INTERIM WAREHOUSE AND SECURITY AGREEMENT
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This INTERIM WAREHOUSE AND SECURITY AGREEMENT, dated as of February
15, 1997 (as amended or otherwise modified from time to time, this
"Agreement"), is entered into between FIRST ALLIANCE MORTGAGE COMPANY (the
"Lender"), a California corporation, NATIONSCAPITAL MORTGAGE COMPANY, (the
"Borrower"), a California corporation, and XXXXX XXXXXXX and XXXX XXXXXXX
(each a "Guarantor" and collectively, the "Guarantors"), the sole
shareholders of the Borrower.
WHEREAS, the Lender has agreed, subject to the terms and conditions
contained herein, to provide interim funding from time to time to finance
the origination of Mortgage Loans (as defined herein).
NOW, THEREFORE, the parties to this Agreement hereby agree as follows
(an index of certain capitalized, defined terms appears in Section 26 of
this Agreement):
SECTION 1. THE ADVANCES. Subject to the terms of this Agreement, the
Lender agrees to lend to the Borrower from time to time in an aggregate
principal amount not to exceed at any one time outstanding an amount (the
"Maximum Funding Amount") equal to (i) for the period from the date hereof
to and including the initial Termination Date, $5,000,000, and (ii) if the
Termination Date is extended in accordance with Section 2(a) hereof, for
each subsequent Funding Period the amount specified in the Notice of
Extension of Agreement delivered in accordance herewith in respect of such
Funding Period, to be made in one or more advances (each an "Advance" and,
collectively, "Advances"). Each Advance shall be made on a date other than
a Saturday, Sunday or other day on which banks in Los Angeles, California
are authorized or required by law to be closed (each such date, a "Business
Day") that is prior to the Termination Date (each such date on which an
Advance is made, a "Funding Date"); provided that:
(a) the representations and warranties of the Borrower in Section 7
hereof shall be true and correct on and as of such Funding Date as if made
on and as of such date;
(b) no Default or Event of Default shall have occurred and be
continuing or would exist after the making of any Advance on such Funding
Date;
(c) if requested by the Lender, the Lender shall have conducted a due
diligence review of the mortgage files relating to the Mortgage Loans, the
results of which shall have been satisfactory to the Lender;
(d) the Lender shall have received, in connection with the first
Advance, (A) a legal opinion from counsel to the Borrower, in the form of
Exhibit C attached hereto, and (B) the Secured Note (as defined below) duly
executed by the Borrower;
(e) the Borrower shall have delivered to the Lender all documents to
be delivered with respect to the Mortgage Loans being pledged on such
Funding Date, including without limitation the information specified in
Schedule 1 with respect to each Mortgage Loan;
(f) the Lender shall have ascertained that there are no material
deficiencies with respect to the Mortgage Loan Documents (as defined below)
related to such Advance, by no later than 5:00 p.m. two Business Days
before such Funding Date;
(g) the Lender shall have received a guaranty (the "Guaranty")
substantially in the form set forth in Exhibit I attached hereto, fully
executed by each Guarantor;
(h) the Lender shall have received a copy of the Mortgage Loan
Subservicing Agreement, if any, in respect of the Mortgage Loans relating to
such Advance, which Mortgage Loan Subservicing Agreement shall be in form
and substance acceptable to the Lender;
(i) each rescission period, under applicable federal, state or local
law, in respect of the Mortgage Loans being pledged in connection with the
Advance being made on such Funding Date shall have expired, and the Lender
shall have received evidence satisfactory to it to that effect; and
(j) any general conditions for the making of Advances, specified in
Section 2 below, have been satisfied and will continue to be satisfied if
such Advance is made.
SECTION 2. TERMS AND CONDITIONS FOR ALL ADVANCES.
(a) Each outstanding Advance shall mature on the related Maturity
Date (as defined below), and the obligation of the Lender to make any
Advances hereunder shall terminate, on July 31, 1998 (the "Termination
Date"); provided, that the Termination Date may be extended from time to
time, in the sole and absolute discretion of the Lender, upon (i) the
execution and delivery by the parties hereto of (A) a Notice of Extension of
Agreement substantially in the form of Exhibit B-1 attached hereto, and (B)
an Endorsement to the Secured Note, substantially in the form of Exhibit B-2
and (ii) the delivery of an opinion of counsel to the Borrower substantially
in the form of Exhibit B-3 attached hereto; provided further, that such an
extension alone shall not be deemed an Event of Default hereunder.
