LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of July 24, 1998 (this
"Agreement") is between FIRSTCITY COMMERCIAL CORPORATION, a Texas corporation
(the "Company") and CFSC CAPITAL CORP. XXX, a Delaware corporation (the
"Lender").
The Company has requested and the Lender has agreed to provide
the Company with a loan to the Company in the principal amount of
$15,000,000.00.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants set forth herein, the Company and the Lender agree as follows:
ARTICLE I
DEFINITIONS; ACCOUNTING TERMS; INTERPRETATION
SECTION 1.01. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including all directors and
officers of such Person), controlled by, or under direct or indirect
common control with such Person, and any other Person in which such
Person's direct or indirect equity interest is 10% or more of the total
outstanding equity interests of such Person.
"Agreement" has the meaning specified in the introduction to
this Agreement.
"Assignment and Acceptance" has the meaning specified in
Section 9.10 (c).
"Bankruptcy Code" has the meaning specified in Section
8.01(f).
"Board" means the Board of Governors of the Federal Reserve
System of the United States (or any successor).
"Business Day" means any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Minnesota) on which banks are
open for business in Minnetonka, Minnesota.
"Capitalized Lease Obligations" means all lease or rental
obligations which, pursuant to GAAP, are capitalized for balance sheet purposes.
"Change of Control" means any of (i) the failure of the former
shareholders of J-Hawk Corporation (predecessor in interest to the Company) to
hold at least twenty percent (20%) of the outstanding voting capital stock of
the Company, (ii) the failure of any one of James R. Hawkins, James T. Sartain,
Rick Hagelstein, Matt Landry or David W. MacLennan (or anyone approved by the
Lender in writing in lieu of any of the above Persons) to be a member of the
Board of Directors of the Company at any time, (iii) all or substantially all of
the assets of the Company are sold in a single transaction or series of related
transactions to any Persons or (iv) the Company merges or consolidates with or
into any other Person.
"Closing Date" means July __, 1998.
"Code" means Internal Revenue Code of 1986 and the regulations
promulgated thereunder.
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"Collateral" shall have the meaning set forth in the Security
Documents.
"Company" has the meaning specified in the introduction to
this Agreement.
"Default" means the occurrence of any event which with the
giving of notice or the passage of time or both could become an Event of
Default.
"Default Rate" means the lesser of (i) the Highest Lawful Rate
and (ii) the Prime Rate plus ten percent (10%) per annum.
"Delinquent Fee" has the meaning specified in Section 3.01(a).
"Eligible Assignee" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $1,000,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development or any successor organization, or a political
subdivision of any such country, and having total assets in excess of
$1,000,000,000; provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is also
a member of the Organization for Economic Cooperation and Development or any
successor organization; (c) the central bank of any country which is a member of
the Organization for Economic Cooperation and Development or any successor
organization; and (d) any other bank or similar financial institution approved
by the Lender.
"Environmental Laws" means federal, state or local laws, rules
or regulations, and any judicial, arbitral or administrative interpretations
thereof, including any judicial, arbitral or administrative order, judgment,
permit, approval, decision or determination pertaining to conservation or
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protection of the environment in effect at the time in question, including the
Clean Air Act, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Federal Water Pollution Control Act, the
Occupational Safety and Health Act, the Resource Conservation and Recovery Act,
the Safe Drinking Water Act, the Toxic Substances Control Act, the Superfund
Amendment and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, and comparable state and local laws, and other environmental
conservation and protection laws.
"ERISA" means the Employee Retirement Income Security Act of
1974 and the regulations promulgated thereunder.
"ERISA Affiliate" means (a) any trade or business (whether or
not incorporated) which is either a member of the same "controlled group" or
under "common control," within the meaning of Section 414 of the Code and the
regulations thereunder, with the Company and (b) any Subsidiary of the Company.
"Event of Default" has the meaning specified in Section 8.01.
"Fannie Mae Mortgage Selling and Servicing Agreement" means
that certain Agreement dated 7/27/95 by and between Harbor Financial Mortgage
Corporation and Federal National Mortgage Association.
"Fees" means all amounts payable pursuant to Section 3.01.
"Financials" has the meaning specified in Section 5.07.
"GAAP" means generally accepted accounting principles as in
effect from time to time as set forth in the opinions, statements and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants, the Financial Accounting Standards Board and such
other Persons who shall be approved by a significant segment of the accounting
profession and concurred in by the independent certified public accountants
certifying any audited financial statements of the Company.
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"Guaranty Agreement" means that certain Guaranty dated of even
date herewith from FirstCity Financial Corporation in favor of the Lender.
"Guarantor" means FirstCity Financial Corporation.
"Hazardous Materials" means (a) hazardous waste as defined
in the Resource Conservation and Recovery Act of 1976, or in any
applicable federal, state or local law or regulation, (b) hazardous
substances, as defined in CERCLA, or in any applicable state or local
law or regulation, (c) gasoline, or any other petroleum product or
by-product, (d) toxic substances, as defined in the Toxic Substances
Control Act of 1976, or in any applicable federal, state or local law
or regulation or (e) insecticides, fungicides, or rodenticides, as
defined in the Federal Insecticide, Fungicide, and Rodenticide Act of
1975, or in any applicable federal, state or local law or regulation,
as each such Act, statute or regulation may be amended from time to
time.
"Highest Lawful Rate" means the maximum nonusurious rate of
interest that, under applicable law, may be contracted for, taken, reserved,
charged or received by the Lender on the Loans or under the Loan Documents at
any time or from time to time. If the maximum rate of interest which, under
applicable law, the Lender is permitted to charge the Company on the Loans shall
change after the date hereof, to the extent permitted by applicable law, the
Highest Lawful Rate shall be automatically increased or decreased, as the case
may be, as of the effective time of such change without notice to the Company or
any other Person.
"Indebtedness" means all amounts payable to Lender by Company
under the Loan Documents, whether existing or subsequently accruing including
without limitation the principal amount of the Loan, interest, fees, costs, and
other charges payable hereunder.
"Interest Period" means, (a) initially, the period commencing
on the Closing Date and ending on the last day of the current calendar month and
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(b) thereafter, each succeeding monthly period commencing on the first (1st) day
of the following calendar month; provided that any Interest Period that would
otherwise extend beyond the Maturity Date shall end on the Maturity Date.
"Investment" means, as applied to any Person, any direct or
indirect purchase or other acquisition by such Person of the assets, stock or
other securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person, and any other item
which would be classified as an "investment" on a balance sheet of such Person,
including any direct or indirect contribution by such Person of property or
assets to a joint venture, partnership or other business entity in which such
Person retains an interest.
"Lien" means, when used with respect to any Person, any
mortgage, lien, charge, pledge, security interest or encumbrance of any kind
(whether voluntary or involuntary and whether imposed or created by operation of
law or otherwise) upon, or pledge of, any of its property or assets, whether now
owned or hereafter acquired, or any lease intended as security, any capital
lease in the nature of the foregoing, any conditional sale agreement or other
title retention agreement, in each case, for the purpose, or having the effect,
of protecting a creditor against loss or securing the payment or performance of
an obligation.
"Loan" has the meaning specified in Section 2.01.
"Loan Documents" means this Agreement and the other documents
described in Article IV hereof.
"Margin" means seven percent (7%) per annum.
