EXHIBIT 10.6(a)
[Letterhead of Xxxxxxxxx, Xxxxxx & Xxxxxxxx]
October 22, 1997
BNC Mortgage, Inc.
0000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Dear Sirs:
This letter agreement will confirm the agreement of DLJ Mortgage Capital,
Inc. ("DLJMC") and BNC Mortgage, Inc. ("BNC") to the following modifications to
the existing agreements between the parties to be made in connection with the
anticipated sale of BNC stock through a public offering (the "IPO"). The IPO is
expected to occur in December, 1997 or January, 1998 (the "Closing Date") and is
expected to result in the sale of all or a significant portion of DLJMC's equity
in BNC. In exchange for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties, DLJMC and BNC (and where
appropriate, Xxxx Xxxxxxx as shareholder) have agreed to make the following
changes to the existing agreements. In addition to this letter agreement, in
order to effectuate the purposes hereof, the parties hereby agree to execute, as
soon as reasonably possible but in any event prior to the Closing Date, specific
amendments to the existing agreements as described below. Capitalized terms not
otherwise defined, herein shall have the meaning specified in the related
existing agreements.
Based on the foregoing, the parties hereby agree as follows:
1. INCREASE IN THE AMOUNT OF THE CREDIT FACILITY: The parties agree to
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increase the maximum amount available under the Whole Loan Facility (as
defined below) from the current $50 million to $150 million. This letter
agreement hereby modifies the letter agreement between the parties dated
August 28, 1995 (the "Existing Agreement") and the amount of the credit
facility specified in the section entitled "Financing Facility" to provide
for a maximum available amount equal to $150 million and to delete the
second sentence of that section regarding further increases from time to
time in the amount available under the facility. In addition, BNC hereby
agrees to enter into a new promissory note (the "Promissory Note") to
replace the existing promissory note executed in connection with the whole
loan financing facility between the parties dated September 26, 1995 (the
"Whole Loan Facility"). The new Promissory Note will reflect a maximum
amount available under the Whole Loan Facility of $150 million. The
parties further agree to modify any related documents as may be reasonably
necessary to effect the foregoing.
2. TERM OF THE WHOLE LOAN FACILITY: The termination date with respect to the
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Whole Loan Facility shall be modified from the existing termination date of
August 31, 2000 to provide for termination on the date occurring two years
from the Closing Date (the "Facility Termination Date"), without any rights
of extension other than by mutual written agreement of the parties. This
letter agreement hereby modifies the Existing Agreement and the Section
entitled "Final Termination Date" to provide for the new termination date
to be the Facility Termination Date and to eliminate DLJMC's right to
extend the Whole Loan Facility for one, two or three years at its option.
Notwithstanding the foregoing, all existing provisions regarding earlier
termination of the Whole Loan Facility, including but not limited to
termination in connection with an event of default thereunder, shall remain
in full force and effect. In addition, the parties hereby modify section
II(A) of the commitment letter relating to the Whole Loan Facility, dated
October 31, 1995, to change the date through which advances can be provided
to the Facility Termination Date. The parties further agree to modify any
related documents as may be reasonably necessary to effect the foregoing.
BNC Mortgage, Inc.
October 22, 1997
Page 2
3. SALE OF MORTGAGE LOANS: The parties agree that DLJMC shall continue to
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have the exclusive right to sell all mortgage loans as originated by BNC on
behalf of BNC in whole loan formate (or through securitization as provided
in the Existing Agreements to the extent BNC elects to securitize loans)
and to receive on all dispositions of mortgage loans originated on or
before the Closing Date a fee equal to fifty (50) basis points times the
outstanding balance of the related mortgage loans. In addition, to the
extent the IPO occurs prior to March 31, 1998, DLJMC has agreed to further
reduce its fee in connection with such dispositions to (i) zero (0) for
dispositions relating to mortgage loans originated after the Closing Date
but prior to the date occurring one year after the Closing Date of the IPO
(the "Fee Waiver Period"), and (ii) twelve and a half (12.5) basis points
times the outstanding balance of the related loans for dispositions with
respect to mortgage loans originated after the Fee Waiver Period but prior
to the Facility Termination Date. This letter agreement hereby modifies
the DLJ Spread as defined in the Existing Agreement to equal (A) fifty (50)
basis points with respect to loans originated prior to the Closing Date,
(B) zero with respect to loans originated after the Closing Date but during
the Fee Waiver Period, and (C) twelve and a half (12.5) basis points with
respect to loans originated after the Fee Waiver Period but prior to the
Facility Termination Date. In the event the IPO does not occur, the DLJ
Spread shall remain fifty (50 basis points) as further specified in section
11 hereof. The parties further agree to modify any related documents as
may be reasonably necessary to effect the foregoing.
4. INTEREST RATE WITH RESPECT TO THE WHOLE LOAN FACILITY: The parties agree
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that the interest rate payable by BNC with respect to amounts outstanding
under the Whole Loan Facility (absent an event of default) shall be
modified from the current rate equal to the sum of the market rate obtained
by DLJMC in connection with its obtaining financing, plus twelve and a half
(12.5) basis point (the "Original Rate"), to equal (a) the "Federal Funds"
rate plus fifty (50) basis points from the Closing Date through the Fee
Waiver Period, and (b) the "Federal Funds" rate plus one hundred (100)
basis points after the Fee Waiver Period through the Facility Termination
Date. The Original Rate shall remain in effect prior to the Closing Date.
