EXHIBIT 10.15
[EXECUTION COPY]
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INTERIM WAREHOUSE AND
SECURITY AGREEMENT
by and between
PRUDENTIAL SECURITIES REALTY
FUNDING CORPORATION,
as Lender
and
WILSHIRE FUNDING COMPANY, L.L.C.,
as Borrower
Dated as of December 1, 1995
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TABLE OF CONTENTS
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PAGE
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Section 1. The Loan................................... 1
Section 2. Additional Conditions Precedent; Required
Characteristics; and Correspondents........ 7
Section 3. Mortgage Files and Custodian............... 8
Section 4. Representations, Warranties and Covenants.. 9
Section 5. Mandatory Prepayment of Loan............... 12
Section 6. Release of Mortgage Files following Payment 13
Section 7. Servicing.................................. 14
Section 8. Modifications; Successors and Assigns...... 14
Section 9. Reports.................................... 14
Section 10. Events of Default.......................... 14
Section 11. Remedies Upon Default...................... 16
Section 12. Indemnification............................ 18
Section 13. Power of Attorney.......................... 18
Section 14. Agreement Constitutes Security Agreement... 19
Section 15. Lender May Act Through Affiliates.......... 19
Section 16. Notices.................................... 19
Section 17. Severability............................... 20
Section 18. Counterparts............................... 20
Section 19. Certain Definitions........................ 20
EXHIBITS
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Exhibit A - Secured Note
Exhibit B - Legal Opinion
Exhibit C - Form of Credit Increase
Exhibit D - Form of Notice to Lender
Exhibit E - Form of Guarantee
Exhibit F - Mortgage Loan Schedule Information
INTERIM WAREHOUSE AND SECURITY AGREEMENT
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INTERIM WAREHOUSE AND SECURITY AGREEMENT, dated as of December 1, 1995
(as amended or otherwise modified from time to time, this "Agreement") among
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PRUDENTIAL SECURITIES REALTY FUNDING CORPORATION, a Delaware corporation, having
an office at 0000 X. Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (the "Lender"),
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and WILSHIRE FUNDING COMPANY, L.L.C., a Delaware limited liability company,
having its principal office at 0000 X.X. Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000
(the "Borrower").
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WHEREAS, the Lender intends to lend and the Borrower intends to borrow
up to $120,000,000 (One Hundred Twenty Million dollars) to fund the purchase or
origination by the Borrower of fixed and adjustable rate, first lien,
residential mortgage loans; and
WHEREAS, the Lender intends to lend and the Borrower intends to borrow
up to $30,000,000 (Thirty Million dollars) to fund the purchase or origination
by the Borrower of fixed and adjustable rate, second lien, residential mortgage
loans which were purchased or originated in conjunction with the related first
lien mortgage loans; and
WHEREAS, the Lender's affiliate, Prudential Securities Incorporated
("PSI") may act as the sole or lead manager or co-manager on a mortgaged-backed
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securities insurance (the "First Lien Securitization") collateralized by Fist
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Lien Mortgage Loans (as defined below) and on a mortgage-backed securities
issuance (the "Second Lien Securitization") collateralized by Second Lien
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Mortgage Loans (as defined below), in each case on the terms and subject to the
conditions set forth in Section 1(e)(ii) below;
An index to the location of the definitions of the defined terms used
herein is set forth in Section 19 hereof.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto hereby agree as follows:
Section 1. The Loan.
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(a) Subject to the terms of this Agreement:
(i) The Lender agrees to lend to the Borrower up to (x) $120,000,000
(such borrowing, the "First Lien Loan") to be made in one or more advances
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(the "First Lien Advances") in respect of fixed or adjustable rate, first
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lien, residential mortgage loans and (y) $30,000,000 (such borrowing, the
"Second Lien Loan" and, together with the First Lien Loan, the "Loans") to
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be made in one or more advances (the "Second Lien Advances" and, together
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with the First Lien Advances, the "Advances") in respect of fixed or
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adjustable rate, second lien, residential mortgage loans which were
purchased or originated in conjunction with the related first lien mortgage
loans. The Borrower agrees that the First Lien Loan shall be used to
warehouse fixed or adjustable rate, first lien, residential mortgage loans
that are to be included in the First Lien Securitization (the "First Lien
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Mortgage Loans"), as such First Lien Mortgage Loans are identified to the
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Lender in writing and in electronic form from time to time. The Borrower
agrees that the Second Lien Loans shall be used to warehouse fixed or
adjustable rate, second lien, residential mortgage loans (which were
purchased or originated in conjunction with the related First Lien Mortgage
Loans) that are to be included in the Second Lien Securitization (the
"Second Lien Mortgage Loans") and, together with the First Lien Mortgage
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Loans, the "Mortgage Loans"), as such Second Lien Mortgage Loans are
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identified to the Lender in writing and in electronic form from time to
time. All Mortgage Loans financed hereunder shall be closed loans; i.e.,
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this facility shall not be used for "wet" or "table" fundings. The Lender
may refuse to lend against any Mortgage Loan(s) which the Lender reasonably
believes will not be eligible for inclusion in any securitized pool either
(x) due to the characteristics of such Mortgage Loan or (y) due to the
expected aggregate characteristics of the Mortgage Loans.