"Material Adverse Effect" means, relative to any occurrence of
whatever nature (including any adverse determination in any litigation,
arbitration or governmental investigation or proceeding) a material adverse
effect equal to or greater than the lesser of (a) the value of five percent (5%)
of the outstanding common stock of the Company and (b) $2,000,000.00.
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"Maturity Date" means October 30, 1998, unless accelerated
pursuant to Section 8.02.
"Mortgage Loans" shall have the meaning set forth in the
Purchase and Sale Agreement.
Multiemployer Plan" means any plan which is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA).
"Note" has the meaning specified in Section 2.02.
"Notice of Default" has the meaning specified in Section 8.02.
"Obligations" means all the obligations of the Company now or
hereafter existing under the Loan Documents, whether for principal, interest,
Fees, expenses, indemnification or otherwise.
"Payment Date" means the first (1st) day of each month and the
Maturity Date.
"Payment Office" means the office of the Lender located at
6000 Clearwater Drive, Minnetonka, Minnesota, 55343, or such other office as the
Lender may hereafter designate in writing as such to the other parties hereto.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to all or any of its functions under ERISA.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock company,
trust, unincorporated association, joint venture or other entity, or a foreign
or domestic state or political subdivision thereof or any agency of such state
or subdivision.
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"Plan" means any employee pension benefit plan (as defined in
Section 3(2) of ERISA), subject to Title IV of ERISA or Section 412 of the Code,
other than a Multiemployer Plan, with respect to which the Company or an ERISA
Affiliate contributes or has an obligation or liability to contribute, including
any such plan that may have been terminated.
"Prime Rate" means the prime rate announced to be in effect
from time to time, as published as the average rate in The Wall Street Journal.
"Purchase and Sale Agreement" means that certain Servicing
Income Purchase and Sale Agreement dated July 24, 1998 by and between Harbor
Financial Mortgage Corporation and Firstcity Commercial Corporation.
Regulation U" means Regulation U of the Board (respecting
margin credit extended by banks), as the same is from time to time in effect,
and all official rulings and interpretations thereunder or thereof.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including the abandonment or discarding of
barrels, containers and other closed receptacles).
"Reportable Event" means an event described in Section 4043(b)
of ERISA with respect to a Plan as to which the 30-day notice requirement has
not been waived by the PBGC.
"Requirements of Environmental Laws" means, as to any Person,
the requirements of any applicable Environmental Law relating to or affecting
such Person or the condition or operation of such Person's business or its
properties, both real and personal.
"Responsible Officer" means, with respect to the Company, the
chairman of the board of directors, president or any executive or senior vice
president.
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"Security Documents" means (a) that certain Security Agreement
dated as of even date herewith and executed by the Company granting the Lender a
first priority security interest in the Collateral, (b) any and all other
security agreements, pledge agreements, mortgages, assignments, UCC financing
statements, registrations of pledge and other similar documents executed by the
Company and securing the obligations.
"Servicing Rights" shall have the meaning set forth in the
Purchase and Sale Agreement.
Tangible Net Worth" means: (a) total assets minus (b) the sum
of (i) all liabilities and (ii) all intangible assets, including, without
limitation, goodwill, patents, trademarks and similar items.
"Unfunded Current Liability" means, with respect to any Plan,
the amount, if any, by which the present value of the accrued benefits under the
Plan as of the close of its most recent Plan year exceeds the fair market value
of the assets allocable thereto, determined in accordance with Section 412 of
the Code.
SECTION 1.03. Accounting Terms. All accounting terms not
defined herein shall be construed in accordance with GAAP, as applicable, and
all calculations required to be made hereunder and all financial information
required to be provided hereunder shall be done or prepared in accordance with
GAAP.
ARTICLE II
THE LOAN
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SECTION 2.01. The Loan. Subject to the terms and conditions
hereof, the Lender shall make, and Company shall accept, the Loan in a principal
amount not to exceed Fifteen Million Dollars ($15,000,000).
SECTION 2.02. The Note. The Loans shall be evidenced by a note
in favor of the Lender (the "Note"), substantially in the form of Exhibit 2.02
hereto.
SECTION 2.03. Intentionally omitted.
SECTION 2.04. Intentionally omitted.
SECTION 2.05. Intentionally omitted.
SECTION 2.06. Voluntary Prepayments. The Company shall have
the right to voluntarily prepay the Loan in whole or in part at any time on the
following terms and conditions: (a) the Company pays to the Lender all sums
necessary to compensate the Lender for all costs and expenses resulting from
such prepayment, as reasonably determined by the Lender, including, but not
limited to, those costs described in Sections 2.12, and 2.13 hereof; (b) each
partial prepayment shall be in an initial aggregate principal amount of
$500,000.00 and integral multiples thereof; and (c) each prepayment pursuant to
this Section shall be applied first, to the payment of accrued and unpaid
interest, and then, to the outstanding principal of the Loan.
SECTION 2.07. Mandatory Repayments. (a) The outstanding
principal balance of the Loan together with all other Indebtedness shall be
repaid on or before the Maturity Date.
(b) All accrued but unpaid interest on the Note shall be due
and payable on each Payment Date except that interest payable at the Default
Rate shall be payable from time to time daily and on demand.
(c) On each Payment Date all cash flow from the Collateral
will be deposited directly into an account designated by Lender and applied to
repayment of the Note as follows:
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(i) first, to the payment of all accrued and unpaid interest
which is then due and payable under the Note;
(ii) second, to the payment to Lender of any late charges,
Fees, and expenses payable to Lender under the Loan Documents; and
(iii) third, to the Lender to reduce the outstanding
principal balance of the Loan.
(d) In the event that monthly cash flow from the Collateral is
insufficient to make the then current interest payment, the Company shall be
required to make such payment directly to the Lender.
(e) Upon the sale of the Collateral, in whole or in part, all
outstanding principal and interest, together with all other Indebtedness shall
be immediately due and payable.
SECTION 2.08. Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement due from the
Company shall be made to the Lender not later than 11:00 a.m. (Minnetonka,
Minnesota time) on the date when due and shall be made in lawful money of the
United States in immediately available funds at the Payment Office.
SECTION 2.09. Interest. (a) Subject to Section 9.08, the
Company agrees to pay interest on the total outstanding principal balance of the
Loan from the Closing Date to maturity (whether by acceleration or otherwise) at
a rate per annum (computed on the basis of the actual number of days elapsed
over a year of 360 days) which shall, during each Interest Period applicable
thereto, be equal to the lesser of (i) the Highest Lawful Rate and (ii) the
applicable Prime Rate for such Interest Period plus the Margin.
(b) Subject to Section 9.08, overdue principal and, to the
extent permitted by law, overdue interest in respect of the Loan and all other
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overdue amounts owing hereunder shall bear interest for each day that such
amounts are overdue at a rate per annum equal to the Default Rate.
SECTION 2.10. Intentionally omitted.
SECTION 2.11. Intentionally omitted.
SECTION 2.12. Increased Costs or Taxes. If the application or
effectiveness of any applicable law or regulation (i) shall change the basis of
taxation of payments to the Lender of the principal of or interest on the Loan
made by the Lender or any other fees or amounts payable hereunder (other than
taxes imposed on the overall net income of the Lender or franchise taxes imposed
upon it by the jurisdiction in which the Lender has an office), (ii) shall
impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, the Lender or (iii) shall impose on the Lender any other condition
affecting this Agreement or this Loan, and the result of any of the foregoing
shall be to increase the cost to the Lender of maintaining the Loan or to reduce
the amount of any sum received or receivable by the Lender hereunder (whether of
principal, interest or otherwise) in respect thereof by an amount deemed in good
faith by the Lender to be material, then the Company shall pay to the Lender
such additional amount as will compensate it for such increase or reduction upon
demand. The Lender shall not be entitled to make a demand for and the Borrower
shall not be liable for payment of any amount under the terms of this Section
2.12 following the termination of the Obligations hereunder.
