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EXHIBIT 10.17(a)
INTERIM LOAN AND SECURITY AGREEMENT
INTERIM LOAN AND SECURITY AGREEMENT, dated as of November 22,
1996 (as amended, supplemented or otherwise modified from time to time, this
"Agreement"), between (i) PRUDENTIAL SECURITIES CREDIT CORPORATION, a Delaware
corporation (the "Lender"), and (ii) AAMES CAPITAL CORPORATION, a California
corporation (the "Borrower") and a subsidiary of Aames Financial Corporation, a
Delaware corporation (the "Guarantor").
RECITALS
WHEREAS, Prudential Securities Incorporated has agreed to act
from time to time as lead manager or co-manager or placement agent of one or
more public or private offerings of residential loan pass-through certificates
(the "Certificates") to be issued by one or more trusts to be sponsored by the
Borrower; and
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 or acquisition of fixed rate first, second or third
mortgage lien loans ("Fixed Rate Mortgage Loans") or six-month LIBOR and one
year CMT indexed floating rate first or second mortgage lien loans ("Floating
Rate Mortgage Loans") (Fixed Mortgage Loans and Floating Rate Mortgage Loans,
collectively, "Mortgage Loans"), which Mortgage Loans are identified for
inclusion in one of two trusts (each, a "Designated Trust"), which Designated
Trust (i) for the period from the date hereof to but excluding December 1, 1996,
shall be Aames Mortgage Trust 1996-D, (ii) from December 1, 1996 to but
excluding the initial Funding Termination Date, shall be Aames Mortgage Trust
1997-A, and (iii) if the Funding Termination Date is extended in accordance with
Section 2(a) hereof, for the period from the date of such extension to but
excluding the Funding Termination Date so specified (such initial period and
each such subsequent period, a "Funding Period"), shall be the trust specified
in the Notice of Extension of Agreement delivered in accordance with Section
2(a) hereof, and which Mortgage Loans are to be pledged to secure the Advances
to be made by the Lender hereunder, with the proceeds of the related
Certificates to be used to repay such Advances;
NOW, THEREFORE, the parties to this Agreement hereby agree as
follows (an index of certain capitalized, defined terms appears in Section 22 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 an aggregate
principal amount outstanding, 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 Funding Termination
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Date, $125,000,000, and (ii) if the Funding 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
with Section 2(a) hereof 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 New York, New York are authorized or required by law to be closed or on
which the New York Stock Exchange is closed (any such date, a "Business Day")
that is prior to the Funding Termination Date (as defined below; each such date
on which an Advance is made, a "Funding Date"); provided that:
(a) the representations and warranties of the Borrower in Section
5 hereof and Schedule 1 hereto 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 (i) a timely Notice of
Borrowing as provided in Section 2(b) hereof, (ii) a Certification from
the Custodian as provided in Section 2(b) hereof to the effect that the
Custodian has reviewed the Mortgage Loan Documents relating to the
Mortgage Loans being pledged in connection with the Advance being made
on such Funding Date in the manner required by the Custodial Agreement
and has found no material deficiencies in such Mortgage Loan Documents
as so reviewed, and (iii) in connection with the first Advance, (A) a
legal opinion from counsel to the Borrower and the Guarantor, in the
form of Exhibit C attached hereto, (B) the Secured Note (as defined
below), (C) the Custodial Agreement, and (D) a Guarantee, dated as of
the date hereof, made by the Guarantor in favor of the Lender,
substantially in the form of Exhibit F hereto (as amended, supplemented
or otherwise modified from time to time, the "Guarantee") in each case
duly executed by the parties thereto;
(e) the Borrower shall have delivered to the Custodian all
documents to be delivered with respect to the Mortgage Loans being
pledged on such Funding Date;
(f) after the making of such Advance: (i) the outstanding
principal amount of the aggregate of all Advances will not exceed the
Maximum Funding Amount; (ii) the outstanding principal amount of the
aggregate of all Advances made in respect of Fixed Rate Mortgage Loans
will not exceed the lesser of (A) 102% of the aggregate par amount of
all Fixed Rate Mortgage Loans held as Collateral and (B) 96.0% of the
