreement shall be prepared on the same basis as those
prepared by Borrower in prior years and shall be the same financial reports as
those furnished to Borrower's officers and directors. All financial
projections furnished by Borrower to Lender pursuant to this Agreement shall be
prepared in such form and such detail as shall be satisfactory to Lender and
shall be prepared on the same basis as the financial reports furnished by
Borrower to Lender.
12.03. Waiver. No failure to exercise, and no delay in exercising,
on the part of Lender, 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 Lender
hereunder and under the Loan Papers shall be in addition to all other rights
provided by law. No modification or waiver of any provision of this Agreement,
the Note, or any Loan Papers, 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.
12.04. Payment of Expenses. Borrower agrees to pay all costs and
expenses of Lender (including, without limitation, the reasonable attorneys'
fees of legal counsel) incurred by Lender in connection with (a) the
preservation and enforcement of Lender's rights under this Agreement, the Note,
and/or the other Loan Papers, (b) the negotiation, preparation, execution, and
delivery of this Agreement, the Note, and the other Loan Papers and any and all
amendments, modifications, and supplements thereof or thereto, (c) Lender's due
diligence related hereto, and (d) appraisals related to REO Properties procured
by Lender acting in a commercially reasonable manner, whether or not any of the
transactions contemplated hereby are consummated; provided that all such
expenses are properly documented, and provided further, that, solely
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for the purposes of subsection (b) above, the fees and expenses of Lender in
connection with (i) the closing of this Agreement shall not exceed $25,000, and
(ii) each subsequent Advance hereunder shall not exceed $5,000.
12.05. Notices. Except as otherwise expressly provided herein, all
notices, requests, and demands 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) 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 Lender, at
its address shown below its name on the signature pages hereof, (ii) if to
Borrower, at:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
P. O. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with courtesy
copies to: FIRSTCITY SERVICING CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and FIRSTCITY FINANCIAL CORPORATION
Law Department
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Woude
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and CARGILL FINANCIAL SERVICES CORPORATION
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: E. ▇▇▇▇▇▇ ▇'▇▇▇▇▇ ▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 12.05; provided, however, that any
notice, request or demand to or upon Lender pursuant to Section 2 and Section 3
shall not be effective until received by the Lender; and provided, further,
that any notice received by Lender after 3:00 P.M. (New York time) on any day
from Borrower pursuant to Section 2 shall be deemed for the purposes of such
section to have been given by Borrower on the next succeeding Business Day.
12.06. Choice of Law; Submission to Jurisdiction; Waiver of Jury
Trial. The Loan Papers are being delivered and consummated, and Borrower's
duties hereunder are performable in the State of New York. The Loan Papers
(other than those containing a contrary express choice of law provision) shall
be construed in accordance with the laws of New York applicable to contracts
made and performed in New York. Any suit, action, or proceeding against
Borrower 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 New
York, County of New York, or in the United States courts located in the State
of New York as Lender in its sole discretion may elect and Borrower hereby
submits to the non-exclusive jurisdiction of such courts for the purpose of any
such suit, action or proceeding. Borrower hereby irrevocably and
unconditionally waives (a)
41
46
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
Note, or any other Loan Paper brought in the courts located in the State of New
York 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 it may have to claim or recover on any legal action or proceeding related
hereto, any special, exemplary, punitive or consequential damages. BORROWER
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 LOAN PAPERS AND THE RIGHT TO BRING ANY ACTION IN COURTS LOCATED IN
ANY STATE OTHER THAN NEW YORK.
12.07. Invalid Provisions. If any provision of any Loan Paper is
held to be illegal, invalid, or unenforceable under present or future laws
during the term of this Agreement, such provision shall be fully severable;
such Loan Paper shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of such Loan Paper; and the
remaining provisions of such Loan Paper 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 Loan Paper. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision shall be added as part of such
Loan Paper a provision mutually agreeable to Borrower and Lender as similar in
terms to such illegal, invalid, or unenforceable provision as may be possible
and be legal, valid and enforceable. In the event Borrower and Lender are
unable to agree upon a provision to be added to the Loan Paper within a period
of ten (10) Business Days after a provision of the Loan Paper is held to be
illegal, invalid, or unenforceable, then a provision acceptable to Lender 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 Loan Paper. 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.
12.08. Maximum Interest Rate. Regardless of any provision
contained in any of the Loan Papers, Lender shall never be entitled to receive,
collect or apply as interest on the Note any amount in excess of the Maximum
Rate.
