<PAGE> 1
As filed with the Securities and Exchange Commission on August 14, 1997
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _________________
Commission File Number: 0-21443
PLYMOUTH COMMERCIAL MORTGAGE FUND
(Exact name of registrant as specified in its charter)
Delaware 74-6439983
(State or other jurisdiction or (I.R.S. Employer Identification No.)
incorporation or organization)
c/o Greystone Advisers, Inc.,
13333 Blanco Road, Suite 314,
San Antonio, Texas 78216-7756
(Address of principal executive offices, including zip code)
210-493-3971
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
As of August 14, 1997, 921,627 of the registrant's common shares of beneficial
interest, no par value, were outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statement of Assets and Liabilities
June 30, 1997 and December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Assets
------
Investments in securities at fair value, cost
of $8,257,943 and $2,189,090 $ 8,626,844 $ 2,763,554
Investments in affiliates 398,772 130,566
Cash 535,908 5,082,109
Repurchase Agreement - 502,351
Accounts Receivable 2,427 6,451
Organization Costs 88,400 104,000
Other Assets 456,400 103,641
---------------------- -------------------------
Total Assets $ 10,108,751 $ 8,692,672
====================== =========================
Liabilities
-----------
Accounts Payable $ 35,519 $ 66,822
Investment Advisory Fee Payable 43,647 16,677
Dividend Payable 6,176 -
Note Payable 1,552,680 -
Escrow Funds 38,388 16,927
---------------------- -------------------------
Total Liabilities 1,676,410 100,426
Net Assets
----------
Common shares of beneficial interest, no par
value, 1,750,000 shares authorized, 921,627
shares issued and outstanding 7,976,773 7,976,773
Accumulated undistributed net investment loss (323,490) (168,039)
Accumulated undistributed net realized gains net of distributions of
$149,890 and $69,501 383,533 132,930
Accumulated undistributed equity in earnings of
subsidiary 26,624 76,118
Accumulated undistributed unrealized gain on investments 368,901 574,464
---------------------- -------------------------
Total Net Assets ($9.15 and $9.32 per share) 8,432,341 8,592,246
Total Liabilities & Net Assets $ 10,108,751 $ 8,692,672
====================== =========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 3
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statement of Operations
for the 3 month period and 6 month period ended June 30, 1997
(unaudited)
<TABLE>
<CAPTION>
For the three months For the six months
ended June 30,1997 ended June 30, 1997
--------------------- ---------------------
<S> <C> <C>
Investment Income:
Interest $ 64,457 $ 111,215
Other Investment Income 34,909 107,796
------------------ -------------------
Total Investment Income 99,366 219,011
Expenses:
Operating Expenses 102,314 214,705
Management Fees 100,451 159,757
------------------ -------------------
Total Expenses 202,765 374,462
Net Investment Loss $ (103,399) $ (155,451)
Realized gain on sale of investments - 268,628
Realized gain on collection of notes 14,419 62,364
Change in unrealized appreciation on assets 28,555 (205,564)
Equity in earnings of affiliate (49,494) (49,494)
------------------ --------------------
Net increase (decrease) in net assets resulting from operations $ (109,919) $ (79,517)
=================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 4
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statement of Changes in Net Assets
for the 6 month period ended June 30, 1997
(unaudited)
<TABLE>
<S> <C>
Operations before distribution:
Net investment loss $ (155,451)
Net realized gain on sale of investments 268,628
Net realized gain on collections 62,364
Changes in unrealized appreciation on investments (205,564)
Equity in earnings of affiliates (49,494)
-----------------------
Net decrease in net assets from operations
before distributions (79,517)
Distributions to shareholders from
Net realized gain on investments (80,388)
-----------------------
Total decrease in net assets (159,905)
Net Assets, beginning of period 8,592,246
-----------------------
Net assets, end of Period $ 8,432,341
Per Share Data
Investment income $ 0.24
Expenses (0.41)
Net realized gain on sale of investment 0.29
Net realized gain on collection of notes 0.07
Equity in earnings of affiliate (0.05)
Change in unrealized appreciation on assets (0.22)
-----------------------
Increase in net assets from operations before
distributions (0.08)
Distributions from realized gain on securities (0.09)
-----------------------
Net Increase (decrease) in net asset value (0.17)
Net asset value:
Inception 9.32
-----------------------
End of period $ 9.15
=======================
Ratios:
Ratio of expenses to average assets(%) (4)%
Ratio of net investment income to average assets(%) (2)%
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statement of Cashflows
for the 3 month period ended June 30, 1997
(unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities:
Decrease in net assets from operations before distributions $ (79,517)
Adjustments to reconcile increases in net assets from
operations before distributions to net cash used
by operating activities:
Amortization of organization costs 15,600
Change in unrealized appreciation on investments 205,564
Increase in other assets (352,760)
Equity in loss of affiliates 49,494
Decrease in receivables 4,024
Decrease in payables (31,303)
Increase in advisory fee payable 26,970
Increase in escrow 21,461
----------------------
Net cash used by operating activities (140,467)
Cash flow from investing activities
Purchase of securities (7,189,286)
Sale of securities/principal collection on securities 840,733
Investment in affiliate (38,000)
-----------------------
Net cash used by investing activities (6,386,552)
Cash flow from financing activities:
Loan proceeds net of payments 1,552,680
Distribution from net realized gain on investments (74,213)
-----------------------
Net cash provided by financing activities 1,478,467
Net decrease in cash and cash equivalents (5,048,552)
Cash and cash equivalents at beginning of period 5,584,460
----------------------
Cash and cash equivalents at end of period $ 535,908
======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
1. ORGANIZATION AND BUSINESS PURPOSE
Plymouth Commercial Mortgage Fund, a Delaware business trust, (the "Fund")
was organized on August 23, 1996 and commenced operations on September 27,
1996. The Fund seeks to achieve a high level of current income by purchasing
loans where the obligor is having trouble meeting the loan's contractual
requirements. The loans that the Fund purchases are typically secured by
commercial real estate.
The Fund has elected to be regulated as a business development company
under the Investment Company Act of 1940, as amended ("1940 Act").
2. SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation - The financial statements included
herein have been prepared in accordance with generally
accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 6 of
Regulation S-X. Certain information and footnotes normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. The Fund believes that the information that is
presented is a fair representation and reflects all adjustments
which are necessary for a fair presentation of the results of
operations for the interim periods.
B. Security Valuation - There is no publicly quoted market for the
Fund's impaired loan portfolio. As such, the fair value of
the portfolio is established by the Fund's Board of Trustees
using their best judgment. Such values are based upon what
the Board believes the Fund could reasonably expect to receive
for each impaired loan in an orderly disposition over a
reasonable time period.
In establishing the fair value of a loan, the Board considers
aspects about the individual loan as well as the general
economy. Such factors include but are not limited to: the
type of loan, whether the borrower is currently meeting the
contractual terms of the obligation, the length of time that
the borrower has or has not been meeting the contractual
terms, the probability that the borrower will begin or stop
making payments, the value of the collateral and the
guarantees securing the loans, the Fund's historical
experience selling the type of loan being valued, various
standard financial measurements, the remaining contract terms,
and prevailing interest rates.