aggregate market value of all Fixed Rate Mortgage Loans held as
Collateral; and (iii) the outstanding principal amount of the aggregate
of all Advances made in respect of
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Floating Rate Mortgage Loans will not exceed the lesser of (X) 102% of
the aggregate par amount of all Floating Rate Mortgage Loans held as
Collateral and (Y) 97.0% of the aggregate market value of all Floating
Rate Mortgage Loans held as Collateral;
(g) the Lender shall not have determined, in its sole discretion,
that the Designated Trust is not reasonably likely to be established on
substantially the terms agreed upon at the time of the specifying of the
Designated Trust hereunder;
(h) the Mortgage Loans in respect of which such Advance is
proposed to be made shall not include any Specified Mortgage Loans (as
defined in Section 7(h) hereof); and
(i) any general conditions for the making of Advances, specified
in Section 2 below, shall 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 March 31, 1997 (the "Funding Termination Date");
provided that the Funding 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 Notice of Extension of Agreement
substantially in the form of Exhibit B-1 annexed hereto, (ii) the delivery of an
opinion of counsel to the Borrower substantially in the form of Exhibit B-2
annexed hereto and (iii) in connection with an increase of the Maximum Funding
Amount to an amount greater than the then maximum principal amount of the
Secured Note, the execution and delivery by the parties hereto of an Endorsement
to the Secured Note, substantially in the form of Exhibit B-3 hereto.
(b) If the Borrower wishes to receive an Advance, then the
Borrower shall give the Lender written notice by no later than 2:00 p.m. (New
York City time) two Business Days prior to a Funding Date 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, and the Custodian shall
have delivered a Certification no later than 2:00 p.m. (New York City time) one
Business Day before such Funding Date.
(c) Each Advance shall bear interest from the related Funding
Date to but excluding the Maturity Date at a rate per annum equal to LIBOR plus
0.70% and thereafter as provided in Section 2(f). "LIBOR" shall mean the rate
appearing at page 3750 of the Telerate Screen as one-month LIBOR and, if such
rate shall not be so quoted, the rate per annum at which deposits in U.S.
dollars for a period of one month are offered by Xxxxxx Guaranty Trust Company
of New York (or such other prime bank in the London interbank market as the
Lender shall designate) to prime banks in the London interbank market at
approximately 11:00 a.m. (London Time) on the related Funding Date (for purposes
of determining LIBOR, a
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Business Day being a Business Day on which dealings between banks may be carried
on in the London interbank market). Interest shall be calculated on the basis of
a 360-day year and for the actual number of days elapsed.
(d) 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, for any Advance,
be no later than the earlier of (i) subject to the next succeeding proviso
hereto, the applicable Funding Termination Date, and (ii) subject to Sections
2(m) and 2(n), below, the date upon which the Certificates related to the
Mortgage Loans funded by such Advance shall be issued by the Designated Trust;
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 E attached hereto no later than 5 days preceding
the then scheduled Maturity Date of such Advance. If no such notice is delivered
by the Lender, such Advance shall automatically become due and payable without
any further action by the Lender on its 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 New York (the "NY UCC"). The extension of the Maturity Date of
any Advance beyond the applicable Funding Termination Date shall not be deemed
to be an extension, renewal, or modification of the Lender's commitment to lend
to the Borrower under this Agreement at any time after the Funding Termination
Date.
(e) The Advances are pre-payable at any time without premium or
penalty, in whole or in part. Any amounts pre-paid shall be applied to repay the
outstanding principal amount of any Advances (together with interest thereon)
until paid in full. Amounts repaid may be borrowed in accordance with the terms
of this Agreement. If the Borrower intends to prepay an Advance in whole or in
substantial part from a source other than the proceeds of Certificates, the
Borrower shall give two Business Days' prior notice thereof to the Lender.