SECTION 2.13. Intentionally omitted.
ARTICLE III
FEES
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SECTION 3.01. Fees. The Company agrees to pay to the Lender a
delinquency fee (the "Delinquency Fee") of $150,000.00. The Delinquency Fee
shall be due and payable on the Maturity Date if the Loan is not paid in full on
or before that date.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to the Loan. The obligation
of the Lender to make the Loan to the Company is subject to the condition that
the Lender shall have received the following:
(a) this Agreement executed by the Company;
(b) the Note executed by the Company and payable to the order
of the Lender ;
(c) the Security Documents executed by the Company;
(d) the Guaranty Agreement executed by FirstCity Financial
Corporation;
(e) a certificate of an officer and of the secretary or an
assistant secretary of the Company certifying, inter alia, (i) true and complete
copies of each of the articles or certificate of incorporation, as amended and
in effect of the Company and the Guarantor, the bylaws, as amended and in
effect, of the Company and the Guarantor and the resolutions adopted by the
Board of Directors of the Company and the Guarantor (A) authorizing the
execution, delivery and performance by the Company of this Agreement and the
other Loan Documents to which it is or will be a party, (B) approving the forms
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of the Loan Documents to which it is or will be a party and which will be
delivered at or prior to the Closing Date and (C) authorizing officers of the
Company to execute and deliver the Loan Documents to which it is or will be a
party and any related documents, including, any agreement contemplated by this
Agreement, (ii) the incumbency and specimen signatures of the officers of the
Company and the Guarantor executing any documents on its behalf and (iii) that
there has been no change in the businesses or financial condition of the Company
or the Guarantor which could have a Material Adverse Effect;
(f) favorable, signed opinions addressed to the Lender from
counsel to the Company, in form and substance satisfactory to the Lender and its
counsel;
(g) the payment to the Lender of all reasonable fees and
expenses agreed upon by such parties to be paid on the Closing Date; and
(h) certificates of appropriate public officials as to the
existence, good standing and qualification to do business as a foreign
corporation, as applicable, of the Company and the Guarantor in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualifications and where the failure to so qualify would
have a Material Adverse Effect.
The acceptance of the benefits of the Loan shall constitute a
representation and warranty by the Company to the Lender that all of the
conditions specified in this Section above shall have been satisfied or waived
as of that time.
SECTION 4.02. Additional Conditions Precedent. The obligation
of the Lender to make the Loan is subject to the further conditions precedent
that on the Closing Date:
(a) The conditions precedent set forth in Section 4.01 shall
have theretofore been satisfied or waived.
(b) The representations and warranties set forth in Article V
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shall be true and correct in all material respects as of, and as if such
representations and warranties were made on, the Closing Date, and the Company
shall submit a certification to the Lender confirming that such representations
and warranties are true and correct.
(c) No Material Adverse Effect with respect to the Company or
the Guarantor shall have occurred since the delivery of the most recent
financials.
(d) The Lender shall have received such other approvals,
opinions or documents as the Lender may reasonably request.
SECTION 4.03. Delivery of Documents. The Note, certificates,
legal opinions and other documents and papers referred to in this Article IV,
unless otherwise specified, shall be delivered to the Lender and shall be
reasonably satisfactory in form and substance to the Lender.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and
to make the Loan provided for herein, the Company makes, on and as of the
Closing Date, the following representations and warranties to the Lender:
SECTION 5.01. Organization and Qualification. The Company and
the Guarantor (a) are each corporations duly organized, validly existing and in
good standing under the laws of the state of their incorporation or
organization, (b) each the corporate power to own its property and to carry on
its business as now conducted and (c) each is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the failure to be so qualified would have a Material Adverse Effect.
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SECTION 5.02. Authorization and Validity. The Company has the
corporate power and authority to execute, deliver and perform its obligations
hereunder and under the other Loan Documents and all such action has been duly
authorized by all necessary corporate proceedings on its part. The Loan
Documents have been duly and validly executed and delivered by the Company and
constitute a valid and legally binding agreement the Company enforceable in
accordance with the respective terms thereof, except, in each case, as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or affecting
the enforcement of creditors' rights generally, and by general principles of
equity regardless of whether such enforceability is a proceeding in equity or at
law.
SECTION 5.03. Governmental Consents. No authorization,
consent, approval, license or exemption of or filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is necessary for the valid execution,
delivery or performance by the Company of any Loan Document.
SECTION 5.04. Conflicting or Adverse Agreements or
Restrictions. Neither the Company nor the Guarantor is a party to any contract
or agreement or subject to any restriction which would reasonably be expected to
have a Material Adverse Effect. All agreements of the Company relating to the
lending of money or the issuance of letters of credit by any party are described
hereto on Schedule 5.04. Neither the execution nor delivery of the Loan
Documents nor compliance with the terms and provisions hereof or thereof will be
contrary to the provisions of, or constitute a default under (a) the charter or
bylaws of the Company, (b) any applicable law or any applicable regulation,
order, writ, injunction or decree of any court or governmental instrumentality
or (c) any material agreement to which the Company is a party or by which it is
bound or to which it is subject.
SECTION 5.05. Title to Assets. The Company has good title to
the Collateral and to all material personalty and good and indefeasible title to
all material realty as reflected on the Company's books and records as being
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owned by it, except for properties disposed of in the ordinary course of
business, subject to no Liens, except those permitted hereunder or set forth on
Schedule 7.04(a). All of such assets have been and are being maintained by the
appropriate Person in good working condition in accordance with industry
standards.
SECTION 5.06. Litigation. No proceedings against or affecting
the Company or to Guarantor are pending or, to the knowledge of the Company,
threatened before any court or governmental agency or department which involve a
reasonable risk of having a Material Adverse Effect except those listed on
Schedule 5.06 hereof.
SECTION 5.07. Financial Statements. Prior to the Closing Date,
the Company has furnished to the Lender the audited consolidated balance sheet
of FirstCity Financial Corporation, income statement and statement of cash flow
and balance sheet for FirstCity Commercial Corporation as of March 31, 1998 and
all quarterly reports of the Company as are currently available (such audited
financials and quarterly reports, the "Financials"). The Financials have been
prepared in conformity with GAAP consistently applied (except as otherwise
disclosed in such financial statements) throughout the periods involved and
present fairly, in all material respects, the financial condition of the Company
and any consolidated subsidiaries as of the dates thereof and the results of
their operations for the periods then ended. As of the Closing Date, no Material
Adverse Effect has occurred in the consolidated financial condition of the
Company or the Guarantor since March 31, 1998.
SECTION 5.08. Default. Neither the Company nor the Guarantor
is in default under any material provisions of any instrument evidencing any
indebtedness or of any agreement relating thereto, or in default in any respect
under any order, writ, injunction or decree of any court, or in default in any
respect under or in violation of any order, injunction or decree of any
governmental instrumentality, in such manner as to cause a Material Adverse
Effect.