Certain elements of the valuation procedure involve subjective
judgment. Because the majority of the Fund's impaired loans
are delinquent, no assurance can be given that the Fund will
be able to recover the fair value that the Board has
established. The Fund's impaired loans are not typically
backed by any government guarantee or private credit
enhancement. In many cases, the Fund will also incur certain
costs and delays in attempting to assert its right to payment
or in foreclosing on the loan's collateral. The actual value
realized on any particular loan will vary from the values
determined by the Board and can only be determined in
negotiations between the Fund and third parties.
In asserting its rights, the Fund will often attempt to
foreclose on a loan and acquire the collateral. Pursuant to
the terms of its credit agreement, any real estate that is
acquired through foreclosure is held by Plymouth REO, a wholly
owned subsidiary of the Fund. Real estate acquired through
foreclosure is recorded at its estimated fair value.
C. Federal Income Taxes - The Fund intends to elect the special
income tax treatment available to "regulated investment
companies" under Subchapter M of the Internal Revenue Code.
If the Fund qualifies as a regulated investment company and
distributes to shareholders annually in a timely manner at
least 90% of its "investment company taxable income," as
defined by the Code (i.e., net investment income, including
accrued discount, and net short-term capital gains), it will
not be subject to federal income tax on the portion of its
taxable investment income and net capital gain distributed to
shareholders as required under the Code. In addition, if the
Fund distributes in a timely manner 98% of its
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net capital gain income for each one-year period, and
distributes 98% of its investment company taxable income for
each calendar year (as well as any income not distributed in
prior years), it will not be subject to the 4% nondeductible
federal excise tax imposed with respect to certain
undistributed income of regulated investment companies.
D. Distributions to Shareholders - Dividends to shareholders are
recorded on the payment date. The Fund declared a dividend of
$6,176 for the quarter ended June 30, 1997 to shareholders of
record on June 30, 1997. The Fund has distributed a total
of $80,388 this year.
E. Other - Principal and interest payments due on notes held by
the Fund are recognized on the date received. Interest income
is typically not accrued because of the impaired nature of the
Fund's loan portfolio.
3. INVESTMENT ADVISORY AGREEMENT
The Fund has to entered into an Investment Advisory Agreement (the
"Agreement") with Emerald Advisers, Inc., a Delaware corporation, a registered
investment adviser, (the "Adviser"), under the Investment Advisers Act of 1940
(the "Adviser's Act"), as amended. (As of October 28, 1996, the Adviser
changed its name from Emerald Advisers, Inc. to Greystone Advisers, Inc. No
change in the Adviser's operations was made in conjunction with the name
change.) Unless terminated as described, the Agreement remains in effect until
September 22, 1998. Thereafter it will need to be specifically approved at
least annually by the Board of Trustees, including a majority of its members
casting their votes in person who are not "interested persons" of the Fund (as
defined by the 1940 Act) at a meeting called for the purpose of voting on such
approval or by "vote of a majority of the outstanding voting securities" of the
Fund. The Agreement can be terminated by the Fund at any time, without payment
of any penalty, on sixty day's written notice to the Adviser if the decision to
terminate has been made by the Board of Trustees or by "vote of a majority of
the outstanding voting securities" of the Fund. The Agreement will terminate
automatically in the event of its assignment.
Under the Agreement, the Adviser will manage the investments of the
Fund, subject to the supervision and control of the Fund's Board of Trustees.
Specifically, the Adviser will identify, evaluate, structure, close and monitor
the investments made by the Fund.
The Adviser will be required to pay all expenses incurred by it in
rendering its services. Generally, these expenses include the cost of office
space, telephone service, equipment and personnel required to perform its
obligations under the Agreement. The Fund will be required to pay its
operating expenses and reimburse the Adviser promptly for expenses which the
Adviser may pay on the Fund's behalf, except those specifically required to be
borne by the Adviser under the Agreement. Without limitation, such expenses
will include: all expenses of any offering and sale by the Fund of its shares;
the fees and disbursements of the Fund's counsel, accountants, and custodian;
fees and expenses incurred in producing and effecting filings with federal and
state securities administrators; costs of the Fund's periodic reports to and
other communications with the Fund's shareholders; fees and expenses of members
of the Fund's Board of Trustees who are not directors, officers or employees of
the Adviser; premiums for the fidelity bond maintained by the Fund; all costs
related to portfolio investments, including without limitation financing costs,
legal and accounting fees, expenses related to protecting or maintaining the
value of the loan portfolio or its underlying collateral, and other
professional or technical fees and expenses (e.g., credit reports, title
searches and delivery charges, property taxes, insurance premiums,
long-distance telephone charges, costs of specialized consultants such as
accountants or industry-specific technical experts, and travel expenses)
incurred in acquiring, monitoring, negotiating, working-out, and effecting
disposition of such investments, as well as responding to any litigation
arising therefrom; and all expenses related to any borrowings by the Fund.
During the term of this Agreement, the Fund will pay to the Adviser,
on the 15th day of each month: (a) a fee calculated at an effective annual rate
of 5.94% of the Fund's invested assets as of the end of the previous month; and
(b) a fee calculated at an effective annual rate of 0.48% of the Fund's cash
and short-term investments as of the end of the previous month. For purposes
of calculating the fee to be paid on a monthly basis, "invested assets" means
the asset value as determined by the Board as of the end of the previous fiscal
quarter minus cash, short-term investments, intangible assets, and the amount
of collections applied to the
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<PAGE> 8
carrying value of the loan portfolio since the end of the previous quarter,
plus the cost of loans purchased and capitalized advances to protect portfolio
investments or underlying collateral since the end of the previous quarter.
4. INVESTMENTS
The Fund invests primarily in impaired loans of companies that qualify
as "eligible portfolio companies" as defined in Section 2(a)(46) of the 1940
Act or in securities that otherwise qualify for investment as permitted in
Section 55(a)(1) through (6). Pursuant to section 55, loans from eligible
portfolio companies must represent 70% of the value of the Fund's total assets
before the Fund may purchase any loans that are not from eligible portfolio
companies. This percentage is difficult to maintain because the Fund must
purchase loans in package that may include some loans made by individuals who
do not meet the definition of an eligible portfolio company. As of June 30,
1997 qualifying loans represented approximately 57% of the total value of the
Fund's assets. The Fund has requested that the Securities and Exchange
Commission grant the Fund exemptive relief in order to allow the Fund to
invest in loans that are made by individual but that were made for commercial
purposes.
These loans typically are offered at auction in packages of multiple
loans. Sellers include entities such as the Federal Deposit Insurance
Corporation ("FDIC"), banks, savings and loans, insurance companies and other
financial institutions. The Fund's investments in loan packages will be
directed by the Adviser. The Fund holds its real estate assets in a
wholly-owned subsidiary as required in the agreement establishing its senior
credit facility.
Generally, a loan is considered impaired when, based on current information and
events, it is probable that a creditor will be unable to collect all amounts
due according to the contractual terms of the loan agreement unless the
borrower receives material assistance. While several types of impaired loans
are available for purchase, the Fund's portfolio will be concentrated in
impaired loans secured by commercial real estate. For both financial and
regulatory reasons, commercial banks, either directly or indirectly through the
FDIC, make these loans available for sale in packages with prices that are
typically more than $1 million per package. Quite often the sale of impaired
loans in this market offers creditors the only alternative to foreclosure.