(b) (i) If the Borrower wishes to receive an Advance in respect of
Mortgage Loans, then the Borrower shall give the Lender written notice
by no later than 12:00 p.m. two Business Days prior to the Funding Date
for such Mortgage Loans of the amount of such Advance to be advanced on
such Funding Date by delivering a Notice of Borrowing substantially in
the form of Exhibit D attached hereto ("Notice of Borrowing");
provided, that the Lender may, in its sole discretion, require, for any
one or more such Mortgage Loans, that as a condition precedent to
making an Advance with respect thereto the Borrower provide a written
confirmation of a guarantee to purchase the related Mortgage Loan
subsequent to the Funding Date ("Unconditional Commitment Letter"), in
the form of Exhibit E attached hereto. The Unconditional Commitment
Letter shall be provided to the Borrower by any entity which delivers
to the Borrower an Unconditional Commitment Letter prior to the Funding
Date and purchases the related Mortgage Loan(s) subsequent to the
Funding Date ("Third Party Buyer"). Lender shall, by the end of the
Business Day on which it receives a Notice of Borrowing, advise
Borrower of any Mortgage Loan(s) for which Unconditional Commitment
Letter(s) will be so required and which were not provided with the
Notice of Borrowing, and the Funding Date with respect thereto shall be
made as a separate Advance within two Business Days of the date on
which the Unconditional Commitment Letter(s) is/are provided as
required herein.
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(ii) Each Advance shall bear interest from the related Funding
Date to but excluding the earlier of the date of its prepayment or the
Maturity Date, at a rate per annum equal to ten percent (10.00%) per
annum.
(c) Each outstanding Advance shall mature on the Related Maturity
date specified for such Advance as set forth in the related Notice of
Borrowing (the "Maturity Date"); provided, that the Maturity Date shall,
subject to the second succeeding proviso hereto, for any Advance be no later
than the earlier of (A) the Termination Date, (B) the date upon which the
Mortgage Loans funded by such Advance shall be sold to a Third Party Buyer
(but only with respect to that portion of the Advance related to Mortgage
Loans so sold), or (C) the date which is ninety (90) days after the Funding
Date with respect to such Advance; provided further, that the Lender shall
have the option, in its sole discretion, to extend the Maturity Date of an
Advance from time to time for a period of up to thirty (30) days by
delivering to the Borrower notice of such election in the form of Exhibit F
attached hereto no later than thirty (30) days preceding the then scheduled
Maturity Date of such Advance; provided further, that if the Lender chooses
to extend the Maturity Date of an Advance and such Maturity Date is a date
later than the Termination Date of this Agreement, then the Borrower shall
deliver to the Lender an endorsement in the form of Exhibit G attached
hereto. If no such notice or endorsement, as applicable, is delivered to
the Lender, such Advance shall automatically become due and payable without
any further action by the Lender on its respective Maturity Date, and in
such event the Lender may exercise all rights and remedies available to it
as the holder of a first perfected security interest under the Uniform
Commercial Code as in effect in the State of California (the "California
UCC"). The extension of the Maturity Date of any Advance beyond the
Termination Date of this Agreement shall not be deemed to be an extension or
renewal, beyond such Termination Date, of the Lender's obligations to lend
to the Borrower under this Agreement, and the Borrower's obligations in
respect of an Advance so extended shall survive the termination of this
Agreement.
(d) Interest shall be calculated on the basis of a 360 day year
comprised of twelve 30-day months, and paid for the actual number of days
elapsed. Interest is due and payable on the fifth day (or if such day is
not a Business Day, the first Business Day thereafter) of each calendar
month (the "Interest Payment Date") with respect to all Advances outstanding
during the previous calendar month.
(e) Advances are prepayable at any time without premium or penalty,
in whole or in part. Any amounts prepaid shall be applied to repay the
outstanding principal amount of any Advances until paid in full. Amounts
repaid may be borrowed in accordance with the terms of this Agreement.
(f) If an Advance is not repaid in full on the date when due such
Advance shall, commencing on such date, bear interest at a rate per annum
equal to eleven percent (11.00%) per annum for the period from and including
the due date thereof to but excluding the date the same is paid in full.
All such interest shall be payable on demand.
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(g) The Advances shall be evidenced collectively by the secured
promissory note of the Borrower in the form attached hereto as Exhibit A
(the "Secured Note"). The Lender is authorized to record the date and
amount of each Advance and the date and amount of each repayment of
principal thereof on the schedule annexed to the Secured Note and any such
recordation shall be conclusive evidence of the accuracy of the amounts so
recorded (absent manifest error); provided, that the failure of the Lender
to make such recordation (or any error in such recordation) shall not affect
the rights and obligations of the Borrower hereunder or under the Secured
Note.
(h) Each Advance shall be repaid in full on the related Maturity
Date, and the Lender shall release its security interest in the Mortgage
Loans when the Advances are so repaid.
(i) If an Advance is not repaid in full when due, thereafter all
payments and prepayments of the related Mortgage Loans shall be paid to the
Lender as promptly as practicable following receipt of such payments but in
any event no later than fifteen days following Borrower's receipt thereof.
(j) If at any time the outstanding principal amount of the aggregate
of all Advances exceeds the lesser of the following:
(i) the aggregate market value of Mortgage Loans held as
Collateral (such amount not to exceed the par amount thereof), and
(ii) the aggregate par amount of Mortgage Loans held as
Collateral, in each case as determined by the Lender and notified to
the Borrower on the third business day of each week (or, in the sole
discretion of the Lender following notice to the Borrower, on any
Business Day), the Borrower shall no later than one Business Day after
receipt of notice of such excess and written demand by Lender, either
prepay such Advances (together with interest thereon) in part or in
whole or pledge additional Collateral (as hereinafter defined) to the
Lender, such that after giving effect to such prepayment or pledge the
unpaid principal amount of such Advances does not exceed such lesser
amount.