SECTION 5.09. Investment Company Act. Neither the Company nor
the Guarantor is, or is directly or indirectly controlled by or acting on behalf
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of any Person which is, an "investment company," as such term is defined in the
Investment Company Act of 1940, as amended.
SECTION 5.10. Public Utility Holding Company Act. Neither the
Company nor the Guarantor is a non-exempt "holding company," or is subject to
regulation as such, nor is, to the knowledge of the Company's or Subsidiaries'
officers, an "affiliate" of a "holding company" or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
SECTION 5.11. ERISA. No accumulated funding deficiency (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived, exists or is expected to be incurred with respect to any Plan. No
liability to the PBGC (other than required premium payments) has been or is
expected by the Company to be incurred with respect to any Plan by the Company
or any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has incurred
any withdrawal liability under Title IV of ERISA with respect to any
Multi-Employer Plans.
SECTION 5.12. Tax Returns and Payments. Each of the Company
and the Guarantor has filed all federal income tax returns and other tax
returns, statements and reports (or obtained extensions with respect thereto)
which are required to be filed and has paid or deposited or made adequate
provision in accordance with GAAP for the payment of all taxes (including
estimated taxes shown on such returns, statements and reports) which are shown
to be due pursuant to such returns, except for such taxes as are being contested
in good faith and by proceedings.
SECTION 5.13. Environmental Matters. Each of the Company and
the Guarantor (a) possesses all environmental, health and safety licenses,
permits, authorizations, registrations, approvals and similar rights necessary
under law or otherwise for the Company or the Guarantor to conduct its
operations as now being conducted (other than those with respect to which the
failure to possess or maintain would not, individually or in the aggregate for
the Company or the Guarantor, have a Material Adverse Effect) and (b) each of
such licenses, permits, authorizations, registrations, approvals and similar
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rights is valid and subsisting, in full force and effect and enforceable by the
Company or the Guarantor, and each of the Company and the Guarantor is in
compliance with all terms, conditions or other provisions of such permits,
authorizations, registrations, approvals and similar rights except for such
failure or noncompliance that, individually or in the aggregate for the Company
or such Guarantor, would not have a Material Adverse Effect. Except as disclosed
on Schedule 5.13, neither the Company nor the Guarantor has received any notices
of any violation of, noncompliance with, or remedial obligation under,
Requirements of Environmental Laws (which violation or non-compliance has not
been cured) and there are no writs, injunctions, decrees, orders or judgments
outstanding, or lawsuits, claims, proceedings, investigations or inquiries
pending or, to the knowledge of the Company or the Guarantor, threatened,
relating to the ownership, use, condition, maintenance or operation of, or
conduct of business related to, any property owned, leased or operated by the
Company or the Guarantor or other assets of the Company or the Guarantor, other
than those violations, instances of noncompliance, obligations, writs,
injunctions, decrees, orders, judgments, lawsuits, claims, proceedings,
investigations or inquiries that, individually or in the aggregate for the
Company or the Guarantor, would not have a Material Adverse Effect. Except as
disclosed on Schedule 5.13, there are no material obligations, undertakings or
liabilities arising out of or relating to Environmental Laws to which the
Company or the Guarantor has agreed, assumed or retained, or by which the
Company or the Guarantor is adversely affected, by contract or otherwise. Except
as disclosed on Schedule 5.13, neither the Company nor the Guarantor has
received a written notice or claim to the effect that such Person is or may be
liable to any other Person as the result of a Release or threatened Release of a
Hazardous Material.
SECTION 5.14. Purpose of Loans. (a) The proceeds of the Loan
will be used solely to finance operating expenditures and for certain capital
investments of the Company made in the ordinary course of its business.
(b) None of the proceeds of the Loan will be used directly or
indirectly for the purpose of purchasing or carrying any "margin stock" within
the meaning of Regulation U (herein called "margin stock") or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry a margin stock.
19
SECTION 5.15. Franchises and Other Rights. Each of the Company
and the Guarantor has all franchises, permits, licenses and other authority as
are necessary to enable it to carry on its businesses as now being conducted
where the absence of such would have a Material Adverse Effect except those
listed on Schedule 5.15 hereof. To the best of its knowledge, the Company is not
in default in respect of any of such operating rights.
SECTION 5.16. Intentionally omitted.
SECTION 5.17. Solvency. After giving effect to the Loan
hereunder and all other indebtedness of the Company, the Company has (a) capital
sufficient to carry on its businesses and transactions, (b) assets, the fair
market value of which exceeds its consolidated liabilities (as reflected on the
Financials or on the financial statements most recently delivered to the
Lender), and (c) sufficient cash flow to pay its existing debts as they mature.
SECTION 5.18. Material Facts. There is no fact which the
Company has failed to disclose to the Lender in writing which will have a
Material Adverse Effect on or, so far as the Company can now foresee, will have
a Material Adverse Effect on the assets, business, prospects, profits or
condition (financial or otherwise) of the Company, the ability of the Company to
perform its obligations under this Agreement, or the Guarantor. No information,
exhibit or report furnished by the Company to the Lender in connection with the
negotiation of this Agreement contained any material misstatement of fact or
omitted a material fact or any fact necessary to make the statement contained
therein not materially misleading.
SECTION 5.19. Solvency. The Company is, and after giving
effect to the transactions contemplated under the Loan Documents will be,
solvent.
SECTION 5.20. Security Interests. The Security Documents
create valid security interests in the Collateral in favor of the Lender
securing the Obligations and constitute perfected first priority security
interests in the Collateral subject to no Liens other than Liens permitted by
Section 7.04.
20
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company covenants and agrees that on and after the date
hereof and for so long as this Agreement is in effect and until the Obligations
have been paid in full:
SECTION 6.01. Information Covenants. The Company will furnish
to the Lender:
(a) As soon as available, and in any event within 45 days
after the close of each of the first three quarters in each fiscal year of the
Company, the consolidated and consolidating balance sheet of the Company and the
Guarantor as of the end of such quarterly period and the related consolidated
and consolidating statements of income and cash flows for such quarterly period
and for the portion of the fiscal year ended at the end of such quarter, setting
forth, in each case, comparative consolidated figures for the related periods in
the prior fiscal year, all of which shall be certified by the chief financial
officer or chief executive officer of the Company as fairly presenting in all
material respects, the financial position of the Company and the Guarantor as of
the end of such period and the results of their operations for the period then
ended in accordance with GAAP, subject to changes resulting from normal year-end
audit adjustments.
(b) As soon as available, and in any event within 120 days
after the close of each fiscal year of the Company, the audited consolidated and
the unaudited consolidating balance sheets of the Guarantor and its subsidiaries
as at the end of such fiscal year and the related consolidated and consolidating
statements of income, stockholders equity and cash flows for such fiscal year,
setting forth, in each case, comparative figures for the preceding fiscal year
21
and certified by KPMG Peat Marwick, L.L.P. or other independent certified public
accountants of recognized national standing, whose report shall be without
limitation as to the scope of the audit and reasonably satisfactory in substance
to the Lender.