This letter agreement hereby modifies the Existing Agreement and the
section entitled "Interest to DLJMC" to effect the foregoing change in
rate. In the event the IPO does not occur, the rate charged by DLJMC in
connection with the Whole Loan Facility shall continue to be the Original
Rate as further specified in section 11 hereof. The parties further agree
to modify any related documents as may be reasonably necessary to effect
the foregoing.
5. RESIDUAL FINANCING: DLJMC shall provide BNC with financing for
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subordinated interest only securities ("Residual Securities") to the extent
retained by BNC in connection with the securitization of mortgage loans
originated by BNC. The maximum amount of such financing is $5 million and
the maximum term is one year (with such financing being subject to such
other market provisions regarding termination and default and such other
provisions as DLJMC deems reasonable). The parties will enter into
documents regarding Residual Securities financing substantially similar to
those utilized by DLJMC in connection with similar arrangements to which it
is a party, modified to reflect their terms specified herein.
Notwithstanding the foregoing, such documents will provide that advances
under the Residual Security facility shall be made to BNC only to the
extent BNC does not have sufficient cash, in excess of reasonable reserves
established by BNC in its annual business plan and reasonably acceptance to
DLJMC, available in its operating or investment accounts to fund the
retention of the Residual Securities absent such an advance.
6. EXCLUSIVITY: Notwithstanding anything contained in existing documents to
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the contrary, after the Closing Date, BNC shall not be obligated to sell
whole loans using DLJMC or to securitize its mortgage loans through DLJMC.
This letter agreement hereby modifies the Existing Agreement to eliminate
as of the Closing Date the section thereof entitled "Exclusivity." In the
event the IPO does not occur by February 28, 1998 (the "Offering
Termination Date"), such section shall remain in full force and effect, as
further specified in section 11 hereof, and shall not be eliminated or
modified hereby. The parties further agree to
BNC Mortgage, Inc.
October 22, 1997
Page 3
modify any related documents as may be reasonably necessary to effect the
foregoing. Nothing contained herein or in any existing document shall
prevent BNC from electing to utilize DLJMC in connection with such loan
dispositions. Nothing contained herein or in any existing document shall
prevent BNC from obtaining after the Closing Date financing facilities in
addition to or in place of the Whole Loan Facility or from terminating the
Whole Loan Facility after the Closing Date but prior to the Facility
Termination Date.
7. RELATED DOCUMENTS: The parties agree to modify the related agreements
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between the parties and to enter into such additional agreements as may be
reasonably and necessary to effect the purposes hereof.
8. SHAREHOLDER AGREEMENT; OTHER DOCUMENTATION: Other than with respect to
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matters addressed herein, the parties agree that the shareholders agreement
between BNC, DLJMC and Xxxx Xxxxxxx dated October 10, 1995 (the
"Shareholders Agreement") shall be terminated on the Closing Date of the
IPO. The parties further agree to modify or terminate the Existing
Agreement and any related agreements upon completion of the IPO to the
extent reasonably and necessary with respect to the IPO of to the effect
the purposes of this agreement.
9. RELEASE AND WAIVER: To the extent that during the term of the agreements
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some or all of the parties thereto may have failed to comply with certain
provisions of the Existing Agreement or the Shareholder Agreements,
effective on the Closing Date, the parties hereby waive and release each
other from any and all claims, rights duties and liability resulting from
any such failure.
10. STANDSTILL DURING OFFERING PERIOD: The parties agree that to use their
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reasonable efforts to act in a manner likely to facilitate the IPO during
the period commencing with the initial filing of the Form S-1 registration
statement relating to the IPO through the Closing Date (the "Offering
Period"). In such connection the parties agree that notwithstanding to
continued existence of the Shareholders Agreement during the Offering
Period, the parties will not seek to enforce their nights thereunder except
to the extent such enforcement is necessary to continue the current
operation of BNC, preserve the assets of BNC or the value of it business or
to continue the operation of the business in accordance with the provisions
specified in section 3.01(b).
11. CURRENT AGREEMENTS TO BE REINSTATED: Notwithstanding anything contained
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herein to the contrary in the event the IPO is abandoned to terminate or
does not occur by the Offering Termination Date, the Shareholders
Agreement, Existing Agreement, Whole Loan Facility and related agreements
shall remain in full force and effect absent, the modifications to specify
terms described herein.
12. MISCELLANEOUS: This agreement represents the entire agreement for the
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parties. This agreement may be singed in counterparts or by different
parties on direct counterparts. This agreement may not be assigned or
modified absent the written agreement of both parties. Each party shall be
reasonably for the costs and disbursements of its counsel as well as its
own our of pocket expenses and overhead incurred in connection with this
transaction. All notices hereunder or relating hereto shall be given in
writing delivered to the address of each party appearing herein.
BNC Mortgage, Inc.
October 22, 1997
Page 4
If the foregoing is consistent with your understanding of our agreement,
please acknowledge your agreement hereto by signing in the space provided below
and returning one original counterpart of this agreement to the address
specified above.
Yours truly,
DLJ MORTGAGE CAPITAL, INC.
By: /s/ X. Xxxxx XxXxxxx
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Name: X. Xxxxx XxXxxxx
Title: S.V.P.
ACKNOWLEDGED AND AGREED:
BNC MORTGAGE, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: CFO/V.P.
XXXX XXXXXXX
/s/ Xxxx Xxxxxxx
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