(k) If more than one monthly installment of a Mortgage Loan is
delinquent as of the end of any calendar month, the Borrower shall prepay
the amount of the Advances made in respect of such Mortgage Loan or pledge
one or more replacement Mortgage Loans having an aggregate unpaid principal
amount of not less than the principal amount of such delinquent Mortgage
Loan and otherwise meeting the requirements of this Agreement.
(l) Notwithstanding anything to the contrary in this Agreement, the
Lender shall have no obligation to make any Advance hereunder if (i) the
Lender is unable, after good faith effort, to obtain a source of funds for
the proposed Advance on substantially the same economic terms as are
available to the Lender as of the date of this Agreement, or (ii) there
shall have occurred any material adverse change in (A) the financial
condition of the Lender, (B) the financial markets generally or (C) the
secondary market for mortgage loans or mortgage-related securities. The
Lender shall promptly notify the Borrower of any such determination by the
Lender.
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(m) No Advance shall be made in respect of any Mortgage Loans unless,
if requested by the Lender, the Lender shall have reviewed a sample of the
Mortgage Loans to be funded by such Advance and been satisfied in its sole
discretion with the results of such review.
(n) No Advance shall be made in respect of a Mortgage Loan if the
aggregate principal amount of all Advances previously made and outstanding
in respect of Mortgage Loans, together with the amount of the Advance to be
made, exceeds $5,000,000.
SECTION 3. PURPOSE AND DISBURSEMENT OF FUNDS ADVANCED. Each Advance
shall be used to originate six-month LIBOR-indexed first mortgage loans and
fixed-rate first mortgage loans and such other loans (the "Mortgage Loans").
All Advances shall be disbursed by the Lender in accordance with wiring
instructions accompanying the daily Notice of Borrowing. For purposes of
this Agreement, "LIBOR" shall mean the London Interbank Offered Rate for the
corresponding number of months on the date of determination.
SECTION 4. NO COMMITMENT TO EXTEND MATURITY DATE OR TERMINATION DATE.
The Lender shall have no obligation hereunder to extend the Maturity Date of
any Advance or the Termination Date hereunder, and the Borrower expressly
waives, and agrees not to assert, any claim or cause of action the Borrower
may have in respect of any determination by the Lender not to extend the
Maturity Date of any Advance or the Termination Date hereunder.
SECTION 5. DELIVERY OF MORTGAGE LOAN DOCUMENTS. In connection with
each Advance the Borrower shall deliver, or heretofore has delivered, to
Lender, the documents and instruments listed in Schedule 1 hereto, all such
documents and instruments evidencing and relating to the Mortgage Loans
(collectively, the "Mortgage Loan Documents"), together with all computer
records and tapes relating thereto, and any proceeds thereof, being
hereinafter referred to as the "Collateral." Lender shall upon receipt
thereof review such Mortgage Loan Documents and identify any deficiencies in
such Mortgage Loan Documents as so reviewed.
SECTION 6. GRANT OF SECURITY INTEREST. The Borrower hereby pledges
and grants a security interest in all of its respective right, title and
interest in and to the Collateral to the Lender to secure the repayment of
principal of and interest on all Advances and all other amounts owing to the
Lender hereunder (collectively, the "Secured Obligations"). The Borrower
agrees to xxxx its computer records and tapes to evidence the security
interests granted to the Lender hereunder.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
(a) The Borrower represents and warrants to the Lender that:
(i) It has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of California.
(ii) It is duly licensed as a licensee or is otherwise qualified
in each state in which it transacts business and is not in default of
such state's applicable laws, rules and regulations. It has the
requisite power and authority and legal right to own and xxxxx x xxxx
on all of its right, title and interest in and to the Collateral, and
to execute and deliver, engage in the transactions contemplated by, and
perform and observe the terms and conditions of, this Agreement and the
Secured Note.
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(iii) It is solvent and is not in default under any mortgage,
borrowing agreement or other instrument or agreement pertaining to
indebtedness for borrowed money, and the execution, delivery and
performance by it of this Agreement and the Secured Note do not
conflict with any term or provision of its articles of incorporation or
bylaws or any law, rule, regulation, order, judgment, writ, injunction,
or decree applicable to any of them of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it
and will not result in any violation of any such mortgage, instrument
or agreement.
(iv) All financial statements and certificates of the Borrower
or any of its officers furnished to the Lender are true and complete
and do not omit to disclose any material liabilities or other facts
relevant to the Borrower's condition. All such financial statements
have been prepared in accordance with generally accepted accounting
principles, consistently applied. No financial statement or other
financial information as of a date later than December 31, 1996 has
been furnished by the Borrower to any lender that has not been
furnished to the Lender.