These loans are carried on the Statement of Assets and Liabilities as of June
30, 1997, at fair value, as determined in good faith by the Fund's Board of
Trustees.
5. INDEBTEDNESS
As of June 30, 1997, the Fund had indebtedness of $1,552,680. The Fund has
open an $8,000,000 line of credit with a Texas bank.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
1) Financial Condition
During the six month period ended June 30, 1997, Plymouth purchased 60 loans
with a total cost of $7,189,286 and a total outstanding principal balance of
$13,506,000. Of these purchases, a total of 6 loans with a total principal
balance of $3,238,722 were purchased directly from a Texas bank pursuant to
a developing relationship that we first mentioned last quarter. As a result
of these purchases and one subsequent purchase, the Fund now owns a
total of 69 loans under management and 3 pieces of real estate held by a
subsidiary.
The Fund has fully invested its available equity and has borrowed additional
capital pursuant to an $8,000,000 line of credit. As of August 11, 1997
Plymouth had outstanding borrowings of $2,275,341. Plymouth intends to use
this line of credit to make additional purchases and has also begun considering
options to increase its capital base.
2) Results of Operations
Six Months ended June 30, 1997
For the six-month period ended June 30, 1997, the company recorded total
collections of $1,306,579. The majority of these collections came from six
loans that were either settled or sold in the first quarter for a total of
$927,039. The annual internal rate of return on the loans (including interim
expenses) was 26%, although
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<PAGE> 9
one loan was settled for a loss of $20,032. The most significant gain was
$119,439 on one loan that had no assigned cost.
Plymouth recorded a loss of $79,517 for the six-month period ended June 30,
1997 based on generally accepted accounting principles. The loss is primarily
because most of the Fund's portfolio consists of new loans that have not
generated much cashflow and for which the ultimate cash recovery has not been
well established. With the exception of two small loans disposed of in the
second quarter, Plymouth has received only monthly principal and interest
payments from the loans that it has recently acquired. Plymouth realizes
profits primarily when the loan is disposed of either through sale or
settlement. This process can take anywhere from nine to eighteen months.
For accounting purposes this gain or loss on disposition will most likely be
recorded when the Fund's Board of Trustees revalues the loans based upon the
perceived outcome. Because the new loans have not been held long, the Board
chose to leave most of these loans at their acquisition cost. Revising a
loan's value based on this information will have a material impact on earnings
in future quarters.
By comparison the Fund recorded net income and capital gains for the same
period of approximately $115,179 based on federal income tax accounting
methods. The difference between the Fund's earnings on a GAAP basis and on
a federal income tax basis reflects the initial markup to fair value to the
loans acquired from SWF 1995 Limited Partnership ("SWF 1995"). Based upon the
net income and capital gains reported for federal income tax purposes, the
Board of Trustees has declared distributions of $57,589 for this period (50% of
the net income and capital gains). Plymouth also made an additional
distribution of $22,799 in April for a portion of the capital gains recognized
in 1996.
Three Months ended June 30, 1997
For the three-month period ended June 30, 1997, the Fund recorded total
collections of $284,176. These collections came primarily from monthly
payments made pursuant to obligations that the Fund holds. Only two smaller
assets were settled in the second quarter for $16,652. The assets cost the
Fund $8,938.
Plymouth recorded a loss of $109,919 for the three-month period because the
Fund's loan portfolio primarily consists of newly acquired loans. Plymouth
realizes profits primarily when the loan is disposed of, either through sale or
settlement. This process can take anywhere from nine to eighteen months on
average.
For the present period, the Fund's Board of Trustees chose to leave the
value of most of the newly acquired loans at their cost until Plymouth's
adviser has been able to determine how it will recover the amount owed and
how much can be recovered. Revising a loan's value will have a material impact
on earnings in future quarters.
PART II - OTHER INFORMATION
1. LEGAL PROCEEDINGS
None.
2. CHANGES IN SECURITIES
(a) None.
(b) None.
3. DEFAULTS UPON SENIOR SECURITIES
(a) None.
(b) None.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
5. OTHER INFORMATION
8
<PAGE> 10
Lon A. Critchfield, former Senior Vice President of Plymouth
Commercial Mortgage Fund, resigned as an officer of Plymouth and left
the employment of Greystone Advisers, Inc. In March 1997, Mr.
Critchfield was an important part of both the asset review and asset
resolution function of Plymouth. To fill those roles, John Mosher and
Larry Krause have become active in asset review. Ted Hanes has
assumed Mr. Critchfield's responsibilities as to asset resolution.
Mr. Krause's former accounting responsibilities have been filled by
the new hire of Patrick J. Panzarella, a certified public accountant.
Management believes that the gap left by Mr. Critchfield has been
adequately filled.
The National Securities Markets Improvement Act of 1996 altered the
allocation of regulation of investment advisers between the federal
government and states. Pursuant to this reglation, because Greystone
Advisers, Inc. does not have at least $25,000,000 in assets under
management, it withdrew its federal investment adviser registration as
of July 8, 1997 and currently has an application pending with the
state of Texas. Management does not expect the change from federal to
state regulation of Greystone to have any effect on Plymouth or its
operations.
Plymouth's assets were formerly subject to a custodial agreement with
Comerica Bank--Texas, N.A. Comerica, however, discontinued its
custodial operations, and Plymouth has entered into another custodial
agreement with Broadway National Bank of San Antonio, Texas.
Management does not expect the change of custodian to have any effect
on Plymouth or its operations.
6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS-
(2)Plan of acquisition, reorganization, arrangement,
liquidation or succession: (None)
(3)(i) (A)Certificate of Trust of the registrant, as filed
August 23, 1996(1)
(B)Declaration of Trust of the registrant, dated
August 23, 1996(1)
(3)(ii)Bylaws of the registrant, dated September 3,
1996(1)
(4) (A)Loan Agreement between Comerica Bank-Texas and the
registrant, dated September 27, 1996(2)
(B)Agreement to furnish to the Commission upon
request a copy of Subordinated Note Agreement between the
registrant and SouthWest Holding Company, Inc., dated
September 27, 1996(2)
(10) (A)Investment Advisory Agreement by and between the
registrant and Emerald Advisers, Inc. (former name of
Greystone Advisers, Inc.), dated September 22, 1996(2)
(B)Custodial Agreement by and between Broadway
National Bank, Comerica Bank-Texas and the
registrant, dated June 16, 1997*
(15)Letter re unaudited interim financial information: (None)
(18)Letter re change in accounting principles: (None)
(19)Report furnished to security holders: (None)
(22)Published report regarding matters submitted to vote of
security holders: (None)
(23)Consents of experts and counsel: (None)
- --------------------
(1)Incorporated herein by reference from the registrant's
initial registration statement on Form 10 (File No. 0-21443), as
filed with the Commission on September 27, 1996.
(2)Incorporated herein by reference from amendment #1 of the
registrant's initial registration statement on Form 10 (File No.
0-21443), as filed with the Commission on January 15, 1997.