(c) Immediately after any Responsible Officer of the Company
obtains knowledge thereof, notice of:
(i) any material violation of, noncompliance with, or remedial
obligations under, Requirements of Environmental Laws,
(ii) any material Release or threatened material Release of
Hazardous Materials affecting any property owned, leased or operated by the
Company or any of its Subsidiaries,
(iii) any event or condition which constitutes a Default or an
Event of Default,
(iv) any condition or event which, in the opinion of
management of the Company, would reasonably be expected to have a Material
Adverse Effect on the Company or the Guarantor,
(v) any Person having given any written notice to the Company
or taken any other action with respect to a claimed material default or material
adverse event under any material instrument or material agreement, and
(vi) the institution of any litigation which might reasonably
be expected in the good faith judgment of the Company either to have a Material
Adverse Effect or result in a final, non-appealable judgment or award in excess
of $1,000,000.00 with respect to any single cause of action, or the institution
of any litigation of any kind by any party against the Company.
then, a notice of such event or condition will be delivered to the Lender
specifying the nature and period of existence thereof and specifying the notice
given or action taken by such Person and the nature of any such claimed default,
22
event or condition and, in the case of an Event of Default or Default, what
action has been taken, is being taken or is proposed to be taken with respect
thereto.
(vii) Any default or condition which threatens or constitutes
a default by Harbor Financial Mortgage Corporation under the Fannie Mae Mortgage
Selling and Servicing Agreement or any commitment relating thereto.
(d) At the time of the delivery of the financial statement
provided for in Sections 6.01(a) and 6.01(b), a certificate of a Responsible
Officer to the effect that no Default or Event of Default exists or, if any
Default or Event of Default does exist, specifying the nature and extent thereof
and the action that is being taken or that is proposed to be taken with respect
thereto, which certificate shall set forth the calculations required to
establish whether the Company was in compliance with the provisions of Sections
7.10 and 7.11 as at the end of such fiscal period or year, as the case may be.
(e) Upon request by the Lender such audits of the Company's
procedures and policies and operations in respect of Environmental Laws as the
Lender may reasonably request.
(f) Promptly upon receipt thereof, a copy of any report or
letter submitted to the Company by its independent accountants in connection
with any regular or special audit of the Company's records.
(g) From time to time and with reasonable promptness, such
other information or documents as the Lender may reasonably request.
SECTION 6.02. Books, Records and Inspections. The Company and
the Guarantor will maintain, and will permit, or cause to be permitted, any
Person designated by the Lender to visit and inspect any of the properties of
the Company or the Guarantor, to examine the corporate books and financial
records of the Company and the Guarantor and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any such
corporations with the officers, employees and agents of the Company and the
Guarantor and with their independent public accountants, all at such reasonable
23
times and as often as the Lender may request. Such inspections shall be made as
often as the Lender reasonably requests, and shall be at the expense of the
Company up to $5,000.00 annually.
SECTION 6.03. Insurance and Maintenance of Properties. (a) The
Company and the Guarantor will keep reasonably adequately insured by financially
sound and reputable insurers all of its material property, which is of a
character, and in amounts and against such risks, usually and reasonably insured
by similar Persons engaged in the same or similar businesses, including, without
limitation, insurance against fire, casualty and any other hazards normally
insured against. The Company and the Guarantor will at all times maintain
insurance against its liability for injury to Persons or property, which
insurance shall be by financially sound and reputable insurers and in such
amounts and form as are customary for corporations of established reputation
engaged in the same or a similar business and owning and operating similar
properties, and shall annually provide the Lender a listing of all such
insurance and such other certificates and other evidence thereof, as the Lender
shall reasonably request. A listing of all presently existing policies of the
Company and the Guarantor is attached hereto as Schedule 6.03.
(b) The Company will cause all of its material properties used
or useful in the conduct of its business to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all reasonably necessary repairs, renewals and
replacements thereof, all as in the reasonable judgment of such Person may be
reasonably necessary so that the business carried on in connection therewith may
be properly conducted at all times.
(c) The Company will name the Lender as a loss payee on all of
its insurance policies (other than public liability insurance policies).
SECTION 6.04. Payment of Taxes. The Company will pay and
discharge all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any properties belonging to it, prior
to the date on which penalties attach thereto, except for such amounts that are
being contested in good faith and by appropriate proceedings.
24
SECTION 6.05. Corporate Existence. The Company will do all
things necessary to preserve and keep in full force and effect (a) its corporate
existence and (b) unless the failure to do so would not have a Material Adverse
Effect, the rights and franchises of the Company.
SECTION 6.06. Compliance with Statutes. The Company will
comply with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property, except to the extent the failure to do so would not reasonably be
expected to have a Material Adverse Effect.
SECTION 6.07. ERISA. Immediately after any Responsible Officer
of the Company or any of its Subsidiaries knows or has reason to know any of the
following items are true the Company will deliver or cause to be delivered to
the Lender a certificate of the chief financial officer of the Company setting
forth details as to such occurrence and such action, if any, the Company or its
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Company or its ERISA
Affiliate with respect thereto; that a Reportable Event has occurred or that an
application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard; that a Multiemployer
Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that any required contribution to a Plan or
Multiemployer Plan has not been or may not be timely made; that proceedings may
be or have been instituted under Section 4069(a) of ERISA to impose liability on
the Company or an ERISA Affiliate or under Section 4042 of ERISA to terminate a
Plan or appoint a trustee to administer a Plan; that the Company or any ERISA
Affiliate has incurred or may incur any liability (including any contingent or
secondary liability) on account of the termination of or withdrawal from a Plan
or a Multiemployer Plan; and that the Company or an ERISA Affiliate may be
required to provide security to a Plan under Section 401(a)(29) of the Code; or
any other condition exists or may occur with respect to one or more Plans and/or
Multiemployer Plans.
SECTION 6.08. Fidelity Bond. The Guarantor shall at all times
25
during the term hereof maintain a fidelity bond in an amount not less than
$2,000,000.00 per occurrence and $4,000,000.00 in the aggregate, net of any
applicable deductible.
ARTICLE VII
NEGATIVE COVENANTS
The Company covenants and agrees that, unless the Lender shall
have otherwise given its written consent, on and after the date hereof and for
so long as this Agreement is in effect and until the Indebtedness is paid in
full.
SECTION 7.01. Change in Business. The Company will not engage
in any businesses not of the same general type as those conducted by the Company
on the Closing Date.
SECTION 7.02. Consolidation, Merger or Sale of Assets. The
Company will not wind up, liquidate or dissolve their affairs, or enter into any
transaction of merger or consolidation, or sell or otherwise dispose of all or
any part of their property or assets (other than sales of inventory and surplus
or obsolete assets in the ordinary course of business provided that any disposal
does not prejudice the Lender in any way), including the capital stock of any
subsidiary, or purchase, lease or otherwise acquire (in one or a series of
related transactions) all or any part of the property or assets of any Person or
all of the capital stock of any Person. The Company will not permit any of its
subsidiaries to wind up, liquidate or dissolve their affairs, or enter into any
transaction of merger or consolidation, or sell or otherwise dispose of any
capital stock of any subsidiary, or purchase, lease or otherwise acquire (in one
or a series of related transactions) all or any part of the property or assets
of any Person or all of the capital stock of any Person.
SECTION 7.03. Indebtedness. The Company will not create,
26
incur, assume or permit to exist any indebtedness except:
(a) Indebtedness existing hereunder;
(b) long term indebtedness or unsecured short term
indebtedness not to exceed in the aggregate $5,000,000.00;
(c) guarantees of any indebtedness of any Person not to exceed
in the aggregate $5,000,000.00 other than (e) below;
(d) $60,000,000.00 Capital Note from FirstCity Commercial
Corporation to FirstCity Financial Corporation; and
(e) guarantee of indebtedness of FirstCity Commercial
Corporation of Guarantor's debt to Bank of Scotland under a Revolving Credit
Agreement dated 4/8/98.