(v) No consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or
court is required under applicable law in connection with the
execution, delivery and performance by it of this Agreement or the
Secured Note, where the failure to obtain any of the foregoing would
materially adversely affect the business, operations, property or
financial condition of the Borrower taken as a whole, the ability of
the Borrower to perform its obligations under this Agreement or the
Secured Note or the validity or enforceability of this Agreement or the
Secured Note, except as have been obtained and are in full force and
effect.
(vi) There is no action, proceeding or investigation pending or,
to the best of its knowledge, threatened against it before any court,
administrative agency or other tribunal (A) asserting the invalidity of
this Agreement or the Secured Note, (B) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement
or the Secured Note, or (C) which might materially and adversely affect
the validity of the Mortgage Loans or the performance by it of its
obligations under, or the validity or enforceability of, this Agreement
or the Secured Note.
(vii) There has been no material adverse change in the business,
operations, financial condition, properties or prospects of the
Borrower since December 31, 1996.
(viii) This Agreement and the Secured Note have each been duly
authorized, executed and delivered by the Borrower, all requisite
corporate action having been taken, and each is legal, valid and
binding and enforceable against the Borrower in accordance with its
terms.
(b) With respect to every Mortgage Loan for which Mortgage Loan
Documents are delivered to the Lender, the Borrower warrants to the Lender
that:
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(i) Such Mortgage Loan and all accompanying documents are
complete and authentic and all signatures thereon are genuine.
(ii) Such Mortgage Loan arose from a bona fide loan, complying
with all applicable State and Federal laws and regulations, to persons
having legal capacity to contract and is not subject to any defense,
set-off or counterclaim.
(iii) All amounts represented to be payable on such Mortgage
Loan are, in fact, payable in accordance with the provisions of such
Mortgage Loan.
(iv) No monetary default has occurred in any provisions of such
Mortgage Loan that has or will cause a prepayment of Advances made in
respect of such Mortgage Loan pursuant to Section 2(k) hereof, and no
non-monetary default has occurred with respect to any provisions of
such Mortgage Loan.
(v) To the best of the Borrower's knowledge, any property
subject to any security interest given in connection with such Mortgage
Loan is not subject to any encumbrance other than a stated first or
second mortgage.
(vi) The Borrower held good and indefeasible title to, and was
the sole owner of, such Mortgage Loan subject to no liens, charges,
mortgages, participations, encumbrances or rights of others or other
liens released simultaneously with such pledge.
(vii) Each Mortgage Loan has been originated according to
Borrower's underwriting guidelines previously provided to Lender, and
conforms to the description thereof as set forth on the related
Mortgage Loan Schedule.
(viii) All disclosures required by Regulation Z of the Board of
Governors of the Federal Reserve System promulgated pursuant to the
statute commonly known as the Truth-in-Lending Act and the Notice of
the Right to Cancel required by said statute and regulation have been
properly made and given.
(ix) None of the Mortgage Loans repurchased by the Borrower from
lenders were repurchased because such Mortgage Loans were in default to
such other lenders.
(x) Upon receipt by the Lender of the Collateral with respect to
any Mortgage Loan and for so long as the Lender maintains actual
physical possession of such Collateral, the Lender shall have a fully-
perfected first priority security interest in such Collateral;
provided, however, that until such time as assignments of mortgage with
respect to the Mortgage Loans are recorded in the appropriate office in
the name of the Lender, (A) the Lender may not be able to enforce a
mortgage against the related mortgage property or the related
mortgagor, (B) the Borrower could record an assignment of such mortgage
in the name of a third party or record a discharge and satisfaction of
such mortgage with the result that, in the former case such third party
could acquire the rights represented by such mortgage and, in the
latter case, the lien of such mortgage could be discharged, with the
result that such mortgage note would no longer be secured by the
related property, and (C) any notice which may be given to the record
holder of a mortgage including, without limitation, notice regarding
the non-payment of real estate taxes, would instead be given to the
Borrower.
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(xi) All payments required to be made through the related
Funding Date for each Mortgage Loan have been made and credited, and no
payment required under any Mortgage Loan was more than sixty (60) days
past due as of the Funding Date for such Mortgage Loan.
(xii) The additional representations and warranties set forth in
Schedule 2 attached hereto are true and correct with respect to each
Mortgage Loan.
SECTION 8. RIGHTS OF LENDER; LIMITATIONS ON LENDER'S OBLIGATIONS.
(a) Anything herein to the contrary notwithstanding, the Borrower
shall remain liable under each of the Mortgage Loan Documents to which it is
a party to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with and pursuant
to the terms and provisions of each such Mortgage Loan Document. The Lender
shall not have any obligation or liability under any Mortgage Loan Document
by reason of or arising out of this Agreement or the receipt by the Lender
of any payment relating to such Mortgage Loan Document pursuant hereto, nor
shall the Lender be obligated in any manner to perform any of the
obligations of the Borrower under or pursuant to any Mortgage Loan Document,
to make any payment, to make any inquiry as to the nature or the sufficiency
of any payment received by it or as to the sufficiency of any performance by
any party under any Mortgage Loan Document, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to it or to which it may be entitled at
any time or times.