9
<PAGE> 11
(24)Power of attorney: (None)
(27)Financial Data Schedule(3)*
(B) REPORTS ON FORM 8-K- None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLYMOUTH COMMERCIAL MORTGAGE FUND
June 14, 1997 /s/ Robert R. Swendson
-----------------------------------------------
Robert R. Swendson, President and
Chief Executive Officer
June 14, 1997 /s/ John C. Mosher
-----------------------------------------------
John C. Mosher, Vice President and
Chief Financial Officer (Principal Financial Officer)
- --------------------
(3)Filed herewith.
10
<PAGE> 12
12
<PAGE> 1
AMENDED AND RESTATED CUSTODIAL AGREEMENT
This Custodial Agreement is entered into as of the 16th day of June,
1997, by and among (i) BROADWAY NATIONAL BANK, a national banking association
(the "Custodian"), (ii) COMERICA BANK - TEXAS, a state banking association (the
"Lender"), and (iii) PLYMOUTH COMMERCIAL MORTGAGE FUND, a Delaware business
trust ("Borrower").
1. The Lender and the Borrower have previously entered into that
certain Custodial Agreement (the "Orginal Agreement") dated
September 27, 1996 pursuant to which the Lender agreed to act
as custodian for certain instruments serving as collateral for
loans from the Lender to the Borrower.
2. Concurrently, herewith, the Lender, in its capacity as
custodian under the Original Agreement, has resigned as
"Custodian" and the Lender and the Borrower now desire to
amend and restate the Original Agreement to provide that
Broadway National Bank shall hereafter serve as Custodian in
accordance with the terms of this Agreement.
3. Now, therefore, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged and
confessed, the Custodian, the Lender and the Borrower hereby
agree that the Original Agreement is hereby amended and
restated in it entirety to hereafter be and read as follows:
R E C I T A L S:
WHEREAS, Borrower and Lender have entered into that certain Loan
Agreement dated September 27, 1996, as amended from time to time hereafter (the
"Loan Agreement"); and
WHEREAS, pursuant to the terms of the Loan Agreement and other
documents executed in connection with the Loan Agreement, Borrower is obligated
to deliver possession of the Acquired Loans and certain collateral therefor
which is required to be possessed by a secured party to obtain and maintain
perfection of the security interests in such Collateral of Lender; and
WHEREAS, Borrower will collect and service the Acquired Loans and REO
Property for the benefit of Borrower and Lender in accordance with the terms of
the Loan Agreement; and
WHEREAS, Borrower and Lender have requested Custodian to serve as
custodian for Lender with regard to the Possessory Collateral (as hereinafter
defined) during the terms of the Loan Agreement and any refinancings thereof,
to provide for perfection of the security interests held by Lender according to
the terms and conditions of this Custodial Agreement and to accommodate the
needs of the parties with respect to having access to Loan Documents in order
to manage and collect and dispose of the Acquired Loans and the REO Property;
and
WHEREAS, Custodian has agreed to serve as custodian for Lender with
regard to the Possessory Collateral in accordance with the terms and conditions
of this Agreement.
<PAGE> 2
NOW, THEREFORE, in consideration of their mutual promises, covenants
and agreements set forth below, the parties hereto agree as follows:
1. Definitions.
1.1 For purposes of this Custodial Agreement, the terms
defined in this Section 1, unless the context otherwise requires, will have the
meanings applied to them in this Section 1 and will include the plural as well
as the singular. Additional definitions may be found throughout this Custodial
Agreement. In addition, capitalized terms used in this Custodial Agreement and
not otherwise defined in this Agreement shall have the meaning set forth in the
Loan Agreement. All terms defined in the Uniform Commercial Code, as adopted
in the State of Texas (the "Code") shall have the meaning as defined therein
unless expressly defined otherwise in this Custodial Agreement.
1.2 As used in this Custodial Agreement, the following terms
will have the following meanings unless the context requires otherwise:
1.2.1 Chattel Paper shall have the meaning set forth
in the Code.
1.2.2 Instruments shall have the meaning set forth
in the Code.
1.2.3 Leases shall mean agreements providing for
payment to the owner of good(s) for the right to possession and use of such
good(s) for a specified period of time and shall include an agreement
determined to be a lease or a security interest under the Code. The term
"Lease" as used herein shall only include the agreement evidencing the
obligation of the lessee to make payments to Borrower as lessor, and shall not
include, or require Custodian to maintain possession or custody of, any bills
of sale, certificates of title, security agreements or other documents or
writings relating to the goods covered by the Lease.
1.2.4 Possessory Collateral shall mean (a) any and
all Chattel Paper, Instruments and Leases which relate to or evidence Acquired
Loans or collateral therefor, including without limitation all promissory notes
evidencing the Acquired Loans and such other documents, instruments and
agreements as Lender may from time to time designate as Possessory Collateral.
2. Delivery of Acquired Loans and Possessory Collateral.
2.1 Lender authorizes Borrower to (and Borrower agrees
to) deliver, or cause to be delivered, full and complete possession of all
Possessory Collateral to Custodian, which Possessory Collateral, along with
other items not delivered to Custodian, shall serve as security for the payment
of the Loans and shall be subject to a first priority lien in favor of Lender
pursuant to the terms of the Loan Documents to secure the promissory note
executed and delivered by Borrower to Lender pursuant to the terms of the Loan
Agreement. While the purpose of this Agreement is to protect, preserve and
perfect the interests of the Lender in the Possessory Collateral, the parties
hereto recognize that the Borrower retains ownership rights therein. The
various references throughout this Agreement to the Lender's interests in the
Possessory Collateral are not meant to negate the interest of Borrower stated
above, provided, however, that until the payment in full of the Loans,
Borrower's
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interest in the Possessory Collateral shall be subordinate in all respect to
the interests of Lender and the Possessory Collateral shall not be in any
manner or to any extent subject to the direction or control of Borrower.
2.2 On or about the date hereof, all of the original
promissory notes evidencing the Acquired Loans currently in Lender's possession
as "Custodian" under the predecessor to this Agreement shall be delivered to
Custodian at Custodian's office specified in Section 15. Upon the acquisition
by Borrower of any Acquired Loans purchased by the Borrower after the date
hereof, Borrower shall immediately deliver or cause to be delivered all the
original promissory notes evidencing such new Acquired Loans to Custodian at
Custodian's office specified in Section 15. Only upon delivery to said office
shall the Acquired Loans be deemed received by Custodian. Custodian shall have
no responsibility for risk of loss to the Acquired Loans while the Acquired
Loans are in the possession of Lender or Lender's Agent. The Lender is
delivering such Acquired Loans at the request of and risk of Borrower.
2.3 Borrower shall provide to Custodian at the time of
delivery to Custodian of any Possessory Collateral, a detailed listing of each
of the Acquired Loans and the associated Possessory Collateral comprising each
Acquired Loan.