(ii) Each Advance shall be made on a date prior to the Maturity Date
referred to below (each such date, a "Funding Date"); provided that:
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(A) the conditions precedent to the making of Advances set forth
in Section 2 hereof shall have been satisfied, and the representations
and warranties of the Borrower in Section 4 hereof shall be true and
correct on and as of such Funding Date as if made on and as of such
date;
(B) no Event of Default shall have occurred and be continuing or
would exist after the making of the Advance on such Funding Date;
(C) The Lender shall have receive (x) in connection with each
Advance, a certificate from the Custodian referred to below to the
effect that it has reviewed the mortgage files relating to the
Mortgage Loans being pledged in connection with the Advance being made
on such Funding Date and has found no material deficiencies in such
mortgage files (the "Custodian's Certification"), and (y) prior to the
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initial Advance, a legal opinion from counsel (which may be in-house
counsel) to the Borrower in the form of Exhibit B attached hereto;
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(D) the Borrower shall have delivered or caused to be delivered
to the Custodian all documents required to be delivered pursuant to
Section 2 of the Custodial Agreement with respect to the Mortgage
Loans being pledged on such Funding Date; and
(E) to the extent described in Section 5(c) hereof, no notice
described in said Section 5(c) shall have been received by PSI.
(iii) The Loan shall accrue interest daily (from and including the
date of disbursement to and excluding the date of payment) on its
outstanding principal amount, with interest calculated for the actual
number of days elapsed, based on a 365-day year. The interest rate shall
be (except as otherwise provided in Section 1(e) and Section 11(d) hereof)
LIBOR plus 1.50% per annum, and shall be reset on each business day.
Interest which accrues during each calendar month shall be payable on the
5th business day of the following month, with any outstanding interest due
and payable in its entirety on the date of termination of this warehouse
facility (including the Maturity Date).
"LIBOR" shall mean, the London interbank offered rate for one-month
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U.S. dollar deposits, as set forth in the most recently-published edition of The
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Wall Street Journal.
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Any amounts pre-paid under this Agreement prior to the Maturity Date
may be re-borrowed, subject to the terms and conditions of this Agreement, until
the Maturity Date.
(b) The amount of each Advance shall not exceed the lesser of:
(i) 100% of the aggregate outstanding principal balance of the
Mortgage Loans (calculated as of the related Cut-Off Date or, if the Borrower is
using the proceeds of the Advance to purchase the related Mortgage Loans at
their aggregate outstanding principal balance as of the settlement date for the
purchase, then their aggregate outstanding principal balance as of such
settlement date) proposed to be pledged to the Lender in connection with such
Advance, minus, in the event that a Collateral Deficiency Situation exists as of
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the date of such Advance, the Restoration Amount as of the date of such Advance;
and
(ii) the product of (x) the Market Value of the Mortgage Loans
proposed to be pledged to the Lender in connection with such Advance and (y)
95%, in the case of First Lien Advances, and 85%, in the case of Second Lien
Advances, minus, in the event that a Collateral Deficiency Situation exists as
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of the date of such Advance, the Restoration Amount as of the date of such
Advance.
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For purpose of this Agreement:
A Collateral Deficiency Situation shall be deemed to be existing as of
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any day on which (x) the outstanding principal amount of the Loans as of such
day exceeds (y) the product of (I) the Market Value of the Pledged Mortgage
Loans (disregarding the Market Value of any Mortgage Loans proposed to be
pledged to the Lender on such day) and (II) the Collateral Percentage in the
case of First Lien Mortgage Loans and 86% in the case of Second Lien Mortgage
Loans. "Collateral Percentage" means 96% so long as none of the First Lien
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Mortgage Loans are more than 31 days delinquent and 95.5% if any of the First
Lien Mortgage Loans are more than 31 days delinquent.
Cut-Off Date means, as of any date, the close of business on the date
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set forth in the related Mortgage Loan Schedule (as defined in the Custodial
Agreement). In no event shall the Cut-Off Date precede by more than two weeks
the date on which the related Mortgage Loan Schedule is delivered.
Market Value means, as of any date and with respect to any Mortgage
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Loans, the whole-loan servicing-retained fair market value of such Mortgage
Loans as of such date as determined by the Lender (or an affiliate thereof) in
its sole discretion and in good faith, together with the aggregate principal
amount of principal payments and prepayments on deposit in the Collection
Account maintained by the Custodian in respect of the Mortgage Loans.
Maturity Date means, the earlier of (i) June 14, 1996 and (ii) the
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date on which both the First Lien Securitization and the Second Lien
Securitization have occurred. The Maturity Date may be extended by Lender, in
Lender's sole and unreviewable discretion, on any date by the execution and
delivery of a Credit Increase Confirmation and Note Amendment in the form of
Exhibit C hereto. The Lender will give the Borrower 10 Business Days prior
written notice if it determines not to extend the Maturity Date or renew this
facility.
Pledged Mortgage Loans means, as of any date of determination, any
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mortgage loans then held by the Custodian on behalf of the Lender to secure the
Loans.
Restoration Amount means, as of any date of determination, the amount,
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if any, by which (x) the outstanding principal amount of the Loans as of such
date exceeds (y) the lesser of (i) the product of (I) the Market Value of the
Pledged Mortgage Loans (disregarding the Market Value of any Mortgage Loans
proposed to be pledged to the Lender on such date) and (II) 95% in the case of
First Lien Mortgage Loans and 85% in the case of Second Lien Mortgage Loans, and
(ii) the outstanding principal balance of the Pledged Mortgage Loans
(disregarding the outstanding principal balance of any Mortgage Loans to be
pledged to the Lender on such date).
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(c) The Loans evidenced hereby shall mature on the Maturity Date and
all amounts outstanding hereunder shall be due and payable on the Maturity Date.