(b) Upon the request of the Lender at any time after the occurrence
and during the continuance of an Event of Default, the Borrower shall notify
parties to the Mortgage Loan Documents to which it is a party that the
Mortgage Loan Documents have been assigned to the Lender and that payments
in respect thereof shall be made directly to the Lender. The Lender may in
its own name or in the name of others communicate with parties to the
Mortgage Loan Documents to verify with them to its satisfaction the
existence, amount and terms of any Mortgage Loan Documents.
SECTION 9. COVENANTS. The Borrower covenants and agrees with the
Lender that, from and after the date of this Agreement until the obligations
of the Borrower hereunder and under the Secured Note are paid in full:
(a) FURTHER DOCUMENTATION. At any time and from time to time, upon
the written request of the Lender, and at the sole expense of the Borrower,
the Borrower will promptly and duly execute and deliver such further
instruments and documents and take such further action as the Lender may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code in effect in any jurisdiction
with respect to the security interests created hereby and the delivery to
the Lender of any reports or notices provided to the Borrower by the
Subservicer (as defined below) in connection with the Mortgage Loans. The
Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of the Borrower to the extent
permitted by applicable law. A carbon, photographic or other reproduction
of this Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.
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(b) LIMITATION ON LIENS ON COLLATERAL. The Borrower will not, nor
will it permit or allow the Subservicer to, create, incur or permit to
exist, will defend the Collateral against, and the Borrower will take such
other action as is necessary to remove, any lien, security interest or claim
on or to the Collateral, other than the security interests created hereby,
and will defend the right, title and interest of the Lender in and to any of
the Collateral against the claims and demands of all persons whomsoever.
(c) LIMITATIONS ON MODIFICATIONS, WAIVERS AND EXTENSIONS OF
CONTRACTS. The Borrower will not, nor will it permit the Subservicer to,
(i) amend, modify, terminate or waive any provision of any Mortgage Loan
Document to which the Borrower is a party in any manner which could
reasonably be expected to materially adversely affect the value of such
Mortgage Loan Document as Collateral, (ii) fail to exercise promptly and
diligently each and every material right which the Borrower may have under
each such Mortgage Loan Document (other than any right of termination) where
the failure to so act could materially adversely affect the Collateral
relating to such Mortgage Loan Document or (iii) fail to deliver to the
Lender a copy of each material demand, notice or document received by it
relating in any way to any such Mortgage Loan Document other than any such
demand, notice or document relating to the delinquency of a Mortgage Loan or
the bankruptcy of the obligor thereunder.
(d) CHANGE IN UNDERWRITING GUIDELINES. The Borrower will provide
Lender with a copy of any changes to its underwriting guidelines prior to
the effectiveness thereof, and will not make any adverse changes to such
guidelines without Lender's prior written consent.
(e) FURTHER IDENTIFICATION OF COLLATERAL. The Borrower will furnish
to the Lender from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in reasonable detail.
(f) LIMITATION ON DELINQUENCIES. The Borrower will not permit or
allow any payment under any Mortgage Loan to become more than sixty (60)
days past due.
(g) LIMITATION ON FORECLOSURES. The Borrower will not, nor will it
permit or allow the Subservicer to, take title to real estate mortgaged in
connection with a Mortgage Loan, whether by means of a foreclosure action
(judicial or non-judicial), acceptance of a deed in lieu of foreclosure, or
any voluntary transfer, without the express written consent of the Lender.
(h) LIMITATION ON COLLECTION ACCOUNT. The Borrower will not permit
or allow the Subservicer to establish a "collection account" with a
financial institution other than one acceptable to the Lender in the
exercise of its reasonable discretion.
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(i) NO VIOLATION OF LAWS. At all times after the Lender's receipt of
Mortgage Loan Documents from the Borrower and until payment in full of all
Advances, the Borrower will not commit any act in violation of applicable
laws, or regulations promulgated pursuant thereto.
(j) NOTICES. The Borrower will notify the Lender promptly, in
reasonable detail and in accordance with Section 24 of this Agreement, (i)
of any lien or security interest (other than security interests created
hereby) on, or claim asserted against, any of the Collateral; (ii) of the
occurrence of any other event which could reasonably be expected to have a
material adverse effect on either (A) the business, operations, financial
condition, properties or prospects of Borrower or any subsidiary of
Borrower, (B) Borrower's ability to perform its obligations under this
Agreement or the Secured Note, or (C) the aggregate value of the Collateral
or on the security interests created hereunder; and (iii) of the existence
of circumstances requiring the Borrower, or permitting the Lender to require
the Borrower, to prepay the Advances pursuant to Section 2(j), Section 2(k),
Section 10(b) or Section 16 hereof.
SECTION 10. REPAYMENT OF ADVANCES IF MORTGAGE LOAN FOUND DEFECTIVE.
(a) Upon discovery by the Borrower or the Lender of any breach of any
of the representations and warranties listed in Section 7 hereof, the party
discovering such breach shall promptly give notice of such discovery to the
other.
(b) The Lender has the right to require, in its unreviewable
discretion, the Borrower to prepay the amount of any Advance made in respect
of any Mortgage Loan which breaches one or more of the representations and
warranties listed in Section 7(b) hereof, no later than five Business Days
after notice from the Lender to the Borrower of such breach.
