GUARANTY
THIS GUARANTY (the "Guaranty") is made and entered into as of the 28th
day of February, 1997 (the "Effective Date") by Fund American Enterprises
Holdings, Inc. (the "Guarantor"), to and for the benefit of Chemical Mortgage
Company, an Ohio corporation, its stockholders, officers, directors, employees,
agents successors and assigns (collectively, the "Purchaser").
WITNESSETH:
WHEREAS, Source One Mortgage Services Corporation (the "Seller") owns
the servicing rights to certain residential mortgage loans with an aggregate
outstanding principal balance of approximately 18 Billion Dollars as of August
31, 1996 (individually, a "Mortgage Loan" or collectively the "Mortgage Loans")
which Mortgage Loans are owned by the Federal National Mortgage Association, the
Federal Home Loan Mortgage Corporation, or the Government National Mortgage
Association, and
WHEREAS, Seller and Purchaser have entered into a certain
FNMA/FHLMC/GNMA Mortgage Servicing Purchase and Sale Agreement dated as of
February 28th, 1997 (the "Sale Agreement") pursuant to which Purchaser agreed to
purchase from Seller all of Seller's right, title and interest in and to the
servicing of the Mortgage Loans, and Seller has agreed to subservice the
Mortgage Loans for a period of time, all as more particularly described in the
Sale Agreement (the "Servicing"); and
WHEREAS, Purchaser has advised Guarantor and Seller that it will not
purchase the Servicing unless, among other matters, Guarantor guarantees to the
Purchaser the performance and satisfaction of the obligations of Seller as
described in the Sale Agreement, as hereinafter provided, because Guarantor will
derive substantial benefits from the purchase of the Servicing by Purchaser.
NOW, THEREFORE, in order to induce Purchaser to complete the
transaction contemplated by the aforesaid Sale Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor agrees as follows:
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Section 1. Incorporation of Recitals and Definition of Purchase
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Documents. The foregoing recitals are hereby acknowledged and agreed to be true
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and are hereby incorporated into the body of this Guaranty by reference to the
same extent as if herewith set forth in full. The Sale Agreement and all other
documents, instruments and certifications related to the purchase of the
Servicing are sometimes herein collectively referred to as the "Purchase
Documents."
Section 2. Guaranty.
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(a) Guarantor hereby guarantees to Purchaser, and shall stand as surety
for, the full and complete payment and performance of the obligations of Seller
pursuant to the Sale Agreement, including but not limited to the obligations of
Seller to act as subservicer pursuant to the terms of an interim subservicing
agreement and a subservicing agreement which are a part of the Sale Agreement.
This is a guaranty of payment and performance and not of collection only.
Guarantor shall not be discharged or released hereunder by reason of a discharge
of Seller in bankruptcy, receivership or other proceeding, a disaffirmation or
rejection of the Sale Agreement by a trustee, custodian, or other representative
with respect to a bankruptcy or receivership, a stay or other enforcement
restriction, or any other reduction, modification, impairment or limitation of
the liability of Seller or any remedy of Purchaser. Except in accordance with
Section 7, Guarantor shall not be discharged or released hereunder by reason of
the full or partial transfer or assignment of Seller's obligations under the
Sale Agreement (or the Mortgage Loan Subservicing Agreement or the Mortgage Loan
Interim Subservicing Agreement which are incorporated into and are a part of the
Sale Agreement).
(b) The right of recovery against the Guarantor under this Guaranty is,
however, limited, in the aggregate, to an amount calculated as set forth herein
below (the "Guaranty Amount"):
The Guaranty Amount shall equal, as of the date of the presentation by
Purchaser to Guarantor of any claim for payment hereunder, Twenty
Million Dollars ($20,000,000) times a fraction, the numerator of which
is the aggregate outstanding principal balance of the mortgage loans
which are the subject of the Sale Agreement as of the date of
presentation of such claim, and the denominator of which is the
aggregate outstanding principal balance of the mortgage loans which are
the subject of the Sale Agreement as of the Effective Date.
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Notwithstanding anything to the contrary contained herein, the Guaranty
Amount shall never be greater than Twenty Million Dollars ($20,000,000) nor less
than Fifteen Million Dollars ($15,000,000). The Guaranty Amount applies to the
liability of Guarantor under this Guaranty with respect to the obligations
guaranteed under this Section 2, and not with respect to the par value of any
mortgage loan which may be the subject of a claim hereunder.