SECTION 7.04. Liens. The Company will not create, incur,
assume or suffer to exist any Lien upon or with respect to any of its property
or assets of any kind whether now owned or hereafter acquired (nor will they
covenant with any other Person not to grant such a Lien to the Lender), except
(a) Liens existing on the Closing Date and listed on Schedule
7.04(a);
(b) Liens for taxes or assessments or other governmental
charges or levies, either not yet due and payable or being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established;
(c) Liens securing long term indebtedness permitted under
Section 7.03(b) above; and
(d) any renewal, extension or replacement of any Lien referred
to in subparagraph (a) above; provided, that no Lien arising or existing as a
result of such extension, renewal or replacement shall be extended to cover any
27
property not theretofore subject to the Lien being extended, renewed or
replaced, and provided further, the principal amount of the indebtedness secured
thereby shall not exceed the principal amount of the indebtedness so secured at
the time of such extension, renewal or replacement.
SECTION 7.05. Intentionally omitted.
SECTION 7.06. Intentionally omitted.
SECTION 7.07. Change in Accounting. The Company will not
change its method of accounting except for (a) immaterial changes permitted by
GAAP in which the Company's auditors concur or (b) changes required by GAAP. The
Company shall advise the Lender in writing promptly upon making any material
change to the extent same is not disclosed in the financial statements required
under Section 6.01 hereof.
SECTION 7.08. Intentionally omitted.
SECTION 7.09. Transactions with Affiliates. The Company will
not, directly or indirectly, engage in any transaction with any Affiliate,
including the purchase, sale or exchange of assets or the rendering of any
service, except in the ordinary course of business or pursuant to the reasonable
requirements of its business and, in each case, upon terms that are no less
favorable than those which might be obtained in an arm's-length transaction at
the time from non-Affiliates.
SECTION 7.10. Minimum Tangible Net Worth. The Company will not
permit its Tangible Net Worth during the term hereof to be less than
$5,000,000.00.
SECTION 7.11. Intentionally Omitted
SECTION 7.12 The Company shall not permit the sale by Harbor
Financial Mortgage Corporation of the Servicing Rights related to the Mortgage
Loans without the express written consent of Lender.
28
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01. Events of Default. The following events shall
constitute Events of Default ("Events of Default") hereunder:
(a) any installment of principal or payment of interest on the
Note or any payment of any Fee shall not be paid on the date on which such
payment is due and such failure is not remedied within five (5) days; or
(b) any representation or warranty made or, for purposes of
Article V, deemed made by the Company or the Guarantor herein or in any of the
Loan Documents or other document, certificate or financial statement delivered
in connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made or reaffirmed,
as the case may be; or
(c) the Company shall fail to perform or observe any duty or
covenant contained in Article VII hereof; or
(d) the Company or the Guarantor shall fail to perform or
observe any duty or covenant contained in this Agreement other than in Article
VII, or in any of the Loan Documents, and such failure is not remedied within
thirty (30) days; or
(e) the Company shall (i) fail to make (whether as primary
obligor or as guarantor or other surety) any principal payment of or interest or
premium, if any, on any instrument of indebtedness allowed hereunder (other than
the Note) outstanding beyond any period of grace provided with respect thereto
or (ii) shall fail to duly observe, perform or comply with any agreement with
any Person or any term or condition of any instrument of indebtedness in excess
29
of $500,000.00, if such failure causes such obligations to become due prior to
any stated maturity; or
(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of the Company or the Guarantor, or of a substantial part
of the property or assets of the Company or the Guarantor, under Title 11 of the
United States Code, as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"), or any other federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company or the
Guarantor for a substantial part of the property or assets of the Company or the
Guarantor or (iii) the winding-up or liquidation of the Company or the
Guarantor; and such proceeding or petition shall continue undismissed for sixty
60 days or an order or decree approving or ordering any of the foregoing shall
be entered; or
(g) the Company or the Guarantor shall (i) voluntarily
commence any proceeding or file any petition seeking relief under the Bankruptcy
Code or any other federal or state bankruptcy, insolvency, receivership or
similar law, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or the filing of any petition described
in clause (e) above, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
the Company or the Guarantor or for a substantial part of the property or assets
of the Company or the Guarantor, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become due or
(vii) take any action for the purpose of effecting any of the foregoing; or
(h) a judgment or order, which with other outstanding
judgments and orders against the Company or the Guarantor equal or exceed
$1,000,000.00 in the aggregate (to the extent not covered by insurance as to
which the respective insurer has acknowledged coverage), shall be entered
against the Company or the Guarantor and (i) within thirty (30) days after entry
thereof such judgment shall not have been paid or discharged or execution
thereof stayed pending appeal or, within thirty (30) days after the expiration
30
of any such stay, such judgment shall not have been paid or discharged or (ii)
any enforcement proceeding shall have been commenced (and not stayed) by any
creditor or upon such judgment; or
(i) the occurrence of a change which has a Material Adverse
Effect, in the opinion of the Lender, (A) in the financial condition, business
or operations of the Company or the Guarantor (B) in the ability of the Company
to make payment hereunder or under the Note or the right of the Lender to
enforce any of its remedies to collect any amounts owing under the Loan
Documents; or
(j) a Change of Control with respect to FirstCity Financial
Corporation shall occur.
SECTION 8.02. Primary Remedies. In any such event, and at any
time after the occurrence of any of the above described events, the Lender may,
by written notice to the Company (a "Notice of Default") take any or all of the
following actions to enforce any other rights it may have against the Company;
provided, that if an Event of Default specified in Section 8.01(f) or Section
8.01(g) shall occur, the following shall occur automatically without the giving
of any Notice of Default: (a) declare the principal of and any accrued and
unpaid interest, and all obligations owing hereunder, to be, whereupon the same
shall become, forthwith due and payable without presentment, demand, notice of
demand or of dishonor and non-payment, protest, notice of protest, notice of
intent to accelerate, declaration or notice of acceleration or any other notice
of any kind, all of which are hereby waived by the Company; and (b) exercise any
rights or remedies under any document securing any of the Loan Documents.
SECTION 8.03. Other Remedies. Upon the occurrence and during
the continuance of any Event of Default and after a Notice of Default, the
Lender may proceed to protect and enforce its rights, either by suit in equity
or by action at law or both, whether for the specific performance of any
covenant or agreement contained in this Agreement or in any other Loan Document
31
or in aid of the exercise of any power granted in this Agreement or in any other
Loan Document; or may proceed to enforce the payment of all amounts owing to the
Lender under the Loan Documents and any accrued and unpaid interest thereon in
the manner set forth herein or therein; it being intended that no remedy
conferred herein or in any of the other Loan Documents is to be exclusive of any
other remedy, and each and every remedy contained herein or in any other Loan
Document shall be cumulative and shall be in addition to every other remedy
given hereunder and under the other Loan Documents or now or hereafter existing
at law or in equity or by statute or otherwise.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments. No amendment or waiver of any
provision of this Agreement, the Note or any other Loan Document, nor consent to
any departure by the Company herefrom or therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Company, as to
amendments, and by the Lender in all cases, and then, in any case, such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
SECTION 9.02. Notices. Except with respect to telephone
notifications specifically permitted pursuant to Article II, all notices,
consents, requests, approvals, demands and other communications provided for
herein shall be in writing (including telecopy communications) and mailed,
telecopied, sent by overnight courier or delivered:
32
(a) If to the Company:
FirstCity Commercial Corporation
P.O. Box 8216
6400 Imperial Drive
Waco, Texas 76714
Telecopy No: (817) 751-1208
Attention: Mr. James C. Holmes
(b) If to the Lender:
CFSC Capital Corp. XXX
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Telecopy No: (612) 984-3905
Attention: Mr. Jeffrey A. Parker
with copies to:
Cargill Financial Services Corporation
6000 Clearwater Drive
Minnetonka, Minnesota 55343-9497
Telecopy No: (612) 984-3898
Attention: Ms. Laura H. Witte
or, in the case of any party hereto, such other address or telecopy number as
such party may hereafter specify for such purpose by notice to the other
parties.