SECTION 11. RELEASE OF MORTGAGE FILES FOLLOWING PAYMENT OF SECURED
OBLIGATIONS. The Lender agrees to deliver the documents and instruments
held by the Lender pursuant to Section 5 hereof upon request of the Borrower
upon payment in full of the Secured Obligations.
SECTION 12. SERVICING. The Borrower shall, or shall cause the
Subservicer to, service the Mortgage Loans in accordance with the standards,
covenants and terms set forth in Schedule 4 attached hereto. The term
"Subservicer" means a subservicer, satisfactory to the Lender, which
provides subservicing pursuant to a written agreement in form and substance
satisfactory to Lender. The Borrower will not, nor will it permit or allow
the Subservicer to, amend or modify such written agreement without the
express written consent of the Lender, which consent shall not be
unreasonably withheld.
SECTION 13. NO ORAL MODIFICATIONS; SUCCESSORS AND ASSIGNS. No
provisions of this Agreement shall be waived or modified except by a writing
duly signed by the authorized agents of the Lender and the Borrower. This
Agreement shall be binding upon the successors and assigns of the parties
hereto.
SECTION 14. WEEKLY AGING REPORT. The Borrower shall provide the
Lender, on the first Business Day of each week, with an accurate listing of
each Mortgage Loan maintained in the warehouse facility as of the last day
of the previous week. Such Weekly Aging Report shall be substantially in
the form set forth in Exhibit H attached hereto.
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SECTION 15. EVENTS OF DEFAULT. Each of the following shall constitute
an event of default (an "Event of Default") hereunder (a "Default" being any
of the following whether or not any requirement for the giving of notice,
the lapse of time, or both, has been satisfied):
(a) Failure of the Borrower to make any payment of interest or
principal or any other sum which has become due, whether by acceleration or
otherwise, under the terms of the Secured Note, this Agreement or any other
document evidencing or securing indebtedness of the Borrower to the Lender;
(b) Failure of the Borrower to prepay Advances or pledge additional
Collateral when required to do so pursuant to Section 2(j), Section 10(b) or
Section 16 hereof;
(c) Failure of the Borrower to observe or perform any other agreement
contained in this Agreement thirty (30) days after notice from the Lender of
such failure to observe or perform;
(d) Any representation or warranty made by the Borrower herein in
connection with any Advance made hereunder or in any certificate, document
or financial or other statement furnished at any time under or in connection
with this Agreement, shall prove to have been incorrect in any material
respect on or as of the date made;
(e) Assignment or attempted assignment by the Borrower of this
Agreement or any rights hereunder, without first obtaining the specific
written consent of Lender, or the granting by the Borrower of any security
interest, lien or other encumbrance on any Collateral to other than the
Lender;
(f) The filing by or against the Borrower or any subsidiary of the
Borrower of a petition for liquidation, reorganization, arrangement or
adjudication as a bankrupt or similar relief under the bankruptcy,
insolvency or similar laws of the United States or any state or territory
thereof or of any foreign jurisdiction; the failure of the Borrower or such
subsidiary to secure dismissal of any such petition filed against it within
thirty (30) days of such filing; the making of any general assignment by the
Borrower or any subsidiary for the benefit of creditors; the appointment of
a receiver or trustee for the Borrower or any subsidiary, or for any part of
the Borrower or such subsidiary's assets; the institution by the Borrower or
any subsidiary of any other type of insolvency proceeding (under the
Bankruptcy Code or otherwise) or of any formal or informal proceeding, for
the dissolution or liquidation of, settlement of claims against, or winding
up of the affairs of, the Borrower or any subsidiary; the institution of any
such proceeding against the Borrower or any subsidiary if the Borrower or
such subsidiary shall fail to secure dismissal thereof within thirty (30)
days thereafter; the consent by the Borrower or any subsidiary to any type
of insolvency proceeding against the Borrower or such subsidiary (under the
Bankruptcy Code or otherwise); the occurrence of any event or existence of
any condition which could be the ground, basis or cause for any proceeding
or petition described in this Section 15(f);
(g) Any materially adverse change in the business, operations,
financial condition, properties or prospects of the Borrower or of any
subsidiary as determined by the Lender in its discretion or the existence of
any other condition which, in the Lender's determination, constitutes an
impairment of the Borrower's or such subsidiary's ability to perform their
obligations under this Agreement or the Borrower's obligations under the
Secured Note;
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(h) Guarantors shall cease to collectively own, directly or
indirectly, 100% of the outstanding shares of capital stock having voting
power for the election of directors of Borrower, whether at all times or
only so long as no senior class of stock has such voting power because of
default in dividends or other default, or shall otherwise cease to control,
the Borrower; and
(i) Failure by the Borrower or the Subservicer to service the
Mortgage Loans in substantial compliance with servicing requirements
approved by Lender.
SECTION 16. REMEDIES UPON DEFAULT.
