FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

Secured Properties
The Secured Properties will be mortgaged in favour of the Issuer when the Issuer acquires from the
Lenders the Receivables and the Related Security pursuant to the Receivables Transfer and Servicing
Agreement. The principal terms of the Mortgages and the Receivables Transfer and Servicing Agreement
are set out in ‘‘Summary of Principal Documents’’. Under French law the only method of enforcing a
mortgage is to sell the properties at public auction.
The first step to enforcing a mortgage under French law is to deliver an enforcement notice to the debtor
ordering it to pay its debt (commandement de payer) byahuissier (bailiff) (article 673 of the French
Ancien Code de Procédure Civile). Article 673 only applies when the Secured Property is to be sold by the
mortgagor to a third party (article 2169 of the French Code Civil). If the debtor does not pay its debts,
this notice must be filed at the Land Registry (Bureau de la Conservation des Hypothèques) for the district
in which the Secured Property subject to the enforcement is situated. Pursuant to article 688 of the French
Ancien Code de Procédure Civile, the next step is to instruct local legal counsel to draft the terms of the
sale approved by the court (cahier des charges), including a minimum sale price for the Secured Property.
The minimum price is determined by the mortgagee.
Finally, a number of notices would need to be published prior to the sale (such as the legal notice of the
sale, advertisements of the sale and notifying other creditors to inform them of the terms of sale). The
buyer of a Secured Property would have to pay French registration tax (at the rate of 4.99 per cent. plus
notary fees on the purchase price or, in exceptional cases, French VAT at the rate of 19.6 per cent. plus
a 1 per cent. fee (approximately) and notary fees).
Until the day of public auction, the Issuer (represented by the relevant FCC Servicer, acting under the
authority of the Management Company) may sell the Secured Property out of court if the debtor consents
to the price and grants a discharge of the foreclosure notice.
If no bid were made at the public auction, the enforcing creditor would be declared to be the highest
bidder and would be obliged to purchase the Secured Property at the minimum sale price specified in the
terms of the sale.
Any interested party may re open the auction by offering to purchase the Secured Property for a sum 10
per cent. higher than the highest bid within 10 days of the sale by auction.
The Issuer, as mortgagee, would be paid out of the proceeds only after full satisfaction of a minimal
number of preferred claims, if any, such as Court fees, certain ‘‘super preferred’’ (super privilégié) and
‘‘preferred’’ tax and social security claims for wages and (in the case of insolvency) claims arising out of
the continuation of the activity of the insolvent company (Article L.621 32 of the French Commercial
Code). There should not be any social security claims for wages as all of the Borrowers covenant in the
Commercial Mortgage Loan Agreements not to have any employees.
Certain limited ‘‘technical’’ liens (privileges spéciaux) provided for in article 2103 of the French Code Civil,
such as those in favour of architects and builders who have worked on the building, could rank in priority
to the Issuer.
The enforcement procedures would need to be repeated in every district in which Secured Properties
subject to enforcement are situated.
Shares Pledges
Under each Shares Pledge, the Issuer (represented by the relevant FCC Servicer, acting under the
authority of the Management Company) may, pursuant to article 2078 of the French Code Civil, ask the
Court for the Pledged Shares to be transferred to it (attribution judiciaire) in satisfaction of the obligations
of the relevant Borrower to the Issuer. An order for the Pledged Shares to be transferred to the Issuer
would be granted by the Court subject to, among other things, verifying that (i) the secured debt is due
and payable, (ii) the pledge is valid and enforceable and (iii) an expert appointed by the Court has valued
the shares. In the case where the value of the shares is higher than the amount of the secured debt the
Issuer would, subject to being indemnified to its satisfaction, pay a consideration for the difference (or
would limit its claims to the relevant percentage of the pledged shares).
Upon the Issuer becoming the sole or majority shareholder of the Borrowers it could take steps to
dissolve the companies and to proceed with the realisation of their assets and the discharge of their
obligations.
The enforcement procedure would take approximately two years and could take a further one to two
years if appealed by another creditor.
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