All communications shall, when mailed, telecopied or
delivered, be effective when mailed by certified mail, return receipt requested
to any party at its address specified above, or telecopied to any party to the
telecopy number set forth above, or delivered personally to any party at its
address specified above; provided, that communications to the Lender pursuant to
Article II shall not be effective until actually received by the Lender.
SECTION 9.03. No Waiver; Remedies. No failure on the part of
the Lender to exercise, and no delay in exercising, any right hereunder, under
the Note or under any other Loan Document shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, or any abandonment or
discontinuance of any steps to enforce such right, preclude any other or further
exercise thereof or the exercise of any other right. No notice to or demand on
the Company in any case shall entitle the Company to any other or further notice
or demand in similar or other circumstances. The remedies herein are cumulative
and not exclusive of any other remedies provided by law, at equity or in any
other agreement.
SECTION 9.04. Costs, Expenses and Taxes. The Company agrees to
pay on demand: (a) all reasonable out-of-pocket costs and expenses of the Lender
in connection with the preparation, execution and delivery of this Agreement,
the Note, the other Loan Documents and the other documents to be delivered
34
hereunder, including the reasonable fees and out-of-pocket expenses of counsel
for the Lender with respect thereto and with respect to advising the Lender as
to its rights and responsibilities under this Agreement, the Note and the other
Loan Documents, and any modification, supplement or waiver of any of the terms
of this Agreement or any other Loan Document, (b) all reasonable costs and
expenses of the Lender and any other holder of an interest in the Note, and the
Obligations of the Company hereunder and under the Loan Documents, including
reasonable legal fees and expenses, in connection with a default or the
enforcement of this Agreement, the Note and the other Loan Documents and (c)
reasonable costs and expenses incurred in connection with third party
professional services required by the Lender such as appraisers, environmental
consultants, accountants or similar Persons; provided, that prior to any Event
of Default hereunder, the Lender will first obtain the consent of the Company to
such expense, which consent shall not be unreasonably withheld. Without
prejudice to the survival of any other obligations of the Company hereunder and
under the Note, the obligations of the Company under this Section shall survive
the termination of this Agreement or the replacement of the Lender and the
assignment of the Note.
SECTION 9.05. Indemnity. (a) The Company shall indemnify the
Lender and each Affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims or damages (including reasonable legal fees and
expenses) to which any of them may become subject, insofar as such losses,
liabilities, claims or damages arise out of or result from any actual or
proposed use by the Company of the proceeds of any extension of credit hereunder
or any investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing or any of the other Loan
Documents, and the Company shall reimburse the Lender and each Affiliate thereof
and their respective directors, officers, employees and agents, upon demand for
any expenses (including legal fees) reasonably incurred in connection with any
such investigation or proceeding; but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified.
(B) WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT, IT IS
35
THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED
HEREUNDER OR THEREUNDER SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND
ALL LOSSES, LIABILITIES, CLAIMS OR DAMAGES: (I) ARISING OUT OF OR RESULTING FROM
THE ORDINARY SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON OR (II) IMPOSED UPON
SAID PARTY UNDER ANY THEORY OR STRICT LIABILITY. Without prejudice to the
survival of any other obligations of the Company hereunder and under the other
Loan Documents, the obligations of the Company under this Section shall survive
the termination of this Agreement and the other Loan Documents and the payment
of the Obligations or the assignment of the Note.
SECTION 9.06. Right of Setoff. If any Event of Default shall
have occurred and be continuing, the Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits held and other indebtedness owing by the Lender, or any
Affiliate, to or for the credit or the account of the Company against any and
all the Obligations of the Company now or hereafter existing under this
Agreement and the other Loan Documents and other obligations of the Company held
by the Lender, irrespective of whether or not the Lender shall have made any
demand under this Agreement, its Note or the Obligations and although the
Obligations may be unmatured. The rights of the Lender under this Section are in
addition to other rights and remedies (including other rights of setoff) which
the Lender may have.
SECTION 9.07. Governing Law. This Agreement, the Note, the
other Loan Documents and all other documents executed in connection herewith
shall be deemed to be contracts and agreements executed by the Company and the
Lender under the laws of the State of Minnesota and of the United States of
America and for all purposes shall be construed in accordance with, and governed
by, the laws of said state and of the United States of America. Without
limitation of the foregoing, nothing in this Agreement, or in the Note or in any
other Loan Document shall be deemed to constitute a waiver of any rights which
the Lender may have under applicable federal legislation relating to the amount
of interest which the Lender may contract for, take, receive or charge in
respect of the Loan and the Loan Documents, including any right to take,
receive, reserve and charge interest at the rate allowed by the law of the state
where the Lender is located.
36
SECTION 9.08. Interest. Each provision in this Agreement and
each other Loan Document is expressly limited so that in no event whatsoever
shall the amount paid, or otherwise agreed to be paid, to the Lender or charged,
contracted for, reserved, taken or received by the Lender, for the use,
forbearance or detention of the money to be loaned under this Agreement or any
Loan Document or otherwise (including any sums paid as required by any covenant
or obligation contained herein or in any other Loan Document which is for the
use, forbearance or detention of such money), exceed that amount of money which
would cause the effective rate of interest to exceed the Highest Lawful Rate,
and all amounts owed under this Agreement and each other Loan Document shall be
held to be subject to reduction to the effect that such amounts so paid or
agreed to be paid, charged, contracted for, reserved, taken or received which
are for the use, forbearance or detention of money under this Agreement or such
Loan Document shall in no event exceed that amount of money which would cause
the effective rate of interest to exceed the Highest Lawful Rate. Anything in
the Note or any other Loan Document to the contrary notwithstanding, the Company
shall not be required to pay unearned interest on the Note and the Company shall
not be required to pay interest on the Obligations at a rate in excess of the
Highest Lawful Rate, and if the effective rate of interest which would otherwise
be payable under the Note and such Loan Documents would exceed the Highest
Lawful Rate, or if the holder of the Note shall receive any unearned interest or
shall receive monies that are deemed to constitute interest which would increase
the effective rate of interest payable by the Company under the Note and the
other Loan Documents to a rate in excess of the Highest Lawful Rate, then (a)
the amount of interest which would otherwise be payable by the Company shall be
reduced to the amount allowed under applicable law and (b) any unearned interest
paid by the Company or any interest paid by the Company in excess of the Highest
Lawful Rate shall in the first instance be credited on the principal of the
obligations of the Company (or if all such obligations shall have been paid in
full, refunded to the Company). It is further agreed that, without limitation of
the foregoing, all calculations of the rate of interest contracted for,
reserved, taken, charged or received by the Lender under the Note and the
Obligations and under the other Loan Documents are made for the purpose of
determining whether such rate exceeds the Highest Lawful Rate, and shall be
37
made, to the extent permitted by usury laws applicable to the Lender, by
amortizing, prorating and spreading in equal parts during the period of the full
stated term of the Note and this Agreement and all interest at any time
contracted for, charged or received by the Lender in connection therewith.