Section 3. Benefit. This Guaranty may be assigned or transferred in
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whole or in part by Purchaser to any assignee of all of its rights and interest
permitted under the Sale Agreement, and the benefit of this Guaranty shall pass
with a transfer or assignment of the Servicing (or the Servicing related
thereto) to any subsequent transferee or assignee. All references to "Purchaser"
herein shall be deemed to include any successor or assignee of Purchaser or any
subsequent owner of the Servicing.
Section 4. Actions by Purchaser. Except as set forth in the Purchase
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Documents, no action which Purchaser may take or omit to take in connection with
the Purchase Documents or the Servicing, nor any course of dealing with Seller
or any other person shall release Guarantor's obligations hereunder, affect this
Guaranty in any way, or afford Guarantor any recourse against Purchaser. By way
of example, but not in limitation of the foregoing, Guarantor hereby expressly
agrees that Purchaser may, from time to time, and without notice to or consent
of Guarantor (but with notice to or consent of Seller to the extent notice or
consent is required under the Purchase Documents): (a) amend, change or modify,
in whole or in part, any of the Purchase Documents; (b) waive any terms,
conditions or covenants of the Purchase Documents, or grant any extension of
time or forbearance for performance of the same; (c) compromise or settle any
amount due or owing, or claimed to be due or owing, under the Purchase
Documents; or (d) release, substitute or add a guarantor or guarantors of the
obligations of Seller to Purchaser guaranteed hereby. The provisions of this
Guaranty shall extend and be applicable to all amendments and modifications of
the Purchase Documents, and all references to any of the Purchase Documents
shall be deemed to include any amendment or modification thereof.
Section 5. Waiver of Notice. Guarantor expressly waives notice of: (i)
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acceptance of this Guaranty, (ii) collecting sums due under the Purchase
Documents, (iii) enforcing of any of the terms thereof, or (iv) the taking of
any action with reference thereto or any liability under this Guaranty.
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Section 6. Dependent Obligation. The obligations of Guarantor hereunder
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shall be, conditioned solely upon a default by Seller under the Purchase
Documents. Purchaser may proceed directly against the Guarantor to enforce its
rights under this Guaranty without proceeding against or joining the Seller.
Guarantor hereby waives any rights it may have to compel Purchaser to proceed
against Seller.
Neither the exercise of any remedies against Seller, nor the sale,
enforcement or realization of any of the Servicing shall (except to the extent
that such actions cause the obligations guaranteed by Guarantor to be satisfied)
in any way affect Guarantor's obligations hereunder, even though any rights
which Guarantor may have against Seller or others may be extinguished,
diminished or otherwise affected by such action.
Section 7. Delegation/Termination. Except as otherwise set forth in
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this Section 7, Guarantor's obligations hereunder shall not, without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld,
be assigned, assumed or delegated. Guarantor's obligations hereunder may be
assigned, assumed or delegated to any of the five entities named in a separate
letter dated and delivered of even date herewith by Purchaser to Guarantor,
provided that such entity assumes all of Guarantor's obligations hereunder, and
provided that there has not been a material adverse change in the operations or
financial condition of such entity as of the date of any such assumption.
Guarantor's obligations hereunder shall automatically terminate on a date (the
"Termination Date") which is the earlier of (i) ten (10) years from the
Effective Date; or (ii) the date on which all of the Seller's obligations under
the Purchase Documents have been irrevocably paid and discharged in full.
However, Purchaser may recover under this Guaranty beyond the Termination Date
in accordance with the terms of Section 11.6 of the Sale Agreement, provided
that notice shall have been given to Guarantor prior to the Termination Date.
Section 8. No Oral Change. This Guaranty may not be changed or amended,
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except by a writing signed by the party against whom enforcement of such change
or amendment is sought, and no obligation of Guarantor shall be released or
waived by Purchaser or any subsequent owner of the Servicing, except by a
writing signed thereby.
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Section 9. Cost of Enforcement. In connection with any litigation or
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court proceeding arising out of the enforcement of this Guaranty, the prevailing
party shall be entitled to recover from the non-prevailing party all cost
incurred, including attorneys' fees incurred for services rendered before suit
is brought, prior to trial, at trial, or appeal, or in federal bankruptcy
proceedings.