12.09. Offset. Borrower hereby grants to Lender the right of
offset, to secure repayment of the Note, upon any and all moneys, securities,
or other property of Borrower and the proceeds therefrom, now or hereafter held
or received by or in transit to Lender, from or for the account of Borrower,
whether for safekeeping, custody, pledge, transmission, collection, or
otherwise, and also upon any and all deposits (general or special) and credits
of Borrower, and any and all claims of Borrower against Lender at any time
existing.
12.10. 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.
12.11. Entirety. The Loan Papers embody the entire agreement
between the parties and supersede all prior agreements and understandings, if
any, relating to the subject matter hereof and thereof.
12.12. Headings. Section headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
12.13. Survival. All representations and warranties made by
Borrower herein shall survive delivery of the Note and the making of the Loans.
12.14. Successors and Assigns; Participations by the Lenders.
(a) 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, however, that (i)
Borrower shall not, 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 Loan Papers without the
express
42
47
prior written consent of Lender, and (ii) Lender may not assign or
transfer any of its rights or interests in this Agreement, the Note,
the other Loan Documents or the Loan, other than to an Affiliate of
Lender, except in accordance with this Section 12.14.
(b) Lender shall have the right, at any time and from
time to time, to sell or transfer to any Person (other than AMRESCO,
Inc., Ocwen Financial Corporation or Wilshire Funding Corp.) a
participation interest in Lender's portion of the Loans provided in
the case of any such participation, Lender shall remain the "LENDER"
for all purposes under the Loan Papers (including without limitation
any votes, elections or other decisions of the Lender hereunder) and
shall remain fully liable for its obligations hereunder, included but
not limited to funding all Advances hereunder, and Borrower shall
continue to deal directly and solely with Lender under the Loan Papers
and shall have no duty or obligation to deal with any participant in
any manner (including without limitation, delivery of information or
distribution of any funds to any participant).
(c) Lender shall have the right, at any time and from
time to time to assign all or a part of its rights, interests, and
obligations under this Agreement subject to and in accordance with the
following provisions:
(i) Borrower shall have given its prior
written consent for any assignment; provided that Borrower's
consent shall not be unreasonably withheld or delayed, and
shall not be required during the continuation of an Event of
Default or Potential Default.
(ii) Each assignment shall be of a constant,
and not a varying, percentage of all of the assigning
Lender's rights and obligations under this Agreement.
(iii) Any assignment hereunder must also
include an assignment of an equal interest in such Lender's
rights and obligations under the Affiliate Loan Agreements.
(iv) The parties to any assignment shall
execute and deliver to Lender, for recording in the
Register, with a copy thereof to Borrower, an Assignment and
Acceptance, in form and substance acceptable to Lender (an
"ASSIGNMENT AND ACCEPTANCE"), together with new Notes
subject to such assignment.
Upon execution of an Assignment and Acceptance, delivery by the
transferor Lender of an executed copy thereof to Borrower and Lender
(together with notice that payment of the purchase price, as
hereinafter provided, shall have been made), and payment by such
purchaser to such transferor Lender of an amount equal to the purchase
price agreed between such transferor Lender and such purchaser, from
and after the effective date specified in such Assignment and
Acceptance (which effective date shall be at least (5) five Business
Days after the execution thereof), (A) the assignee thereunder shall
be a party to this Agreement as a "LENDER" hereunder and, to the
extent provided in such Assignment and Acceptance, shall have the
rights and obligations of a Lender hereunder, and (B) the assigning
Lender shall, to the extent provided in such assignment, be released
from its obligations under this Agreement, except for any such
obligations which by their nature should survive any such assignment.
(d) Lender shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the
"REGISTER") for the recordation of the names and addresses of each
Lender and the Loan percentages of, and principal amount of the Loan
owing to each Lender from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and Borrower,
and each Lender may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement.
The Register shall be available for inspection by Borrower and the
Lenders at any reasonable time and from time to time upon reasonable
prior notice.