(d) The Loans are pre-payable at any time without premium or penalty,
in whole or in part, and an equal aggregate principal amount of Pledged Mortgage
Loans may be removed from the facility in connection with any such prepayment of
the Loan in part; provided, that Pledged Mortgage Loans removed from this
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facility in connection with any prepayment of the Loans in part will not result
(based on rating agency criteria or standards) in the remaining Pledged Mortgage
Loans being, in the aggregate, materially inferior as collateral as compared to
the pool of Pledged Mortgage Loans immediately prior to such removal. In
addition, no Pledged Mortgage Loans may be removed from this facility with the
result that a Collateral Deficiency Situation would then exist. Notwithstanding
the foregoing, however, a Pledged Mortgage Loan, may in any event be removed
from the facility if such Pledged Mortgage Loan has been paid in full by the
mortgagor. If the Borrower intends to prepay the Loan in whole or in
substantial part from a source other than the proceeds of the Securitization,
the Borrower shall give two business days' written notice to the Lender.
(e)(i) If the Loan is not extended by means of a Credit Increase
Confirmation and Note Amendment, the Loan shall immediately and automatically
become due and payable without any further action by the Lender on the then
scheduled Maturity Date, and in the event of non-payment in full on such
Maturity Date 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 of the State of New York (the "New York UCC").
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(ii) So long as there are Loans outstanding under this Agreement, the
parties hereby acknowledge and agree that PSI will be invited to participate in
any issuance by the Borrower (or any special purpose entity created by the
Borrower) of mortgage-backed securities which are collateralized by Mortgage
Loans financed under this Program or by fixed or adjustable rate, first or
second lien, residential mortgage loans which were not financed under this
Program in each case on the following terms and conditions:
(1) in the event that any such mortgage-backed securities
issuance is not collateralized by any Mortgage Loans financed under
this Program, PSI will be invited to participate as a co-manager in
such mortgage-backed securities issuance and its allocation will be
determined by the lead manager (book runner);
(2) in the event that any such mortgage-backed securities
issuance is in part collateralized by
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Mortgage Loans financed under this Program but such Mortgage Loans are
less than a majority of all mortgage loans collateralizing such
mortgage-backed securities (based on outstanding principal balances at
the cut-off date), PSI will be invited to participate as a co-manager
in such mortgage-backed securities issuance and PSI will be entitled
to receive an allocation of securities being offered by underwriters,
i.e. excluding residual securities (the "Offered Securities"), in a
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principal amount at least equal to the Specified Percentage (as
defined below) of the aggregate principal amount of the Offered
Securities; provided, that the price quoted by PSI for such Offered
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Securities (i.e., interest rate and issue price) will be at least
equal to the pricing set by the lead manager; and
(3) in the event that any such mortgage-backed securities
issuance is in part collateralized by Mortgage Loans financed under
this Program and such Mortgage Loans constitute a majority of all
mortgage loans collateralizing such mortgage-backed securities (based
on outstanding principal balances at the cut-off date), PSI will be
invited to act as lead manager (and book runner) in such mortgage-
backed securities issuance; provided, that PSI will be obligated to
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provide a minimum allocation of Offered Securities to any Specified
Underwriter in a principal amount at least equal to the Specified
Percentage (as defined below) of the aggregate principal amount of the
Offered Securities; provided, that the price quoted by such Specified
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Underwriter for such Offered Securities (i.e., interest rate and issue
price) will be at least equal to the pricing set by PSI.
For purposes of this agreement, "Specified Percentage" means the percentage
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determined by (i) in the case of PSI when not acting as lead manager, dividing
the aggregate principal amount of Mortgage Loans financed under the Program and
included in such mortgage-backed issuance by the aggregate principal amount of
all mortgage loans collateralizing such mortgage-backed securities (based on
outstanding principal balances at the cut-off date) and (ii) in the case of any
Specified Underwriter, dividing the aggregate principal mount of mortgage loans
financed under such Specified Underwriter's or one of its affiliate's warehouse
lending facility and included in such mortgage-backed issuance by the aggregate
principal amount of all mortgage loans collateralizing such mortgage-backed
securities (based on outstanding principal balances at the cut-off date). For
purposes of this agreement, "Specified Underwriter" means any underwriter
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designated by the Borrower with respect to which the Borrower or its parent has
a similar warehousing and underwriting
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agreement as the one between the Lender and PSI described in this Section.
(iii) In the event that the Borrower does not invite PSI to
participate in any issuance by the Borrower or any special purpose entity
created by the Borrower of mortgage-backed securities in the circumstances set
forth in Section 1(e)(ii) above or any Whole Loan Trade, then the interest rate
on the Loans shall increase to LIBOR plus 3.50% per annum, which higher rate
shall retroactively be applied as of the related Funding Date for all prior
Advances or Pledged Mortgage Loans so involved. "Whole Loan Trade" shall mean
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any whole loan trade involving the Pledged Mortgage Loans, other than a whole
loan trade instituted by the Borrower due to the termination of this facility by
the Lender prior to maturity as a result of an Event of Default (other than an
Event of Default under Section 10(a) below).
(f) The First Lien Loan shall be evidenced by the secured promissory
note of the Borrower in the form attached hereto as Exhibit A-1 (the "First Lien
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Secured Note") and the Second Lien Loan shall be evidenced by the secured
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promissory note of the Borrower in the form attached hereto as Exhibit A-2 (the
"Second Lien Secured Note" and, together with the First Lien Secured Note, the
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"Secured Notes").