Section 10. Financial Statements. Guarantor hereby warrants and
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represents that as of the Effective Date, there has been no material adverse
change in its financial condition from that reflected in the financial
statements previously submitted to Purchaser, except as may result from the
transactions effected under the Sale Agreement, and that since the date of such
statements, the business, property and assets of Guarantor have not been
adversely affected in any material way. During the term of this Guaranty,
Guarantor shall, within one hundred (100) days after the end of each calendar
year, provide financial statements to Purchaser for such calendar year certified
by Guarantor as true and correct.
Section 11. Governing Law. This Guaranty shall be governed by and
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construed in accordance with the laws of the State of Ohio.
Section 12. Subrogation. Guarantor hereby unconditionally and
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irrevocably agrees that, until the Termination Date (i) Guarantor will not at
any time assert against Seller (or Seller's estate in the event Seller becomes
bankrupt or becomes the subject of any case or proceeding under the bankruptcy
laws of the United States of America) any right or claim to indemnification,
reimbursement, contribution or payment for or with respect to any and all
amounts Guarantor may pay or be obligated to pay Purchaser, including, without
limitation, the indebtedness and any and all obligations which Guarantor may
perform, satisfy or discharge, under or with respect to this Guaranty; (ii)
Guarantor shall have no right of subrogation, and Guarantor shall have no right
to enforce any remedy which Guarantor now has or may hereafter have against
Seller; and (iii) Guarantor waives any benefit of, and any right to participate
in, any security now held by Purchaser. Guarantor waives any defense based upon
an election of remedies by Purchaser which destroys or otherwise impairs any
subrogation rights of Guarantor or the right of Guarantor to proceed against
Seller for reimbursement. Prior to the Termination Date, Guarantor may take such
steps as may be reasonably necessary to protect its ability to assert its rights
after the Termination Date. If any
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amount shall be paid to or received by Guarantor, prior to the Termination Date,
on account of such subrogation rights or in connection with action taken to
protect such subrogation rights, such amount shall be held in trust by Guarantor
for the benefit of Purchaser and shall be paid to Purchaser to be credited and
applied against the obligations of Guarantor hereunder. Guarantor further hereby
unconditionally and irrevocably agrees that, subject to the limitation set forth
in Section 2 of this Guaranty, its guaranty extends to the full and prompt
payment to Purchaser of any of the indebtedness or other sums paid to Purchaser
pursuant to the Purchase Documents which Purchaser is subsequently ordered or
required to pay or disgorge on the grounds that such payments constituted an
avoidable preference or a fraudulent transfer under applicable bankruptcy,
insolvency or fraudulent transfer laws; and Guarantor shall fully and promptly
indemnify Purchaser in defense of such claims of avoidable preference or
fraudulent transfer.
Section 13. Guarantor's Representations and Warranties. Guarantor
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hereby represents and warrants to Purchaser as follows:
(a) Guarantor has all requisite power and capacity to enter into
this Guaranty and to perform its obligations hereunder. Guarantor's execution
and delivery of this Guaranty and any related agreements or instruments and the
consummation of the transactions contemplated hereby and thereby has been duly
authorized by all requisite action and no further action or approval is required
in order to constitute this Agreement as a binding and enforceable obligation of
the Guarantor;
(b) Guarantor's execution and delivery of this Guaranty does not
violate any provision of law or regulation, any order of any court or other
agency or instrumentality of government (including but not limited to, a
supervisory agreement, memorandum of understanding, cease and desist order,
capital directive, supervisory directive or consent decree); and
(c) The execution, delivery and performance of this Guaranty, and
any related agreements or instruments by Guarantor, its compliance with the
terms hereof and thereof, and consummation of the transactions contemplated
hereby and thereby, will not violate, conflict with, result in a breach of,
constitute a default under, be prohibited by, or require any additional approval
under its by-laws, or any instrument or agreement to which it is a party or by
which it is bound or which affects the Servicing.
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Section 14. Invalidity of Particular Provisions. If any term or
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provision of this Guaranty shall be determined to be illegal or unenforceable,
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by law.
Section 15. Headings. The heading used herein are for purposes of
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convenience only and shall not be used in construing the provisions hereof.
Section 16. Notice of Special Events. If Guarantor shall become
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bankrupt or insolvent, or any application shall be made to have Guarantor
declared bankrupt or insolvent, or a conservator, receiver or trustee shall be
appointed for Guarantor or for all or a substantial part of the property of
Guarantor, or Guarantor shall make an assignment for the benefit of its
creditors, or Guarantor shall enter into a proceeding for its dissolution,
notice of such occurrence shall be promptly furnished to Purchaser by Guarantor.