43
48
(e) Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note
subject to such assignment, Lender shall (i) record the information
contained therein in the Register, and (ii) give prompt notice thereof
to Borrower and Lender (other than the assigning Lender), and this
Agreement shall automatically be deemed revised to reflect the name,
address, Commitment and Loan Percentage of the new Lender and the
deletion of or changed information for the assigning Lender. Within
five (5) Business Days after receipt of such notice, Borrower, at the
Lenders' expense, shall execute and deliver to the Lender, in exchange
for each surrendered Note, a new Note payable to the order of such new
Lender in an amount equal to the amount assigned to such new Lender
pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained some portion of its obligations hereunder, a new
Note payable to the order of the assigning Lender in an amount equal
to the amount retained by it hereunder. Such new Note shall provide
that they are replacements for the surrendered Note, shall be in an
aggregate principal amount equal to the aggregate principal amount of
the surrendered Note, shall be dated the effective date of such
Assignment and Acceptance and shall otherwise be in substantially the
form of the assigned Note. The surrendered Note shall be canceled and
returned to Borrower.
12.15. Senior Debt; Borrower Subordination. The Indebtedness of
Borrower hereunder and under the Note and all of the Obligation is intended to
be and shall be senior to any subordinated indebtedness of Borrower or any
other Indebtedness of Borrower secured by a Lien on any portion of the
Collateral (the foregoing shall not in any way imply Lender's consent to any
such subordinate debt or Liens which is not otherwise permitted by this
Agreement). The Note and any other amounts advanced to or on behalf of
Borrower or any other Person pursuant to the terms of this Agreement or any
other Loan Paper shall never be in a position subordinate to any Indebtedness
of Borrower owing to any other Person, except with the knowledge and written
consent of Lender.
12.16. No Third Party Beneficiary. The parties do not intend the
benefits of this Agreement to inure to any third party, nor shall this
Agreement be construed to make or render Lender liable to any materialman,
supplier, contractor, subcontractor, purchaser, or lessee of any property owned
by Borrower, or for debts or claims accruing to any such persons against
Borrower. Notwithstanding anything contained herein or in the Note, or in any
other Loan Paper, 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 Loan
Papers neither this Agreement nor any other Loan Paper shall be construed as
creating any right, claim, or cause of action against Lender, 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 Borrower, nor to any other person or entity other than Borrower.
12.17. Oral Agreements Ineffective. THE LOAN PAPERS 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 PAGE FOLLOWS.
44
49
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
FC PROPERTIES, LTD. FC PROPERTIES, LTD.,
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy No. 254/756-7032 By: FC ASSETS CORP.,
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ as general partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Senior Vice President
NOMURA ASSET CAPITAL NOMURA ASSET CAPITAL CORPORATION
CORPORATION
2 World Financial ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Director
SIGNATURE PAGE TO CREDIT AGREEMENT
50
EXHIBIT "A"
FORM OF NOTE
$30,000,000 March 20, 1998
FOR VALUE RECEIVED, FC PROPERTIES, LTD., a Texas limited corporation
("BORROWER"), promises to pay to the order of NOMURA ASSET CAPITAL CORPORATION
("LENDER") that portion of the principal amount of $30,000,000 that may from
time to time be disbursed and outstanding under this note together with
interest.
This note is the "Note" under the Revolving Credit Loan Agreement (as
renewed, extended, amended, or restated, the "LOAN AGREEMENT") dated as of
March 20, 1998, between Borrower and Lender. All of the defined terms in the
Loan Agreement have the same meanings when used, unless otherwise defined, in
this note.
This note incorporates by reference the principal and interest payment
terms in the Loan Agreement for this note, including, without limitation, the
final maturity, which is the stated Maturity Date. Principal and interest are
payable to the holder of this note through Lender at either (a) its offices at
2 World Financial ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or (b) at
any other address so designated by Lender in written notice to Borrower.
This note incorporates by reference all other provisions in the Loan
Agreement applicable to this note, such as provisions for disbursements of
principal, applicable interest rates before and after an Event of Default,
voluntary and mandatory prepayments, acceleration of maturity, exercise of
rights and remedies, payment of attorneys' fees, court costs, and other costs
of collection, certain waivers by Borrower and other obligors, assurances and
security, choice of New York and United States federal Law, usury savings, and
other matters applicable to Loan Papers under the Loan Agreement.