2.4 Upon receipt of the Possessory Collateral, Custodian
will, promptly and with due care, review the listing of Acquired Loans and
Possessory Collateral received by it to ascertain that all Possessory
Collateral set forth in the listing has been received by Custodian and provide
a trust receipt to Lender acceptable to Lender, evidencing receipt of the
Possessory Collateral. If requested by Lender, Custodian will, on or before
ten (10) Business Days following receipt of the detailed listing, provide all
parties to this Custodial Agreement with a listing setting forth the Acquired
Loans and the Possessory Collateral received by it with respect thereto and
also specifying any Possessory Collateral set forth on the listing which have
not been placed in the actual possession of Custodian.
3. Custody of Acquired Loans and Possessory Collateral.
Custodian agrees to hold the Possessory Collateral in trust for the benefit of
and on behalf of Lender, and as Lender's agent in accordance with the
provisions of this Custodial Agreement. Except as otherwise provided in this
Custodial Agreement, Custodian shall, during the term of this Custodial
Agreement, segregate and maintain continuous actual custody, possession and
control of the Possessory Collateral deposited with it for and on behalf of
Lender. Custodian shall release the Possessory Collateral to Lender, as
required in this Custodial Agreement. Custodian may release Possessory
Collateral, from time to time, to Borrower solely in accordance with the
provisions of this Custodial Agreement.
4. Location of Acquired Loans and Possessory Collateral.
Borrower and Lender agree that the Possessory Collateral received by Custodian
may be maintained in a segregated and divided space in a vault or other secure
facility at any of Custodian's places of business in the State of Texas.
Custodian shall provide a 2-hour fire resistant facility to be located within
the storage area, the combination or keys for which shall be solely within the
custody of Custodian.
5. Examination of Possessory Collateral. Lender shall have and
is hereby granted right to examine and to obtain copies (to be made under
Custodian's supervision or by Custodian, as
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Custodian may require) of the Possessory Collateral and related documents in
Custodian's possession. Custodian is hereby directed and Custodian hereby
agrees to permit Lender and its agents and representatives to exercise such
rights on the premises of Custodian during normal business hours on any
Business Day, subject to compliance with Custodian's security regulations and
procedures. To the extent required by law, Possessory Collateral may be
inspected during Custodian's normal business hours by representatives
(employees or agents) of the Securities and Exchange Commission who may be
accompanied, unless otherwise directed by order of the Securities and Exchange
Commission, by one or more officers of Borrower authorized by a resolution of
Borrower described in Paragraph 12.2. Furthermore, representatives of
Borrower's independent public accountants, accompanied either by any two
persons specified in a resolution of Borrower described in Paragraph 12.2. or
by properly authorized officers or employees of Custodian, may physically
inspect Possessory Collateral for verification purposes. Custodian and Lender
may, but neither is obligated to, have one or more of their respective officers
or employees present at any physical inspection of any Possessory Collateral.
6. Continuation of Custody. Until the occurrence of termination
of this Agreement pursuant to the terms hereof, the Custodian's custody of the
Possessory Collateral shall continue, and neither Borrower nor Lender shall
have the right to retake the Possessory Collateral, except as permitted by
Sections 7, 8, 9 and 10 hereof.
7. Release of Acquired Loans and Possessory Collateral for
Collections or Foreclosure. Subject to Section 9 below, from time to time, to
the extent necessary in connection with foreclosure or collection proceedings
with respect to any Acquired Loan, the Custodian shall, upon Custodian's
receipt of a "Release Request" from Borrower (in accordance with Section 9
below), deliver to Borrower (or to such other party as may be designated in
such Release Request) such Possessory Collateral with respect to the Acquired
Loan in question as is listed in such Release Request. No original promissory
notes, Instruments or Leases comprising a part of the Acquired Loan shall be
delivered to Borrower (or to such other party as may be designated in the
Release Request) unless notice of the assignment thereof to Lender has been
placed on or attached to same. No legend shall be placed upon any other
Possessory Collateral.
The following legend shall be a satisfactory notice of the assignment
to Lender:
NOTICE: THIS PROMISSORY NOTE, INSTRUMENT OR CHATTEL PAPER AND ALL
DOCUMENTS EXECUTED IN CONNECTION HEREWITH HAVE BEEN TRANSFERRED AND ASSIGNED AS
COLLATERAL TO COMERICA BANK - TEXAS, P.O. BOX 650282, DALLAS, TEXAS
75262-0282.
Lender, in its sole discretion, may, pursuant to a written direction,
allow Custodian to release Possessory Collateral with respect to a specified
Acquired Loan without a legend where necessary to allow Borrower to pursue
collection of foreclosure.
8. Release of Possessory Collateral in Preparation of Payment of
Loan in Full or Sale. Subject to Section 9 below, from time to time in order
to facilitate a sale of an Acquired Loan or a payment in full of such Acquired
Loan, the Custodian shall, upon Custodian's receipt of a "Release
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<PAGE> 5
Request" from Borrower (in accordance with Section 9 below), deliver to
Borrower (or such other party as may be designated in such Release Request)
such Possessory Collateral with respect to the Acquired Loan in question as is
listed in such Release Request.
9. General Provisions Applicable to Releases of Possessory
Collateral.
9.1 All releases of Possessory Collateral pursuant to
Section 7 or Section 8 above shall be subject to the provisions of this Section
9.
9.2 Each Release Request shall be in the form of Exhibit
A attached hereto (a "Release Request") and shall have been consented to in
writing by Lender. Each Release Request shall set forth (i) the Acquired Loan
in question, (ii) a listing of the specific Possessory Collateral being
requested, (iii) the purpose for the release of the Possessory Collateral in
question and (iv) an acknowledgment of the continuing application of the
security interests of the Lender in the Acquired Loan and Possessory Collateral
in question and any proceeds thereof. Each such fully-executed Release Request
must be received by Custodian at least two (2) Business Days prior to the date
that possession of the Possessory Collateral in question is required.
9.3 Within two (2) Business Days after Custodian receives
a Release Request whereupon Lender has indicated in writing its consent to said
release, Custodian shall cause the requested Possessory Collateral to be
delivered to Borrower (or such other party as may be designated in such Release
Request) via overnight courier.
9.4 Contemporaneously with the delivery of any such
Released Possessory Collateral, Borrower shall execute and cause to be received
by Custodian a Trust Receipt in the form attached hereto as Exhibit B (a "Trust
Receipt"), or, if the Released Possessory Collateral is released to another
party designated in the Release Request, Borrower shall cause such party to
execute and cause to be received by Custodian a Trust Receipt; which Trust
Receipt shall set forth (i) the Acquired Loan in question, (ii) a listing of
the specific Possessory Collateral delivered and an acknowledgment of receipt
of same and (iii) an acknowledgment of the continuing application of the
security interest of Lender in the Acquired Loan and Possessory Collateral in
question and any proceeds thereof.
9.5 With respect to any Possessory Collateral released
pursuant to this Section, Borrower (and such other party as may be designated
in the Release Request) shall hold such Possessory Collateral as the subagent
of Custodian pursuant to the terms and conditions of this Agreement. Borrower
(and such other party as may be designated in the Release Request) may not
release any Possessory Collateral to any other party unless there has been
remitted to the Cash Collateral Account an amount in immediately available
funds equal to or greater than the minimum disposition amount with respect to
the Acquired Loan in question as specified in such Release Request approved by
Lender. The minimum disposition amount with respect to an Acquired Loan is an
amount equal to the Fair Market Value of such Acquired Loan, or if no such Fair
Market Value is then available, such other amount as is acceptable to Lender.