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(g) In the event that the Loan is extended beyond its then scheduled
Maturity Date by means of a Credit Increase Confirmation and Note Amendment, the
factors set forth in the definitions of "Collateral Deficiency Situation" and
"Restoration Amount" may be revised downward by the Lender in its sole
discretion.
Section 2. Additional Conditions Precedent; Required Characteristics;
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and Correspondents.
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(a) Not later than two business days prior to the proposed Funding
Date for an Advance, the Borrower shall deliver to the Lender (i) a written
notice in the form of Exhibit D hereto and (ii) an electronic disk or tape, in a
mutually satisfactory form to be agreed upon detailing certain specified
characteristics of the Mortgage Loans proposed to be pledged in connection with
such Advance (each such schedule, a "Mortgage Loan Schedule"). Mortgage Loan
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Schedules containing the information set forth in Exhibit F are considered to be
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in satisfactory form.
(b) It is the Lender's understanding that the Borrower's current
business strategy (the "Program") is to operate as a "conduit" for the
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securitization of first and second lien, conforming and non-conforming credit
mortgage loans which the Borrower will purchase from others.
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In connection with the Program, the Borrower agrees as follows:
(i) the Borrower shall supply to the Lender and/or its counsel
copies of all purchase agreements ("Purchase Agreements") (or, if such
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agreements have not been finalized, the latest drafts of such
agreements), together with copies of all underwriting guidelines
applicable to any Mortgage Loans proposed to be financed hereunder,
not later than the second business day prior to the proposed Funding
Date (it being understood that if the same agreements and guidelines
apply to multiple Funding Dates they only need to be furnished once);
(ii) The Lender may in its sole reasonable discretion reject for
financing hereunder any Mortgage Loans based upon the identity of the
entity selling such Mortgage Loans to the Borrower (each such entity,
a "Correspondent"), or, if the originator of such Mortgage Loans is
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not the Correspondent, upon the identity of such originator, provided,
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that, in furtherance of the foregoing the Borrower and the Lender
agree to communicate with reasonable frequency concerning the
Borrower's pipeline and upcoming trades;
(iii) the Borrower hereby assigns to the Lender, as collateral
security for the Loans, all of the Borrower's right, title and
interest in and to each Purchase Agreement and the Custodial Agreement
(collectively, the "Program Agreements"); and
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(iv) notwithstanding the collateral assignment granted in clause
(iii) above, the Borrower agrees and covenants with the Lender (x) to
enforce diligently the Borrower's rights and remedies set forth in the
Program Agreements and (y) to provide the Lender with prompt written
notice of any default or event which, with the passage of time, will
become a default, by any party to any Program Agreement and of which
the Borrower is aware.
(c) The Borrower shall reimburse the Lender for any of the Lender's
reasonable out-of-pocket costs, including due diligence review costs and
reasonable attorney's fees, incurred by the Lender in determining the
acceptability to the Lender of (x) any Mortgage Loans, (y) any Program Agreement
or (z) the identity of any Correspondent, originator or servicer.
Section 3. Mortgage Files and Custodian. The Borrower shall deliver
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to Bankers Trust Company of California, N.A. as custodian (the "Custodian") on
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behalf of the Lender, the documents and instruments listed in Section 2 of that
certain
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Custodial Agreement dated as of December 1, 1995 (the "Custodial Agreement")
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among the Borrower, Wilshire Credit Corporation and the Custodian. Such
documents and instruments evidencing and relating to the Mortgage Loans,
together with any proceeds thereof, and together with the Borrower's right,
title and interest in and to the Program Agreements with respect to Pledged
Mortgage Loans are hereinafter referred to as the "Collateral". The Borrower
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hereby pledges all of its right, title and interest in and to the Collateral to
the Lender to secure the repayment of principal of and interest on the Loans and
all other amounts owing by the Borrower to the Lender hereunder (collectively,
the "Secured Obligations").
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Section 4. Representations, Warranties and Covenants. (a) The
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Borrower represents and warrants to the Lender that:
(i) It has been duly organized and is validly existing as a limited
liability company in good standing under the laws of the State of Delaware.
(ii) It or the Guarantor is duly licensed as a "Licensee" or is
otherwise qualified in each state in which it or such affiliate 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, each Program Agreement, and the Secured Notes.
(iii) At all times after the Custodian has received a Mortgage Loan
from the Borrower and until payment in full of the Loan, the Borrower will
not knowingly and intentionally commit any act in violation of applicable
laws or regulations promulgated with respect thereto.
(iv) Each of the Borrower and the Guarantor 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 the Borrower of this Agreement, the Secured
Notes and the Program Agreements do not conflict with any term or provision
of the certificate of formation or operating agreement of the Borrower or
any law, rule, regulation, order, judgment, writ, injunction or decree
applicable to the Borrower of any court, regulatory body, administrative
agency or governmental body having jurisdiction over the Borrower and will
not result in any violation of any such mortgage, instrument or agreement.
(v) All financial statements or certificates of the Borrower or the
Guarantor shed to the Lender are true and
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complete and do not omit to disclose any material liabilities or other
facts relevant to the Borrower's or such Guarantor's condition. All such
financial statements have been prepared in accordance with GAAP. No
financial statement or other financial information as of a date later than
that supplied to the Lender, has been furnished by the Borrower or the
Guarantor to another lender of the Borrower or the Guarantor that has not
been furnished to the Lender.
(vi) Except for those held by its affiliate, Wilshire Credit
Corporation, 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 the Borrower of this Agreement, the Secured Notes and
the Program Agreements.