FC PROPERTIES, LTD.,
as Borrower
By: FC ASSETS CORP.,
as general partner
By:
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Senior Vice President
51
EXHIBIT "B"
DISCOUNT FACTORS
=====================================================================================================
COLL NPV DISCOUNT FACTOR (%)
CODES DAYS DELINQUENT BASED ON ORIGINAL NOTE TERMS COLLATERAL
---------------------------------------------------------------- DESCRIPTION
0-30 31-60 61-90 >90
=====================================================================================================
1 INDEX + 4 INDEX + 4 INDEX + 5 INDEX + 6 RESIDENTIAL 1-4
-----------------------------------------------------------------------------------------------------
7 INDEX + 4 INDEX + 5 INDEX + 7 INDEX + 8 RESIDENTIAL MOBILE HOME
-----------------------------------------------------------------------------------------------------
9 INDEX + 4 INDEX + 5 INDEX + 6 INDEX + 7 RESIDENTIAL MOBILE HOME &
LOT
-----------------------------------------------------------------------------------------------------
10 INDEX + 4 INDEX + 6 INDEX + 9 INDEX + 19 UNSECURED
-----------------------------------------------------------------------------------------------------
11 INDEX + 3 INDEX + 3 INDEX + 3 INDEX + 3 NEGOTIABLE INSTRUMENTS
-----------------------------------------------------------------------------------------------------
15 INDEX + 3 INDEX + 3 INDEX + 3 INDEX + 3 CASH VALUE - LIFE INSURANCE
-----------------------------------------------------------------------------------------------------
16 INDEX + 4 INDEX + 6 INDEX + 9 INDEX + 14 COSIGNER/GUARANTOR
-----------------------------------------------------------------------------------------------------
20 INDEX + 4 INDEX + 4 INDEX + 6 INDEX + 9 MECHANICS LIEN
-----------------------------------------------------------------------------------------------------
21 INDEX + 4 INDEX + 4 INDEX + 6 INDEX + 9 HOME IMPROVEMENT
-----------------------------------------------------------------------------------------------------
22 INDEX + 5 INDEX + 5 INDEX + 6 INDEX + 9 CONTRACT FOR DEED
-----------------------------------------------------------------------------------------------------
23 INDEX + 6 INDEX + 6 INDEX + 8 INDEX + 10 PROMISSORY NOTES/NOTES
RECEIVABLE
-----------------------------------------------------------------------------------------------------
30 INDEX + 6 INDEX + 6 INDEX + 9 INDEX + 14 ACCOUNTS
RECEIVABLE/INVENTORY
-----------------------------------------------------------------------------------------------------
31 INDEX + 4 INDEX + 6 INDEX + 9 INDEX + 14 CONSUMER GOODS
-----------------------------------------------------------------------------------------------------
32 INDEX + 4 INDEX + 4 INDEX + 6 INDEX + 9 VEHICLE
-----------------------------------------------------------------------------------------------------
33 INDEX + 4 INDEX + 4 INDEX + 6 INDEX + 9 AIRPLANE
-----------------------------------------------------------------------------------------------------
34 INDEX + 4 INDEX + 6 INDEX + 9 INDEX + 14 CROPS & LIVESTOCK
-----------------------------------------------------------------------------------------------------
35 INDEX + 4 INDEX + 6 INDEX + 9 INDEX + 14 BOATS OR SHIPS
-----------------------------------------------------------------------------------------------------
37 INDEX + 4 INDEX + 6 INDEX + 9 INDEX + 14 MISCELLANEOUS
-----------------------------------------------------------------------------------------------------
38 INDEX + 5 INDEX + 6 INDEX + 9 INDEX + 14 FURNITURE, FIXTURES,
EQUIPMENT
-----------------------------------------------------------------------------------------------------
45 INDEX + 6 INDEX + 8 INDEX + 11 INDEX + 15 LAND COMMERCIAL
-----------------------------------------------------------------------------------------------------
46 INDEX + 5 INDEX + 7 INDEX + 9 INDEX + 11 LAND - RESIDENTIAL
-----------------------------------------------------------------------------------------------------
47 INDEX + 5 INDEX + 7 INDEX + 9 INDEX + 11 LAND - AGRICULTURAL
-----------------------------------------------------------------------------------------------------
52 INDEX + 4 INDEX + 4 INDEX + 6 INDEX + 8 MULTIFAMILY DWELLING
-----------------------------------------------------------------------------------------------------
18 INDEX + 5 INDEX + 5 INDEX + 8 INDEX + 10 OFFICE
-----------------------------------------------------------------------------------------------------
19 INDEX + 5 INDEX + 5 INDEX + 8 INDEX + 10 OFFICE/WAREHOUSE
-----------------------------------------------------------------------------------------------------
52
-----------------------------------------------------------------------------------------------------
24 INDEX + 5 INDEX + 5 INDEX + 7 INDEX + 9 RETAIL
-----------------------------------------------------------------------------------------------------
12 INDEX + 5 INDEX + 5 INDEX + 8 INDEX + 10 HOTEL/MOTEL
-----------------------------------------------------------------------------------------------------
13 INDEX + 5 INDEX + 6 INDEX + 9 INDEX + 12 SPECIALTY
-----------------------------------------------------------------------------------------------------
36 INDEX + 5 INDEX + 5 INDEX + 8 INDEX + 10 INDUSTRIAL/WAREHOUSE
-----------------------------------------------------------------------------------------------------
25 INDEX + 5 INDEX + 6 INDEX + 9 INDEX + 12 CONVALESCENT
-----------------------------------------------------------------------------------------------------
64 INDEX + 5 INDEX + 5 INDEX + 8 INDEX + 10 MIXED USE
=====================================================================================================
The Index Equals: The yields on actively traded government issues
adjusted to constant maturity of three years quoted on a bond equivalent basis
as published by the Federal Reserve Board in its H.15 Publication.