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9.6 Borrower shall be fully responsible to Lender for the
value of all Possessory Collateral in its possession, which value shall be no
less than the minimum disposition amount allocated to the Acquired Loan in
question, unless (a) within ten (10) Business Days after such delivery of the
Possessory Collateral, there has been received at the Cash Collateral Account
an amount in immediately available funds equal to the minimum disposition
amount specified in the Release Request, or (b) within ten (10) Business Days
after such delivery (except to the extent, if any, that Lender shall have
consented in writing to a longer period) Borrower has delivered or caused the
Possessory Collateral to be received by the Custodian. Except as provided
above or as otherwise consented to by Lender, Borrower (and such other party as
may be designated in the Release Request) shall have no right to retain any
Possessory Collateral for a period of more than ten (10) Business Days after
delivery by Custodian of such Possessory Collateral. Promptly upon Lender's
demand, Borrower shall pay to the Cash Collateral Account any amounts owed by
Borrower under this Section (except to the extent that breach of this section
has been cured as of the date of such demand).
10. Return of Possessory Collateral for Exercise of Rights. Upon
request from time to time of Lender, Custodian shall promptly cause to be
delivered to and received by Lender such Possessory Collateral as is requested
by Lender.
11. Reports. If requested by Lender, the Custodian shall advise
Lender by monthly written reports to be provided within ten (10) Business Days
following the end of each calendar month, and more frequently upon written
request by Lender of a detailed listing of the Possessory Collateral then held
by the Custodian and a detailed listing of Possessory Collateral released
pursuant to Sections 7 and 8.
12. Other Special Terms Affecting Withdrawal and Access.
12.1 PROVIDED, that Lender has been paid in full and no
longer claims a security interest or other rights in or to the Possessory
Collateral, or any of it, and FURTHER PROVIDED, that Custodian is still in
possession of Possessory Collateral and holding same pursuant to this
Agreement, Borrower may withdraw or order the withdrawal of Possessory
Collateral and need not maintain with Custodian:
a. Possessory Collateral on loan to third
parties which is collateralized to the full extent of this market value
(provided, however, that Custodian shall be under no duty to inquire as to the
details of any such loan of Possessory Collateral or to ascertain the adequacy
of any collateral or security therefor);
b. Possessory Collateral hypothecated, pledged,
or placed in escrow for Borrower's account in connection with a loan or other
transaction authorized by specific resolution of Borrower's Board of Trustees
(provided, however, that Custodian shall be under no duty to inquire as to the
terms of any such loan or other transaction or to obtain evidence or proof of
its authorization); or
c. Possessory Collateral in transit in
connection with its sale, exchange, redemption, maturity, or conversion, the
exercise of warrants or other rights, or assents to changes
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in the terms of Possessory Collateral, or other transactions necessary or
appropriate in the ordinary course of Borrower's business relating to the
management of Possessory Collateral.
12.2 Except as otherwise provided for by law or provided
for herein, no person shall be authorized or permitted to have access to the
Possessory Collateral deposited in accordance with Paragraph 2 except pursuant
to a resolution of Borrower's Board of Trustees. Each such resolution shall
designate not more than five (5) persons who shall be officers or employees of
Borrower. Such resolution(s) shall provide that access to Possessory
Collateral shall be had only by two or more persons jointly, at least one of
whom must be an officer of Borrower.
13. Other Records. In addition to any other records provided for
herein, each person, when depositing, withdrawing, or ordering the withdrawal
of Possessory Collateral, shall sign a notation with respect to such deposit,
withdrawal, or order which shall show:
a. the date and time of the deposit, withdrawal, or
order;
b. the identity of the Possessory Collateral made the
subject of such deposit, withdrawal, or order, describing it with reasonable
particularity to enable the reader of such notation to identify the specific
Possessory Collateral to which it relates;
c. the manner of acquisition of such Possessory
Collateral deposited or the purpose for which it is withdrawn or ordered to be
withdrawn; and
d. if such person delivered withdrawn Possessory
Collateral to another person, the name of such person.
Such notation shall be transmitted promptly to an officer or trustee of
Borrower designated by Borrower's Board of Trustees who shall not be a person
authorized to withdraw or order the withdrawal of Possessory Collateral;
PROVIDED, however that Custodian shall be under no duty to make inquiry or
determine that the officer(s) or trustee(s) so designated actually meet the
foregoing criteria. All such notations shall be on serially numbered forms,
and Custodian will retain copies of all executed notations for a period of one
year.
14. Termination of the Custodial Agreement.
14.1 Custodian may terminate this Custodial Agreement by
serving written notice of the intention to terminate to all other parties to
the Custodial Agreement not less than thirty (30) days prior to the intended
date of termination. In addition, this Custodial Agreement may be terminated
by Lender upon its serving notice to Custodian. Immediately upon termination
of this Custodial Agreement, Custodian shall deliver all of the Possessory
Collateral in its custody to Lender or a successor custodian specified in
writing by Lender at such location as Lender shall specify in writing. In the
event that the appropriate party, either Lender or a successor custodian,
specified in writing by Lender fails to accept delivery of the Possessory
Collateral within fifteen (15) days after termination of this Custodial
Agreement, then Custodian, at the expense of Borrower, shall deliver the
Possessory Collateral to Lender if the successor custodian failed to accept
delivery. The Possessory Collateral
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<PAGE> 8
shall be delivered together with a complete accounting of all of the Possessory
Collateral released at the time of such termination.
14.2 The termination of this Custodial Agreement by
Borrower may only occur after the payment in full of the Note and the
termination of the Loan Agreement.
14.3 Borrower shall pay all reasonable costs associated
with termination of this Custodial Agreement, including, but not limited to,
cost of shipping and transporting all Possessory Collateral and any
out-of-pocket expenses incurred by the Custodian.
15. Notice. Any notice, request or demand to or upon the parties
hereto must be given in writing. Notices shall be sent certified, postage
prepaid and shall be addressed to the party to receive the same as follows or
to such other addressee as may be hereafter designated in writing by the
respective parties hereto:
To Custodian: BROADWAY NATIONAL BANK
N.E. Loop 410 at Nacogdoches Road
San Antonio, TX 78217
Attention: Marika R. Witt
To Lender: COMERICA BANK-TEXAS
1601 Elm Street
Dallas, Texas 75201
P. O. Box 650282
Dallas, Texas 75262-0282
Attention: Gary W. Orr
with a copy to: COMERICA BANK-TEXAS
-------------- 114 W. 7th Street
Austin, Texas 78701
Attention: David W. Whiting
To Borrower: PLYMOUTH COMMERCIAL MORTGAGE FUND
c/o Emerald Advisers, Inc.
13333 Blanco, Suite 314
San Antonio, Texas 78216
Attention: Robert R. Swendson
All notices and other communications given to any party hereto in
accordance with the provisions of this Custodial Agreement shall be deemed to
have been given to any party five (5) days after being sent by registered or
certified mail, if by mail, in each case addressed to such party as provided
herein or in accordance with the latest unrevoked written notice from such
party in accordance with this Section.