(vii) There is no action, proceeding or investigation pending with
respect to which the Borrower has received service of process or, to the
best of the Borrower's knowledge threatened against it before any court,
administrative agency or other tribunal (A) asserting the invalidity of
this Agreement, the Secured Notes or any Program Agreement, (B) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement, the Secured Notes or any Program Agreement, 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, the Secured Notes or any Program
Agreement.
(viii) There has been no material adverse change in the business,
operations, financial condition, properties or prospects of the Borrower or
the Guarantor since the date set forth in the financial statements supplied
to the Lender.
(ix) This Agreement, the Secured Notes and the Program Agreements
have been (or, in the case of Program Agreements not yet executed, will be)
duly authorized, executed and delivered by the Borrower, all requisite
corporate action having been taken, and each is valid, binding and
enforceable against the Borrower in accordance with its except as such
enforcement may be affected by bankruptcy, by other insolvency laws, or by
general principles of equity.
(b) With respect to every Mortgage Loan pledged to the Lender, the
Borrower represents and warrants to the Lender that:
(i) Such Mortgage Loan and all documents listed in Section 2 of the
Custodial Agreement are complete and authentic and all signatures thereon
are genuine.
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(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) Except for payment defaults permitted by clause 8 below, no
default has occurred in any provisions of such Mortgage Loan.
(iv) 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 other encumbrances other than in the case of Second Lien
Mortgages, the security interest of the party having the first mortgage
lien on such property.
(v) The Borrower pledging such Mortgage Loan hereunder holds good and
indefeasible title to, and is 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.
(vi) Each Mortgage Loan conforms to the description thereof as set
forth on the related Mortgage Loan Schedule delivered to the Custodian and
the Lender.
(vii) All disclosures required by the Real Estate Settlement
Procedures Act, by Regulation X promulgated thereunder and 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 of Rescission required by said statute and regulation
have been properly made and given.
(viii) Such Mortgage is not 31 or more days delinquent as of the last
payment due date for such Mortgage Loan; except that in the aggregate up to
1% of the First Lien Mortgage Loans hereunder may be not 61 or more days
delinquent as of the last payment due date for such First Lien Mortgage
Loans.
(ix) Such Mortgage Loan was originated in accordance with the
underwriting guidelines set forth in the Wilshire Mortgage Corporation
Seller Guide as of the date of origination and referred to in the Purchase
Agreements.
(x) Each representation and warranty made by the related
Correspondent in the related Purchase Agreement was true and correct as of
its date.
(c) The Borrower covenants with the Lender that during the term of
this facility (i) the Guarantor will continue to maintain, for it and its
affiliates, insurance coverage with
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respect to employee dishonesty, forgery or alteration, theft, disappearance and
destruction, robbery and safe burglary, property (other than money and
securities) and computer fraud in an amount which is consistent with industry
practice, (ii) the Borrower will establish and maintain a lock-box account with
Bank of America (Oregon) for the benefit of the Custodian under the Custodial
Agreement into which the obligors on the Pledged Mortgage Loans will be
instructed to remit their payments and the Borrower will remit, or cause to be
remitted, from such account no later than the first Business Day after the
Business Day on which payments on the Mortgage Loans are received and identified
by the Servicer, all principal payments and such portion of the interest
payments on such Mortgage Loans in an amount sufficient to make the monthly
payments of interest required by Section 1(a)(iii) hereunder, and (iii) the
Borrower and the Guarantor will, at the request of the Lender, employ a third
party contract underwriter to reunderwrite up to 20% of the Mortgage Loans
financed under this Program during any month; provided, that (x) such third
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party contract underwriter shall initially be Xxxxx & Associates and any
successor thereto appointed by the Borrower shall be a third party contract
underwriter acceptable to any credit rating agency or monoline insurance
company, (y) the cost of such third party contract underwriter's services shall
be for the account of the Borrower and shall not exceed $5,000 in any month, and
(z) any such reunderwriting shall be done during regular business hours with
reasonable frequency and in such a manner as to be the least disruptive as
possible to the Borrower and the Guarantor.
Section 5. Mandatory Prepayment of Loan.
--------- ----------------------------
(a) Upon discovery by the Borrower or the Lender of any breach of any
of the representations and warranties listed in Section 4(b) preceding, the
party discovering such breach shall promptly give notice of such discovery to
the others.
The Lender has the right to require, in its unreviewable discretion,
the Borrower to repay the Loans in part with respect to any Mortgage Loan (i)
which breaches one or more of the representations and warranties listed in
Section 4(b) preceding or (ii) which is determined by a rating agency or a party
providing credit enhancement to be unacceptable for inclusion in the First Lien
Securitization or the Second Lien Securitization, as the case may be.
(b) If 1% of the First Lien Mortgage Loans hereunder are 31 or more
days delinquent as of the last payment due date for such First Lien Mortgage
Loans, the Lender may require the Borrower to prepay the First Lien Loan in part
with respect to any First Lien Mortgage Loan which becomes 31 or more days
delinquent as indicated on any Supplemental Mortgage Loan Schedule delivered
pursuant to Section 9(a) hereof, or, with the Lender's consent, deliver a
qualifying substitute mortgage loan
-12-
in its place. The Lender may require the Borrower to prepay the First Lien Loan
in part with respect to any First Lien Mortgage Loan which becomes 61 or more
days delinquent as indicated on any Supplemental Mortgage Loan Schedule
delivered pursuant to Section 9(a) hereof, or, with the Lender's consent,
deliver a qualifying substitute mortgage loan in its place. The Lender may
require the Borrower to prepay the Second Lien loan in part with respect to any
Second Lien Mortgage Loan which becomes 31 or more days delinquent as indicated
on any Supplemental Mortgage Loan Schedule delivered pursuant to Section 9(a)
hereof, or, with the Lender's consent, deliver a qualifying substitute mortgage
loan in its place.