A possible increase (adjustment) to the discount rates shown above is
the Credit Risk Adjustment ("CRA"). The CRA applies only to loans less than 60
days delinquent. The CRA is an amount added to the discount rates shown above
for purposes of increasing the discount factors used in the Net Present Value
calculation.
Credit Risk Adjustment: CRA Amount Credit Risk Category
---------------------- ---------- --------------------
Minimal Risk of Default 0.0% 1
Mild Risk of Default 0.5% 2
Moderate Risk of Default 1.0% 3
Significant Risk of Default 2.0% 4
Other Variable up to 2.0% 5
The "Other" category (shown above) will be applicable only to those assets with
special circumstances and will be subject to the judgment of the Servicer and
mutually agreed to by the Lender. In some instances, the variable may be
negative. In other words, circumstances may dictate that the CRA should serve
to reduce the risk in a particular Asset.
53
EXHIBIT "C"
PERMITTED LIENS
None
54
EXHIBIT "D"
BORROWING REQUEST
Nomura Asset Capital Corporation
2 World Financial ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Loan Agreement dated March 20, 1998 between you and FC
PROPERTIES, LTD., (the "Loan Agreement")
Dear Sirs:
We refer to the above Loan Agreement between Nomura Asset Capital
Corporation ("LENDER") and FC PROPERTIES, LTD., as borrower ("BORROWER").
Terms defined in the Loan Agreement have the same meaning in this Borrowing
Request. This represents Borrower's request to borrow $___________________
under the Loan Agreement on _____________, 19_______, from Lender.
The Borrowing Request is one of the Borrowing Requests referred to in,
and shall be interpreted in accordance with and subject to the conditions of,
the Loan Agreement. Pursuant to the Loan Agreement, this Borrowing Request
constitutes Company's request to have Lender finance, on the terms and
conditions of the Loan Agreement, ______% of the Net Present Value of the Asset
Portfolio, subject to Company's purchase of such Asset Portfolio, as such Asset
Portfolio is more fully described in the Asset Portfolio Report which is
attached hereto as ATTACHMENT I.
1. DESCRIPTION OF ASSET PORTFOLIO:
A. ACQUISITION ID:
----------------- ----------------------
B. SELLER NAME:
----------------------
C. SELLER PORTFOLIO:
----------------------
D. ADVANCE/SETTLEMENT DATE:
----------------------
E. NUMBER OF ASSETS:
----------------------
F. TOTAL PRINCIPAL BALANCE OF ASSETS:
----------------------
G. PURCHASE PRICE (%):
----------------------
H. PURCHASE PRICE ($):
----------------------
I. GENERAL CHARACTERISTICS OF ASSETS:
----------------------
J. CASHFLOW PROJECTION ("ROLLUP," with
detail attached):
----------------------
K. COLLECTION FEE PERCENTAGE
ON ASSET PORTFOLIO:
----------------------
L. PROPOSED CAPITAL STRUCTURE:
----------------------
M. ADVANCE PERCENTAGE:
----------------------
N. SERVICER FirstCity Servicing Corporation
O. ASSET THRESHOLD AMOUNT
----------------------
2. WIRE INSTRUCTIONS:
Attached hereto as ATTACHMENT II are complete payment and wiring
instructions with respect to the purchase price of the Asset Portfolio to be
paid to the Asset Seller.