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16. Facsimile Notices. All parties to this Custodial Agreement
agree that where any written consent or notice is required of any party that a
facsimile transmission signed on behalf of that party will be sufficient to
serve as such written consent or notice. The Custodian may act upon any
instrument or other writing believed by it in good faith to be genuine, and to
be signed or presented by the proper person. Each party to this Custodial
Agreement shall provide Custodian with notice executed by an officer of such
party containing the names of persons authorized, subject to change by
subsequent notice executed by an officer of such party and received in writing
by Custodian, to receive the Possessory Collateral, to sign notice or otherwise
act on behalf of those respective parties. Such notice shall additionally
provide sample signatures for such authorized persons. Custodian shall have no
liability and shall be held harmless by Borrower for any action that it takes
or fails to take in reliance on the signature or facsimile thereof provided
pursuant to this Section and not revoked in writing.
17. Replacement of Custodian. Lender and Borrower agree that upon
designation of a third party custodian, all parties to this Custodial Agreement
(except Custodian) will enter into a new custodial agreement with the third
party custodian. The agreement with the replacement custodian will require the
written consent of all parties to this Custodial Agreement (except Custodian)
to the release of any Possessory Collateral by the third party custodian, other
than the release of any Possessory Collateral to Lender which not require the
consent of any party other than Lender. The custodial agreement with the third
party custodian will additionally acknowledge that the third party custodian
holds the Possessory Collateral in trust as agent for Lender and will
acknowledge the residuary interest of Borrower in the Possessory Collateral.
18. No Qualification to do Business. Nothing in this Custodial
Agreement shall be deemed to impose upon the custodian any duty to qualify to
do business in any state other than the State of Texas.
19. Prior Agreements. This Custodial Agreement supersedes all
prior and contemporaneous agreements and understandings relating to the subject
matter hereof. This Custodial Agreement may not be changed, waived, discharged
or terminated orally, but rather only by an instrument in writing signed by the
parties hereto.
20. Compensation of Custodian. In consideration of the services
to be performed by Custodian hereunder, Borrower agrees to pay to Custodian an
annual fee of $2,500.00 (the "Custodial Fee"), together with all other
out-of-pocket expenses and costs incurred by Custodian in performing its duties
hereunder.
The Custodial Fee has been paid contemporaneously with the execution
of this Agreement. Additional payments of the Custodial Fee shall be due and
payable on the anniversary date of this Agreement. The Custodial Fee includes
all services to be provided under the terms of this Custodial Agreement. In
the event that additional services are required of Custodian, the Custodial Fee
shall be increased to take into account such additional services to be provided
by Custodian.
21. Prohibition on Assignment. Custodian shall not delegate,
assign or sub-contract any of its rights or obligations under this Custodial
Agreement except to an Affiliate of Custodian.
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22. Termination of Obligations of Custodian. Unless the Loan
Agreement contemplates the delivery of additional Possessory Collateral to the
Custodian, the Custodian's obligations under this Custodial Agreement shall
cease upon the delivery or surrender of all of the Possessory Collateral then
in its possession pursuant to Section 12.
23. Limitation of Liability of Custodian. Except from the time of
receipt by Custodian of any item of Possessory Collateral until the time of
delivery by Custodian of such item of Possessory Collateral, the Custodian
shall not be liable for the physical loss of or damage to such time of
Possessory Collateral, including loss or damage caused by fire, water, theft or
burglary, riots, civil strife or commotion, force majeure, acts of God or acts
of war. Except as to physical loss of or damage to items of Possessory
Collateral occurring from the time of receipt of same by Custodian until the
time of delivery of same by Custodian, the Custodian shall not be liable in
connection with the performance of its fiduciary duties pursuant to the
provisions of this Custodial Agreement, except for: (i) liability arising from
Custodian's gross negligence; (ii) willful misconduct; (iii) intentional
breaches of this Custodial Agreement; or (iv) dishonest or fraudulent acts.
Borrower shall hold harmless and indemnify Custodian and its officers,
directors, employees and affiliates against all losses, damages, costs and
expenses (including, without limitation, reasonable legal fees) to the extent
arising from claims made against Custodian for any action or inaction which
does not constitute gross negligence, willful misconduct, intentional breaches
of this Custodial Agreement or dishonest or fraudulent acts. Under no
circumstances shall Custodian be liable for any consequential, incidental or
indirect damages, even if advised of the possibility of same.
24. Limitation of Duties of Custodian. Except as set forth in
this Custodial Agreement, the duties of the Custodian are specifically limited
to receiving actual possession of the Possessory Collateral delivered to it,
notifying (if requested by Lender) the parties of its receipt or non-receipt of
Possessory Collateral set forth in the listings provided by Borrower,
maintaining actual possession and custody of the Possessory Collateral subject
to temporary release thereof as set forth in this Custodial Agreement, and
ultimately delivering Possessory Collateral as specified in this Custodial
Agreement. Custodian shall have no responsibility with respect to any
Possessory Collateral or to notify any party concerning its possession or lack
of receipt of any Possessory Collateral except as to those items of Possessory
Collateral listed in the listings described in Section 2.23 of this Custodial
Agreement. Custodian shall not be responsible for determining the sufficiency
of any documentation or other actions required for perfection of the security
interest of Lender in the Possessory Collateral. Custodian shall not be
responsible for determining the authenticity of any documents provided to it,
but shall advise Borrower and Lender if it believes that any documents provided
to it are not authentic or otherwise are not what they purport to be on such
listing, though Custodian shall have no liability for failure to do so.
Custodian shall not be responsible for taking possession of any consumer goods,
certificates of title or other items of collateral or property (except for the
Possessory Collateral). Custodian shall not be responsible for maintaining
custody of any files, documents, or other materials in addition to the
Possessory Collateral.
25. Modification. This Agreement and the procedures described
herein may be modified from time to time but only in writing and in an
instrument executed by all of the parties hereto.
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26. Negation of Partnership. The relationship between the
Borrower and Lender is that of debtor and creditor. Nothing contained in this
Agreement will be deemed to create a partnership or joint venture between any
of the parties hereto or between Custodian and any other party, or to cause
Custodian to be liable or responsible in any way for the actions, liabilities,
debts, or obligations of the borrower or any other party.
27. Indemnification.
27.1. Borrower agrees to indemnify and hold harmless
Custodian and its directors, officers, agents and employees against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursement of any kind or nature whatsoever which
may be imposed upon, incurred by or asserted against Custodian or such
directors, officers, agents or employees, by reason of any action taken or
omitted to be taken by Custodian as Custodian under this agreement, except such
liabilities, obligations losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Custodian's own gross
negligence or willful misconduct, or from Custodian's refusal to follow the
specific directions of Lender in compliance with this Agreement requiring the
immediate transfer of any item of Possessory Collateral.
27.2. The indemnification obligations of Borrower shall
survive termination of this Agreement.