(c) If the Borrower awards a securitization or any Whole Loan Trade
involving any Pledged Mortgage Loans to an investment banking house, agent or
underwriter other than as agreed or permitted in Section 1(e)(ii) then (x) the
Lender may demand that the Borrower prepay any portion of the Loans evidenced
hereby relating to the dollar amount of the Mortgage Loans to be included in
such securitization or Whole Loan Trade for payment within five business days of
the demand for prepayment, (y) the Lander may refuse to make further Advances
hereunder if such Advances would relate to Mortgage Loans to be included in such
securitization or Whole Loan Trade in which PSI has not been selected for
participation and (z) the interest rate on the Loan shall increase as set forth
in Section 1(e)(iii) hereof. The Borrower shall give immediate notice, by
facsimile transmission, to the attention of Xxxxxxxxx Xxxxxxxx at the Lender,
Xxxxxxx Xxx at PSI (fax 000-000-0000) and to Xxxx Xxxxxxx at PSI (fax 212-778-
7401) of any decision to award the lead manager role or to name any group of
managers for any Securitization or whole-loan trade involving any Pledged
Mortgage Loans.
(d) If, on any date other than a Funding Date, the Lender determines
that a Collateral Deficiency Situation exists, the Lender shall so notify the
Borrower, and the Borrower, within two business days, shall either (i) pay to
the Lender the Restoration Amount or (ii) deliver to the Custodian on behalf of
the Lender additional Mortgage Loans having an aggregate Market Value at least
equal to the Restoration Amount. The provisions of Section 1(b) shall govern
with regard to a Collateral Deficiency Situation as of a Funding Date.
Section 6. Release of Mortgage Files following Payment. The Lender
--------- -------------------------------------------
agrees to release its lien hereunder and to cause to be released the documents
described in Section 2 of the Custodial Agreement upon payment in full of the
Loans, or, if a partial payment of the Loans occurs, the liens and documents
relating to the Pledged Mortgage Loans in respect of which such partial
prepayment was made.
-13-
Section 7. Servicing. Wilshire Credit Corporation shall act as
--------- ---------
servicer of the Mortgage Loans and shall service the Mortgage Loans in the same
manner and subject to the same standards as set forth in the Wilshire Mortgage
Corporation Loan Servicing Procedures Manual.
Section 8. 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 and the parties
may assign their rights and obligations under this Agreement; provided that the
--------
Borrower will not be required to deal with a lender other than the Lender.
Section 9. Reports. (a) The Borrower shall provide the Lender with
--------- -------
an electronic disk or tape (each, a "Supplemental Mortgage Loan Schedule")
-----------------------------------
within two business days following any reasonable request made by the Lender or
any affiliate thereof for such a report, but in any event at least once a month
on the 8th day of such month. Such Supplemental Mortgage Loan Schedule will
contain information concerning all Mortgage Loans then held in the warehouse
facility, and shall be in the format as may be agreed upon by the Borrower and
the Lender from time to time.
(b) The Borrower shall furnish to Lender (x) promptly, copies of any
material and adverse notices (including, without limitation, notices of
defaults, breaches, potential defaults or potential breaches) given to or
received from its other lenders, (y) immediately, notice of the occurrence of
any "Event of Default" hereunder or of any situation which the Borrower, with
the passage of time or notice or both, would become an "Event of Default"
hereunder and (z) the following:
(i) audited financial statements of Wilshire Credit Corporation
within 120 days of Wilshire Credit Corporation's fiscal year end;
(ii) unaudited financial statements of Wilshire Credit
Corporation for each of Wilshire Credit Corporation's first three
quarters of each fiscal year, within 45 days after quarter end; and
(iii) unaudited financial statements of the Borrower for each
quarter within 45 days after quarter end.
All required financial statements, information and reports shall be
prepared in accordance with U.S. GAAP.
Section 10. Events of Default. Each of the following shall
---------- -----------------
constitute an "Event of Default" hereunder:
-14-
(a) Failure of the Borrower to (i) 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 Notes, this Agreement, or (ii) pay or
deliver any Restoration Amount following the expiration of the grace period set
forth in Section 5(d).
(b) Any "event of default" by the Borrower or the Guarantor under any
agreement relating to any indebtedness of the Borrower or the Guarantor or any
warehouse and security agreement or any other document evidencing or securing
indebtedness of the Borrower to the Lender or to any affiliate of the Lender or
any other lender which results in the acceleration of such indebtedness in an
amount in excess of $100,000.
(c) Assignment or attempted assignment by the Borrower of this
Agreement or any rights hereunder, without first obtaining the written consent
of Lender, or the granting by the Borrower of any security interest, lien or
other encumbrance on any Collateral hereunder to any other person other than the
Lender or the holder of a second lien position in respect of such Collateral.