Section 17. Notices. Any notices, demands and requests required under
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this Guaranty shall be in writing and shall be deemed to have been given or made
if served personally, or sent by United States registered or certified mail
(effective 48 hours after deposit thereof at any main or branch United States
Post Office), first class postage prepaid, return receipt requested, or by
telecopier, addressed as set forth below or to such other addresses as any party
may hereafter designate by like notice:
PURCHASER: Chemical Mortgage Company
000 Xxx Xxxxxx Xxxxxx Xxxx
Xxxxxxxxxxx, Xxxx 00000-0000
Attn: Xxxx Xxxx, Servicing Portfolio
Manager
With a copy to: Xxxxx Xxxxxxx, General Counsel
000 Xxxxxxxx
Xxxxxx Xxx Xxxxxx 00000
GUARANTOR: Fund American Enterprises Holdings, Inc.
00 X. Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxxxxxxx 00000
Attn: Chief Financial Officer
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Section 18. Termination of Guaranty. All provisions hereof shall remain
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in full force and effect regardless of any investigation made by Purchaser or
its representatives, any cancellation of the Sale Agreement or any applicable
statute of limitations which hereby is expressly waived until the Termination
Date.
Section 19. Heirs, Successors and Assigns. The obligations of the
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Guarantor herein shall be binding upon the Guarantor and the Guarantor's heirs,
successors, assigns, executors and administrators, jointly and severally, for
the performance of the obligations of the Guarantor herein.
Section 20. Independent Guaranty. Nothing in this Agreement shall
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affect or limit any rights or remedies which Purchaser may have against the
Guarantor under any other Guaranty from the Guarantor to the Purchaser.
Section 21. Waiver of Jury Trial. The undersigned hereby (i) covenants
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and agrees not to elect a trial by jury of any issue triable of right by a jury,
and (ii) waives any right to trial by jury fully to the extent that any such
right shall now or hereafter exist. This waiver of right to trial by jury is
separately given, knowingly and voluntarily hereunder, and this waiver is
intended to encompass individually each instance and each issue as to which the
right to a jury trial would otherwise accrue. Purchaser is hereby authorized and
requested to submit this Guaranty to any court having jurisdiction over the
subject matter and the parties hereto, so as to serve as conclusive evidence of
the undersigned's herein contained waiver of the right to jury trial. Further,
the undersigned hereby certifies that no representative or agent of the
Purchaser (including the Purchaser's counsel) has represented, expressly or
otherwise, to any of the undersigned that the Purchaser will not seek to enforce
this waiver of right to jury trial provision.
Section 22. Relationship of the Parties. The relationship between
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Purchaser and the Guarantor is limited to that of purchaser, on the one hand,
and guarantor, on the other hand. The provisions herein for compliance with
financial covenants and delivery of financial statements, are intended solely
for the benefit of Purchaser to protect its interests as Purchaser in assuring
performance of the obligations hereunder, and nothing contained in this Guaranty
shall be construed as permitting or obligating Purchaser to act as a financial
or business advisor or consultant to Guarantor, as permitting or obligating the
Purchaser
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to control Guarantor or to conduct Guarantor's operations, as creating any
fiduciary obligation on the part of Purchaser to Guarantor, or as creating any
joint venture, agency, or other relationship between the parties other that as
explicitly and specifically stated in this Guaranty. The Guarantor acknowledges
that it has had the opportunity to obtain the advice of experienced counsel of
its own choosing in connection with the negotiation and execution of this
Guaranty and to obtain the advice of such counsel with respect to all matters
contained herein, including, without limitation, the provision in Section 21
above for waiver of trial by jury. The Guarantor further acknowledges that it is
experienced with respect to financial and credit matters and has made its own
independent decision to execute and deliver this Guaranty.
Section 23. Counterparts. This Guaranty may be executed in one or more
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counterparts, each of which shall have the force and effect of an original, and
all of which shall constitute but one document.
Section 24. Defined Terms. All capitalized terms not defined herein
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shall having the meaning given them in the Sale Agreement.
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IN WITNESS WHEREOF, this Guaranty has been executed under seal as of
the day and year first above written.
"Guarantor"
Fund American Enterprises
Holdings, Inc.
By:
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Its:
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"Purchaser"
Chemical Mortgage Company
By:
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Its:
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