55
3. NO ADVERSE SELECTION:
The Company represents to the Lender that it has not used any
selection procedures which result in the Asset Portfolio being less desirable
or valuable than other comparable pools of assets similar to the Assets.
4. REPRESENTATIONS AND WARRANTIES:
In delivering this Borrowing Request, the undersigned officer, to the
best of such officer's knowledge, on behalf of Borrower, but not individually,
certifies and confirms that (i) no Potential Default, Event of Default or
Collateral Impairment Event has occurred and is continuing or will occur as a
result of this proposed financing or Borrower's purchase of the loans, (ii) the
Loan Agreement, the Security Documents and all related agreements are in full
force and effect and constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their terms, subject to bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting creditor's
rights generally and the effects, if any, of general principles of equity,
(iii) the representations and warranties in SECTION 5 of the Loan Agreement and
the other Loan Papers are true, correct and complete in all material respects
on and as of the date hereof to the same extent as though made on and as of the
date hereof, except for any representation or warranty limited by its terms to
a specific date and taking into account any amendments to the Schedules or
Exhibits or waivers as a result of any disclosures made by Borrower to Lender
after the Effective Date of the Initial Advance under the Loan Agreement and
approved in writing by Lender; (iv) the amount of the Advance requested herein
does not exceed the Maximum Advance Amount for the Asset Portfolio being
acquired with the proceeds of the proposed Advance; (v) the purchase of the
Asset Portfolio has been underwritten by Borrower in accordance with Borrower's
established underwriting requirements; (vi) the Assets included in the Asset
Portfolio being financed with the Advance are of a type previously financed by
Borrower, or an Affiliate of Borrower, with Lender or, if not, are assets which
have been specifically approved by Lender for inclusion in the Asset Portfolio;
(vii) all other conditions to the making of the Advance requested under the
Loan Agreement will be satisfied as of the applicable Effective Date; and
(viii) on the Effective Date of the requested Advance Borrower will possess the
originals of the promissory notes (or Lost Notes Affidavits, with copies of
each Lost Note) and mortgages evidencing the Collateral Loans included in the
Asset Portfolio being acquired with this Advance and Borrower will deliver such
promissory notes, mortgages and other Collateral loan documents to the
Collateral Custodian within the time periods set forth in the Loan Agreement.
5. ADDITIONAL DOCUMENTATION:
Submitted with the Borrowing Request or prior hereto are the following
documents:
a. Offering materials of the Seller;
b. Form of purchase agreement with Seller, to be followed by
executed copy;
c. Letter from Asset Seller confirming sale to Borrower;
d. UCC-1 executed by Company for county and state filings with
asset schedule attached; and
e. FirstCity due diligence materials.
f. A Trial Balance for the Asset Portfolio setting forth for each
Asset, the Allocated Purchase Price and
any Permitted Prior Liens.
6. INFORMATION ON DISKETTE:
Submitted with the Advance Request is an electromagnetic disk or hard
copy (whichever the Seller provides) containing the information set forth as
"monthly data request" in the Loan Agreement, to the extent available, with
respect to each asset (or Asset Seller's due diligence information or
electromagnetic disk with respect to the purchased assets).
56
Date: ,
------------------------- -----
FC PROPERTIES, LTD.,
as Borrower
By: FC ASSETS CORP.,
as general partner
By:
------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Senior Vice President
Approved and Accepted by Lender on this day of , .
--- ----------------- --------
NOMURA ASSET CAPITAL CORPORATION
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
57
EXHIBIT "E"
AFFILIATE LOAN AGREEMENTS
1. Revolving Credit Loan Agreement dated February 27, 1998, by and among
FH Partners, L.P., and Nomura Assets Capital Corporation, providing
for extensions of credit on a revolving basis up to a maximum
outstanding principal amount of $100,000,000.
58
SCHEDULE 5.09
Material Agreements
(1) Each Partnership Agreement forming each REO Affiliate.
(2) Each Purchase and Sale Agreement related to each Owned Asset
Portfolio.
59
SCHEDULE 5.10
Litigation
None
60
SCHEDULE 7.16
Locations of Books and Records
FIRSTCITY SERVICING CORPORATION
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)
FIRSTCITY SERVICING CORPORATION
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)
FIRSTCITY SERVICING CORPORATION
▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)
FIRSTCITY SERVICING CORPORATION
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(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)
FIRSTCITY SERVICING CORPORATION
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(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)
FIRSTCITY SERVICING CORPORATION
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(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)