(d) The filing by the Borrower or the Guarantor 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 the Guarantor to secure dismissal of any such
petition filed against it within forty-five (45) days of receiving notice of
such filing; the making of any general assignment by the Borrower or the
Guarantor for the benefit of creditors; the appointment of a receiver or trustee
for the Borrower or the Guarantor, or for any part of the Borrower's or the
Guarantor's assets; the institution by the Borrower or the Guarantor 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
the Guarantor; the institution of any such proceeding against the Borrower or
the Guarantor if the Borrower or the Guarantor shall fail to secure a stay or
dismissal thereof within forty-five (45) days thereafter; the lifting of any
such stay if the Borrower or the Guarantor shall fail to secure a dismissal of
such proceeding within forty-five (45) days of the date such proceeding was
originally instituted; the consent by the Borrower or the Guarantor to any type
of insolvency proceeding against the Borrower or the Guarantor (under the
Bankruptcy Code or otherwise).
(e) Any materially adverse change in the financial condition of the
Borrower or of the Guarantor or the occurrence of any other condition which in
the Lender's sole discretion
-15-
impairs the Borrower's ability to perform its obligations under this Agreement
or the Borrower's obligations under the Secured Notes or the Guarantor's
obligations under the Guarantee and which condition is not remedied within ten
(10) days after written notice to the Borrower or the Guarantor thereof or, if
the conditions cannot be fully remedied within said ten (10) days, substantial
progress has not been made within said ten (10) days toward remedy of the
condition.
(f) Wilshire Credit Corporation or the Borrower's parent company
ceases to be the servicer of the Mortgage Loans and no replacement servicer
reasonably acceptable to the Lender is found within 30 days of such termination.
(g) A breach by the Borrower of any representation, warranty or
covenant set forth in Section 4, Section 7 or Section 9 hereof or a use by the
Borrower of the proceeds of the Loans for a purpose other than as set forth in
Section 1(a) hereof.
Section 11. Remedies Upon Default. (a) Upon the happening of one or
---------- ---------------------
more Events of Default, the Lender may (x) refuse to make further Advances
hereunder and (y) immediately declare the principal of the Secured Notes 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 10(d), 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 on the Secured Notes 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 obtain physical possession, and to commence an action to
obtain 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. The Lender shall be entitled to specific performance of all
agreements of the Borrower contained in this Agreement. The Borrower and the
Lender hereby acknowledge that the Lender's right to obtain physical possession
of the Collateral is deemed for all purposes to be equivalent to the rights of
"seizure of property or maintenance or continuation of perfection of an interest
in property" as specified under Bankruptcy Code Sections 362(b) and 546(b)(2).
(c) Upon the happening of one or more Events of Default, the Lender
have the right to direct all servicers then servicing any Pledged Mortgage Loans
to remit all collections on the Pledged Mortgage Loans to the Lender, and if any
such
-16-
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. Subject to the provisions of Section 11(e) below, such
disposition may be on either a servicing released or a servicing-retained basis.
The Lender shall be entitled to place the Mortgage Loans which it receives after
any default in a pool for issuance of mortgage-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 New York 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 New York UCC. The
specification in this Section of manners of disposition of collateral as being
commercially reasonable shall not preclude the use of other commercially
reasonable methods (as contemplated by the New York UCC) at the option of the
Lender.
(d) Following the occurrence and during the continuance of an Event of
Default (other than an Event of Default under Section 10(a) above), interest
shall accrue on the Loan at a default interest rate of LIBOR plus 2.00% per
annum. Following the occurrence of an Event of Default under Section 10(a)
above, interest shall accrue on the Loan at a default interest rate of LIBOR
plus 5.00% per annum; provided, that such interest rate shall decline to LIBOR
plus 2.50% per annum on the occurrence of a Trade Date as provided in Section
11(e) below. Following the occurrence and during the continuance of an Event of
Default, the Borrower or its designee, Wilshire Credit Corporation shall be
entitled to receive a servicing fee (the "Servicing Fee"), payable monthly in
arrears on the 5th day of each month, in an amount equal to 0.50% per annum on
the outstanding principal balance of the Mortgage Loans as of the first day of
the month preceding the month in which such fee is payable, and such servicing
fee shall continue to be payable until the default is cured or the Collateral is
disposed of as provided in Section 11(e) below. In addition, following the
occurrence and during the continuance of an Event of Default, principal payments
received in respect of Mortgage Loans will be applied to reduce the principal
amount of the Loans and interest payments will be applied in the following
order: first, to pay interest on the Loans, second, to pay the Servicing Fee,
and third to reduce the principal amount of the Loans.
(e) If the Lender determines to begin marketing the Collateral as
provided in Section 11(c) above, the Lender shall immediately give written
notice of such determination to Wilshire
-17-
Credit Corporation and, at any time prior to the Lender entering into an
agreement to sell all or a portion of the Collateral with any party (the "Trade
Date"), will allow Wilshire Credit Corporation (or any affiliate thereof) to
purchase all the Mortgage Loans then subject to this Agreement at a price equal
to the then outstanding principal balance of the Loans together with accrued
interest. The Lender agrees to promptly provide the Borrower with written
evidence of any such agreement with a third party. In the event that Wilshire
Credit Corporation does not purchase the Mortgage Loans as provided in this
Section 11(e), the Lender agrees to act in a commercially reasonable manner in
disposing of such Collateral. The Lender and Borrower also agree that in the
event that the Mortgage Loans are sold to a third party as provided in this
Section 11(e) at a price in excess of 105% of the principal balance of such
Mortgage Loans, any amounts payable in excess of 105% of the principal balance
of such Mortgage Loans shall be equally divided between the Borrower and the
Lender. On payment by Wilshire Credit Corporation (or an affiliate), the Lender
shall promptly release any right, title interest or other claim in the Mortgage
Loans or proceeds thereof.