27.3. Acceptance by the Custodian of its duties under this
Agreement is subject to the following terms and conditions, which the parties
to this Agreement hereby agree shall govern and control the rights, duties and
immunities of the Custodian:
(i) The duties and obligations of the Custodian
shall be determined solely by the express provisions of this Agreement and the
Custodian shall not be liable except for performance of such duties and
obligations as are specifically set out in this Agreement;
(ii) The Custodian shall be fully protected by
Borrower in acting or relying upon any written notice, direction, request,
waiver, consent, receipt or other paper or document which the Custodian in good
faith believes to be genuine and to have been signed or presented by the proper
party or parties;
(iii) The Custodian shall not be liable for any
error of judgment, or for any act done or step taken or omitted by it in good
faith or for any mistakes of fact or law, or for anything which it may do or
refrain from doing in connection herewith, except its own gross negligence or
willful misconduct;
(iv) Custodian shall not be responsible to any
party hereto for any recitals, statements, representations or warranties
contained in the Loan Agreement or in any Loan Document; or for the execution,
effectiveness, genuineness, validity, enforceability, collectability, or
sufficiency of the Loan Agreement or any other Loan Documents or instruments
executed and delivered, or which could have been executed or delivered in
connection with the Loan Agreement or the other Loan Documents, including
without limitation the attachment, creation, effectiveness or perfection of the
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<PAGE> 12
security interest granted or purported to be granted hereunder in and to the
Possessory Collateral. Custodian shall be entitled to refrain from exercising
any discretionary powers or actions under this Agreement until Custodian shall
have received the prior written consent of Lender to such action; and
(v) The Custodian may seek the advice of legal
counsel in the event of any dispute or question as to the construction of any
of the provisions of this Agreement or its fully protected in respect of any
action taken, omitted or suffered by it in good faith in accordance with the
written opinion of such counsel.
28. No Waiver of Lender's Rights. The Agreement and the documents
executed in connection herewith by Lender shall not constitute a waiver or
accord and satisfaction of any of Lender's rights and remedies pursuant to any
of the Loan Documents and applicable law, and Lender hereby expressly affirms
its retention of all of their rights pursuant to such loan documents and
applicable law to effect collection of the amounts due it from the Borrower.
Nothing contained herein shall be deemed an election by Lender of any of its
rights and remedies under such loan documents or applicable law against
Borrower or any collateral securing the loans by Lender to Borrower.
29. Conflicts. Solely in the event that any term or condition
contained in this Agreement conflicts or is inconsistent with a provision in
any of the loan documents of Lender, the terms and conditions of this Agreement
shall supersede and control. In all other respects, the provisions of such
loan documents shall remain in full force and effect, including, without
limitation, any and all additional terms or conditions therein which are not in
conflict with the provisions of this Agreement.
30. Headings. Paragraph or other headings contained in this
Agreement are for reference purposes only and are not intended to affect in any
way the meaning or interpretation of this Agreement.
31. Counterpart Execution. This Agreement may be executed in
counterparts, each of which will be deemed an original document, but all of
which will constitute a single document.
32. Cumulative Remedies. This Agreement and each of the documents
to be executed in connection herewith and the obligations of the Borrower
hereunder and thereunder are in addition to and not in substitution for any
other obligations or security interests now or hereafter held by Lender and
shall not operate as a merger of any contract or debt or suspend the
fulfillment of or affect the rights, remedies, powers, or privileges of either
Lender in respect of any obligation or other security interest held by it for
the fulfillment thereof.
33. Cooperation. The Borrower agrees to execute and deliver, or
to cause to be executed and delivered, those documents and to do, or cause to
be done, such other acts and things as might reasonably be requested by Lender
to assure that the benefits of this agreement are realized by the Lender.
34. Attorney's Fees and Expenses. Each prevailing party shall be
entitled to be reimbursed jointly and severally by the non-prevailing parties
for all reasonable costs and expenses (including
-12-
<PAGE> 13
reasonable attorneys' fees and disbursements) in its successful prosecution or
defense of any provision of this Agreement.
35. Severability. In the event that any term or provision of this
Agreement or the application thereof to any person or circumstance shall, to
any extent, be held invalid or unenforceable, the remainder of this Agreement
or the application of such term or provision to persons or circumstances other
than those to which it is held invalid or unenforceable, shall be valid and
enforceable to the fullest extent permitted by law.
36. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
37. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the successors and assigns of the Lender and the
Borrower; provided, however, the foregoing shall not be deemed to allow any
assignment or delegation by Borrower in violation of the terms of the Loan
Agreement. Any such assignment or delegation shall be void.
38. Survival. The provisions of Section 14.3, 16, 20, 23, 24, 27
and 34 shall survive the termination of this Agreement.
The parties to this Custodial Agreement have caused it to be executed
by their duly authorized officers and/or representatives as of the day and year
first above written.
BORROWER:
PLYMOUTH COMMERCIAL MORTGAGE FUND
By: /s/ John C. Mosher
-------------------------------------------------
Name: John C. Mosher
-----------------------------------------------
Title: Vice President
----------------------------------------------
CUSTODIAN:
BROADWAY NATIONAL BANK
By: /s/ Robert W. Carlson
-------------------------------------------------
Name: Robert W. Carlson
-----------------------------------------------
Title: Senior Vice President and Trust Officer
----------------------------------------------
LENDER:
-13-
<PAGE> 14
COMERICA BANK-TEXAS
By: /s/ Andrew A. Britton
----------------------------------------------
Name: Andrew A. Britton
--------------------------------------------
Title: Senior Vice President
-------------------------------------------
-14-
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the
registrant's Statement of Assets and Liabilities as of September 31, 1996
(unaudited), and Statement of Operations, Statement of Changes in Net Assets,
and Statement of Cash Flows for the period ended September 31, 1996
(unaudited), and is qualified in its entirety by reference to such Statement of
Assets and Liabilities, Statement of Operations, Statement of Changes in Net
Assets, and Statement of Cash Flows.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 8,656,715
<INVESTMENTS-AT-VALUE> 9,025,616
<RECEIVABLES> 2,427
<ASSETS-OTHER> 456,400
<OTHER-ITEMS-ASSETS> 624,308
<TOTAL-ASSETS> 10,108,751
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 1,552,680
<OTHER-ITEMS-LIABILITIES> 123,730
<TOTAL-LIABILITIES> 1,676,410
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,976,773
<SHARES-COMMON-STOCK> 921,627
<SHARES-COMMON-PRIOR> 921,627
<ACCUMULATED-NII-CURRENT> (296,866)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 383,533
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 368,901
<NET-ASSETS> 8,432,341
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 64,457
<OTHER-INCOME> 34,909
<EXPENSES-NET> 202,765
<NET-INVESTMENT-INCOME> (103,399)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 28,555
<NET-CHANGE-FROM-OPS> (109,919)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 80,388
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,416,079
<ACCUMULATED-NII-PRIOR> (220,091)
<ACCUMULATED-GAINS-PRIOR> 202,431
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 100,451
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 202,765
<AVERAGE-NET-ASSETS> 8,512,293
<PER-SHARE-NAV-BEGIN> 9.32
<PER-SHARE-NII> 9.15
<PER-SHARE-GAIN-APPREC> 0.82
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.09
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.15
<EXPENSE-RATIO> (4)
<AVG-DEBT-OUTSTANDING> 776,340
<AVG-DEBT-PER-SHARE> 0.84
</TABLE>