(a) Upon the happening of one or more Events of Default, the Lender
may immediately declare the principal of all Advances under the Secured Note
then outstanding to be immediately due and payable, together with all
interest thereon and fees and expenses accruing under this Agreement;
provided, that upon the occurrence of the Event of Default referred to in
Section 15(f), such amounts shall immediately and automatically become due
and payable without any further action by any person or entity. Upon such
declaration or such automatic acceleration, the balance then outstanding
shall become immediately due and payable without presentation, demand or
further notice of any kind to the Borrower.
(b) Upon the happening of one or more Events of Default, the Lender
shall have the right to retain physical possession of all files of the
Borrower relating to the Collateral and all documents relating to the
Collateral which are then or may thereafter come into the possession of the
Borrower or any third party acting for the Borrower, and the Borrower shall
deliver to the Lender such assignments of mortgage as the Lender shall
request. The Lender shall be entitled to specific performance of all
agreements of the Borrower contained in this Agreement.
(c) Upon the happening of one or more Events of Default, the Lender
shall have the right to collect and receive all further payments made on the
Collateral, and if any such payments are received by the Borrower, the
Borrower shall not commingle the amounts received with other funds of the
Borrower and shall promptly pay them over to the Lender. In addition, the
Lender shall have the right to dispose of the Collateral as provided herein,
or as provided in the other documents executed in connection herewith, or in
any commercially reasonable manner, or as provided by law. The Lender shall
be entitled to place the Mortgage Loans which it recovers after any default
in a pool for issuance of asset-backed securities at the then-prevailing
price for such securities and to sell such securities for such prevailing
price in the open market as a commercially reasonable disposition of
collateral subject to the applicable requirements of the California UCC.
The Lender shall also be entitled to sell any or all of such Mortgage Loans
individually for the prevailing price as a commercially reasonable
disposition of collateral subject to the applicable requirements of the
California UCC. The specification in this Section 16 of manners of
disposition of collateral as being commercially reasonable shall not
preclude the use of other commercially reasonable methods at the option of
the Lender. Upon disposition of the Collateral and repayment in full to the
Lender of all amounts owing hereunder plus the reasonable expenses incurred
(including fees and expenses of its counsel), the Lender shall promptly
remit any remaining proceeds to the Borrower or as required by law or as a
court of competent jurisdiction shall direct.
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SECTION 17. INDEMNIFICATION AND EXPENSES.
(a) The Borrower shall hold the Lender harmless from and indemnify
the Lender against all liabilities, losses, damages, judgments, costs and
expenses of any kind which may be imposed on, incurred by, or asserted
against the Lender relating to or arising out of this Agreement or the
Secured Note, any transaction contemplated hereby or thereby, or any
amendment, supplement or modification of, or any waiver or consent under or
in respect of this Agreement or the Secured Note, or any transaction
contemplated hereby or thereby, resulting from anything other than the
Lender's gross negligence or willful misconduct. In any suit, proceeding or
action brought by the Lender in connection with any Mortgage Loan Document
for any sum owing thereunder, or to enforce any provisions of any Mortgage
Loan Document, the Borrower will save, indemnify and keep the Lender
harmless from and against all expense, loss or damage suffered by reason of
any defense, set-off, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder, arising out of a breach by the
Borrower of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such obligor
or its successors from the Borrower. The Borrower also agrees to reimburse
the Lender for all its costs and expenses incurred in connection with the
enforcement or the preservation of the Lender's rights under this Agreement
or the Secured Note, or any transaction contemplated hereby or thereby
including, without limitation, the reasonable fees and disbursements of
counsel. The Borrower hereby acknowledges that, notwithstanding the fact
that the Secured Note is secured by the Collateral, the obligation of the
Borrower under the Secured Note is a recourse obligation of the Borrower.
(b) The Borrower agrees to pay when billed by the Lender all of the
out-of-pocket costs and expenses incurred in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to this Agreement or the Secured Note, or any other documents
prepared in connection herewith or therewith, and the consummation and
administration of the transactions contemplated hereby and thereby
including, without limitation, (i) all the reasonable fees, disbursements
and expenses of Lender's counsel, and (ii) all the reasonable due diligence,
inspection, testing, and review costs and expenses incurred by the Lender
(or a third-party contract underwriter that is both acceptable to the Lender
and is acting on behalf of the Lender), with respect to Mortgage Loans
pledged as Collateral under this Agreement.
(c) The Borrower's agreements in this Section 17 shall survive the
payment in full of the Advances and the expiration or termination of this
Agreement.
SECTION 18. POWER OF ATTORNEY. The Borrower hereby authorizes the
Lender (without requiring the Lender), at the Borrower's expense, to file
such financing statement or statements relating to the Collateral without
the Borrower's signature thereon as the Lender at its option may deem
appropriate, and appoints the Lender as the Borrower's attorney-in-fact to
execute any such financing statement or statements in the Borrower's name
and to perform all other acts which the Lender deems appropriate to perfect
and continue the security interest granted hereby and to protect, preserve
and realize upon the Collateral, including, but not limited to, the right to
endorse notes, complete blanks in documents and sign assignments on behalf
of the Borrower as its attorney-in-fact. This Power of Attorney is coupled
with an interest and is irrevocable without the Lender's consent.