Section 12. Indemnification. The Borrower agrees to hold the Lender
---------- ---------------
harmless from and indemnifies 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, the Secured Notes, any Program Agreement or any transaction
contemplated hereby or thereby resulting from anything other than the Lender's
negligence or willful misconduct. The Borrower also agrees to reimburse the
Lender for all reasonable expenses in connection with the enforcement of this
Agreement, the Secured Notes and any Program Agreement, including without
limitation the reasonable fees and disbursements of counsel. The Borrower's
agreements in this Section shall survive the payment in full of the Secured
Notes and the expiration or termination of this Agreement. The Borrower hereby
acknowledges that, notwithstanding the fact that the Secured Notes is secured by
the Collateral, the obligations of the Borrower under the Secured Notes are
recourse obligations of the Borrower.
Section 13. Power of Attorney. The Borrower hereby authorizes 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, transfer
servicing, and sign assignments on behalf of
-18-
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 may be exercised only during the
occurrence and continuance of any Event of Default hereunder.
Section 14. Agreement Constitutes Security Agreement. This Agreement
---------- ----------------------------------------
is intended by the parties hereto to be governed by New York law, and to
constitute a security agreement within the meaning of the New York UCC.
Section 15. Lender May Act Through Affiliates. The Lender may, from
---------- ---------------------------------
time to time, designate one or more affiliates for the purpose of performing any
action hereunder.
Section 16. Notices. All demands, notices and communications
---------- -------
relating to this Agreement shall be in writing and shall be deemed to have been
duly given when received by the other party or parties at the address shown
below, or such other address as may hereafter be furnished to the other party or
parties by like notice.
If to the Borrower:
Wilshire Funding Company, L.L.C.
0000 X.X. Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to the Guarantor:
Wilshire Credit Corporation
0000 X.X. Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
With copies to:
Xxxxxxx Breed Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxxxxx
Phone Number: 000-000-0000
Fax Number: 000-000-0000
-00-
Xxxxx Xxxxx Xxxxx Xxxxx & Grey
Standard Insurance Center
000 XX Xxxxx Xxx., Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000-0000
Attention: Xxxx Xxxxxxxx
Phone Number: 000-000-0000
Fax Number: 000-000-0000
If to the Lender:
Prudential Securities Realty Funding
Corporation
One Seaport Plaza, 27th Floor
Treasury Department
New York, New York 10291
Attention: Xx. Xxxxxxxxx Xxxxxxxx
Phone Number: 000-000-0000
Fax Number: 000-000-0000
With copies to:
Prudential Securities Incorporated
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxx
Phone Number: 000-000-0000
Fax Number: 000-000-0000
Section 17. Severability. Any provision of this Agreement which is
---------- ------------
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
Section 18. Counterparts. This Agreement may be executed in one or
---------- ------------
more counterparts, each of which shall be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.
Section 19. Certain Definitions. The following capitalized terms are
---------- -------------------
defined in the corresponding sections specified below:
"Advance" - Section 1(a)(i).
-------
"Agreement" - Introductory Clause.
---------
"Borrower" - Introductory Clause.
--------
"Collateral" - Section 3.
----------
-20-
"Collateral Deficiency Situation" - Section 1(b)(ii).
-------------------------------
"Correspondent" - Section 2(b)(ii).
-------------
"Custodian" - Section 3.
---------
"Custodial Agreement" - Section 3.
-------------------
"Custodian's Certification" - Section 1(a)(ii)(C).
-------------------------
"Cut-Off Date" - Section 1(b)(ii).
------------
"Engagement Letter" - Recitals.
-----------------
"Event of Default" - Section 10.
----------------
"First Lien Advance" - Section 1(a)(i).
------------------
"First Lien Mortgage Loan" - Section 1(a)(i).
------------------------
"Funding Date" - Section 1(a)(ii).
------------
"Guarantee" - Section 10.
---------
"Guarantor" - Section 10.
---------
"Lender" - Introductory Clause.
------
"LIBOR" - Section 1(a)(iii).
-----
"Loans" - Section 1(a)(i).
-----
"Market Value" - Section 1(b)(ii).
------------
"Maturity Date" - Section 1(b)(ii).
-------------
"Mortgage Loans" - Section 1(a)(i).
--------------
"Mortgage Loan Schedule" - Section 2(a).
----------------------
"NY UCC" - Section 1(e)(i).
------
"Offered Securities" - Section 1(e).
------------------
"Pledged Mortgage Loans" - Section (1)(b)(ii).
----------------------
"Program" - Section 2(b).
-------
"Program Agreements" - Section 2(b)(iv).
------------------
"PSI" - Recitals.
---
"Purchase Agreements" - Section 2(b)(i).
-------------------
-21-
"Restoration Amount" - Section 1(b)(ii).
------------------
"Second Lien Advance" - Section 1(a)(i).
-------------------
"Second Lien Mortgage Loan" - Section 1(a)(i).
-------------------------
"Secured Notes" - Section 1(f).
-------------
"Secured Obligations" - Section 3.
-------------------
"Securitization" - Recitals.
--------------
"Specified Percentage" - Section 1(e).
--------------------
"Specified Underwriter" - Section 1(e).
---------------------
"Supplemental Mortgage Loan Schedule" - Section 9.
-----------------------------------
-22-
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
WILSHIRE FUNDING COMPANY, L.L.C.
By Wilshire Credit Corporation,
a Member
By: /s/
---------------------------------------
Name:
Title:
PRUDENTIAL SECURITIES REALTY
FUNDING CORPORATION
By: /s/
----------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxx
Title: Treasurer
-23-