SECTION 9.09. Survival of Representations and Warranties. All
representations, warranties and covenants contained herein or made in writing by
the Company in connection herewith and the other Loan Documents shall survive
the execution and delivery of this Agreement, the Note and the other Loan
Documents, the termination of the Loan Documents and will bind and inure to the
benefit of the respective successors and assigns of the parties hereto, whether
so expressed or not.
SECTION 9.10. Successors and Assigns; Participations. (a) All
covenants, promises and agreements by or on behalf of the Company or the Lender
that are contained in this Agreement shall bind and inure to the benefit of
their respective permitted successors and assigns. The Company may not assign or
transfer any of its rights or obligations hereunder.
(b) The Lender may assign to or sell participations to one or
more banks of all or a portion of its rights and obligations under this
Agreement and the other Loan Documents; provided, that the participating banks
or other entities shall be entitled to the cost protection provisions contained
in Article II and Section 9.04 and the Company shall continue to deal solely and
directly with the Lender in connection with its rights and obligations under
this Agreement and the other Loan Documents. Except with respect to cost
protections provided to a participant pursuant to this paragraph and the items
listed in Section 9.01 hereof, no participant shall be a third party beneficiary
of this Agreement nor shall it be entitled to enforce any rights provided to the
Lender against the Company under this Agreement.
(c) With the prior written consent of the Company and the
Lender (which consent shall not be unreasonably withheld), the Lender may assign
to one or more other Eligible Assignees all or a portion of its interests,
rights, and obligations under this Agreement and the other Loan Documents;
provided, however, that (i) each such assignment shall be in a minimum principal
38
amount of not less than $1,000,000.00 and shall be of a constant, and not a
varying, percentage of all the Lender's rights and obligations under this
Agreement, (ii) the parties to each such assignment shall execute and deliver to
the Lender, for its acceptance, an Assignment and Acceptance in form and
substance satisfactory to the Lender (an "Assignment and Acceptance") and the
Note subject to such assignment and (iii) no assignment shall be effective until
receipt by the Lender of a reasonable service fee in respect of said assignment
equal to $2,000.00. Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five (5) Business Days after the
execution thereof unless otherwise agreed to by the Lender and the Eligible
Assignee thereunder (x) the Eligible Assignee thereunder shall be a party hereto
and to the other Loan Documents and, to the extent provided in such Assignment
and Acceptance, have the rights and obligations of the Lender hereunder and
under the other Loan Documents and (y) the Lender thereunder shall, to the
extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement and the other Loan Documents (and, in the case
of an Assignment and Acceptance covering all of the remaining portion of the
Lender's rights and obligations under this Agreement and the other Loan
Documents, the Lender shall cease to be a party hereto).
(d) Notwithstanding any other provision herein, the Lender
may, in connection with any assignment or participation or proposed assignment
or participation pursuant to this Section disclose to the assignee or
participant or proposed assignee or participant, any information relating to the
Company furnished to the Lender by or on behalf of the Company.
SECTION 9.11. Confidentiality. The Lender agrees to exercise
its best efforts to keep any information delivered or made available by the
Company to it which is clearly indicated to be confidential information,
confidential from anyone other than Persons employed or retained by the Lender
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Loans; provided that nothing herein shall prevent any
Lender from disclosing such information (a) pursuant to subpoena or upon the
order of any court or administrative agency, (b) upon the request or demand of
39
any regulatory agency or authority having jurisdiction over the Lender, (c)
which has been publicly disclosed, (d) to the extent reasonably required in
connection with any litigation to which the Lender, the Company or its
respective Affiliates may be a party, (e) to the extent reasonably required in
connection with the exercise of any remedy hereunder, (f) to the Lender's legal
counsel and independent auditors and (g) to any actual or proposed participant
or assignee of all or part of its rights hereunder which has agreed in writing
to be bound by the provisions of this Section. The Lender will promptly notify
the Company of any information that it is required or requested to deliver
pursuant to clause (b) or (c) of this Section and, if the Company is a party to
any such litigation, clause (e) of this Section .
SECTION 9.12. Separability. Should any clause, sentence,
paragraph or Section of this Agreement be judicially declared to be invalid,
unenforceable or void, such decision will not have the effect of invalidating or
voiding the remainder of this Agreement, and the parties hereto agree that the
part or parts of this Agreement so held to be invalid, unenforceable or void
will be deemed to have been stricken herefrom and the remainder will have the
same force and effectiveness as if such part or parts had never been included
herein.
SECTION 9.13. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 9.14. Interpretation. (a) In this Agreement, unless a
clear contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any gender includes each other gender;
(iii) the words "herein," "hereof" and "hereunder" and other
40
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(iv) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and assigns
are permitted by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually, provided
that nothing in this clause is intended to authorize any assignment not
otherwise permitted by this Agreement;
(v) except as expressly provided to the contrary herein,
reference to any agreement, document or instrument (including this Agreement)
means such agreement, document or instrument as amended, supplemented or
modified and in effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof, and reference to the Note or other note
includes the Note issued pursuant hereto in extension or renewal thereof and in
substitution or replacement therefor;
(vi) unless the context indicates otherwise, reference to
any Article, Section, Schedule or Exhibit means such Article or Section hereof
or such Schedule or Exhibit hereto;
(vii) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any description
preceding such term;
(viii) with respect to the determination of any period of
time, except as expressly provided to the contrary, the word "from" means "from
and including" and the word "to" means "to but excluding"; and
(ix) reference to any law, rule or regulation means such as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time.
(b) The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
41
(c) No provision of this Agreement shall be interpreted or
construed against any Person solely because that Person or its legal
representative drafted such provision.
SECTION 9.15. SUBMISSION TO JURISDICTION. (A) ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE
BROUGHT IN THE COURTS OF THE STATE OF MINNESOTA, IN HENNEPIN COUNTY OR ELSEWHERE
OR OF THE UNITED STATES FOR THE DISTRICT OF MINNESOTA AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING.
(B) THE COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID
ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 9.16. WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR
UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN
THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO
ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES,
42
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 9.17. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT
(INCLUDING THE SCHEDULES AND EXHIBITS HERETO), THE NOTE AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
43
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
FIRSTCITY COMMERCIAL CORPORATION
By: /s/ James C. Holmes
-----------------------------
Name: James C. Holmes
Title: Senior Vice President
CFSC CAPITAL CORP. XXX
By: /s/ Jeffery D. Leu
-----------------------------
Name: Jeffery D. Leu
Title: President
44
Exhibit 2.02
45
Exhibit 5.04
46
Exhibit 7.04(a)
47
Exhibit 5.06
None
48
Exhibit 5.13
49
Exhibit 5.15
None
50
Exhibit 6.03
51
Exhibit 7.04(a)
52