Notwithstanding the foregoing, the power of attorney hereby granted shall
only be effective during the occurrence and continuance of any Event of
Default hereunder.
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SECTION 19. AGREEMENT CONSTITUTES SECURITY AGREEMENT. This Agreement
is intended by the parties hereto to be governed by California law, and to
constitute a security agreement within the meaning of the California UCC.
SECTION 20. NO DUTY ON LENDER'S PART. The powers conferred on the
Lender hereunder are solely to protect the Lender's interests in the
Collateral and shall not impose any duty upon it to exercise any such
powers. The Lender shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers, and neither it nor any
of its officers, directors, employees, shareholders or agents shall be
responsible to the Borrower for any act or failure to act hereunder, except
for its own gross negligence or willful misconduct.
SECTION 21. LIMITATION ON DUTIES REGARDING PRESENTATION OF COLLATERAL.
The Lender's sole duty with respect to the custody, safekeeping and physical
preservation of any Collateral in its possession, under Section 9-207 of the
Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as the Lender deals with similar property for its own account.
Neither the Lender nor any of its directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request
of the Borrower or otherwise.
SECTION 22. POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers are coupled with an interest.
SECTION 23. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 24. NOTICES. All written communications hereunder shall be
mailed, telecopied or delivered to the respective addresses as listed below
or to such other address as shall be designated by a party in a written
notice to the other party. All such notices and communications shall be
effective when delivered to the party to which such notice is to be given.
If to Lender:
First Alliance Mortgage Company
00000 Xxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxxxx Xxxxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
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If to Borrower:
Nationscapital Mortgage Company
0000 X. Xxxxxxx, #000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy: (000) 000-0000
Telephone: (000) 000-0000
SECTION 25. RIGHT OF FIRST REFUSAL. In consideration of Lender's
agreement to provide Advances as set forth in this Agreement, Borrower
hereby grants to Lender a right of first refusal to purchase all Mortgage
Loans with respect to which Advances are made hereunder, pursuant to which
no such Mortgage Loan shall be sold by Borrower to any third party (except
one from whom an Unconditional Commitment Letter has been obtained) without
Lender's consent, such consent not to be unreasonably withheld. Such
purchases shall be made pursuant to and in accordance with that certain
Mortgage Loan Purchase and Sale Agreement dated as of July 1, 1996 between
Borrower and Lender, as the same may from time to time be amended.
SECTION 26. CERTAIN DEFINITIONS. The following capitalized terms are
defined in the corresponding sections specified below:
"Advance" - Section 1.
"Agreement" - Introductory Clause.
"Borrower" - Introductory Clause.
"Business Day" - Section 1.
"California UCC" - Section 2(c).
"Collateral" - Section 5.
"Default"- Section 15.
"Event of Default" - Section 15.
"Funding Date" - Section 1.
"Funding Period" - Section.
"Guarantor" - Introductory Clause.
"Guaranty" - Section 1.
"Interest Payment Date" - Section 2(d).
"Lender" - Introductory Clause.
"LIBOR" - Section 3.
"Maturity Date" - Section 2(c).
"Maximum Funding Amount" - Section 1.
"Mortgage Loan Documents" - Section 5.
"Mortgage Loans" - Section 3.
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"Notice of Borrowing" - Section 2(b).
"Secured Note" - Section 2(g).
"Secured Obligations" - Section 5.
"Termination Date" - Section 2(a).
"Third Party Buyer" - Section 2(b).
"Unconditional Commitment Letter" - Section 2(b).
SECTION 27. PARAGRAPH HEADINGS. The paragraph headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
SECTION 28. NO WAIVER; CUMULATIVE REMEDIES. The Lender shall not by
any act (except by a written instrument pursuant to Section 13 hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right
or remedy hereunder or to have acquiesced in any Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Lender, any right, or power
or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by the Lender of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy
which the Lender would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by
law.
SECTION 29. ASSIGNMENT. Borrower may not assign its rights or
delegate its obligations under this Agreement without the express written
consent of the Lender. The Lender may assign its rights and obligations
hereunder to any affiliate of the Lender upon written notice thereof to the
Borrower.
SECTION 30. HYPOTHECATION OR PLEDGE OF COLLATERAL. Nothing in this
Agreement shall preclude the Lender from engaging in repurchase transactions
with any of the Collateral or otherwise pledging, repledging, hypothecating,
or rehypothecating any of the Collateral, but no such transaction shall
relieve the Lender of its obligations to the Borrower under this Agreement
with respect to the Collateral.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
Borrower: NATIONSCAPITAL MORTGAGE COMPANY
By:_____________________________
Name: Xxxxx Xxxxxxx
Title: President
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Lender: FIRST ALLIANCE MORTGAGE COMPANY
By:_____________________________
Name: Xxxx X. Xxxxx
Title: Executive Vice President,
Chief Financial Officer
Guarantor: ________________________________
Xxxxx Xxxxxxx
Guarantor: ________________________________
Xxxx Xxxxxxx
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