(f) If the Advances are not repaid in whole on the date when due,
the Advances shall, commencing on such date, bear interest at a rate per annum
equal to LIBOR plus 3.0% until repaid.
(g) With respect to each Advance, LIBOR shall be determined
initially as of the date of such Advance for the period from such date to but
excluding the fifth calendar day of the month following the month in which such
Advance was made (such fifth calendar day of a month and each succeeding fifth
calendar day of a month, an "Interest Payment Date") and shall thereafter be
determined as of each Interest Payment Date for the period from such date to but
excluding the following Interest Payment Date.
(h) Interest on each Advance is payable on each Interest Payment
Date and on the Maturity Date for such Advance. In the event that an Advance is
not repaid in full on the date when due, interest shall be payable thereafter on
demand.
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(i) 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.
(j) Each Advance shall be repaid in full on the related Maturity
Date, and the Lender shall release its security interest in and to the Mortgage
Loans relating to a Designated Trust when all Advances relating thereto are so
repaid.
(k) 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 five Business Days following receipt thereof.
(l) If at any time,
(A) the aggregate outstanding principal amount of all
Advances in respect of Fixed Rate Mortgage Loans exceeds the lesser of
(i) 102% of the par amount of the Mortgage Loans held as Collateral for
such Advances, and (ii) 96.0% of the aggregate market value of the Fixed
Rate Mortgage Loans held as Collateral for such Advances, 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); or
(B) the aggregate outstanding principal amount of all
Advances in respect of Floating Rate Mortgage Loans exceeds the lesser
of (i) 102% of the par amount of the Mortgage Loans held as Collateral
for such Advances, and (ii) 97.0% of the aggregate market value of the
Floating Rate Mortgage Loans held as Collateral for such Advances, 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); or
(C) any monthly installment of any Mortgage Loan is
delinquent for a period of not less than the period from the due date of
such monthly installment to the due date of the immediately succeeding
monthly installment;
the Borrower shall no later than one Business Day after receipt of notice of
such excess or after such Mortgage Loan becomes delinquent, (X) prepay the
related Advances (together with interest thereon) in part or in whole, (Y)
pledge additional Collateral to the Lender, and/or (Z) in the case of clause (C)
of this subsection (l) only, pledge one or more replacement Mortgage Loans
having an aggregate unpaid principal amount of not less than the principal
amount of
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such delinquent Mortgage Loan and otherwise meeting the requirements of this
Agreement and the Custodial Agreement, such that after giving effect to such
prepayment, pledge or replacement, the unpaid principal amount of the Advances
does not exceed the lesser of the amounts set forth in subclauses (A)(i) and
(A)(ii) or (B)(i) and (B)(ii), as applicable, of this subsection (l) and the
condition described in clause (C) of this subsection (l) shall no longer exist
with respect to any Mortgage Loan.
(m) On the date which is the earlier of (i) the date Certificates
shall be issued by Aames Mortgage Trust 1996-D, and (ii) December 31, 1996, the
Borrower shall prepay the Advances made prior to the cut-off date for Aames
Mortgage Trust 1996-D ("Pre-Cut-Off Date Advances") such that after giving
effect to such prepayment, the aggregate outstanding principal amount of
Pre-Cut-Off Date Advances does not exceed the lesser of (i) $25,000,000 and (ii)
20% of the aggregate principal amount of all Pre-Cut-Off Date Advances which
were outstanding on such cut-off date.
(n) Notwithstanding anything to the contrary in this Agreement,
on the date that the Certificates shall be issued by Aames Mortgage Trust
1997-A, the Borrower shall prepay all Advances in respect of Mortgage Loans
which were pledged to the Lender hereunder prior to the cut-off date for Aames
Mortgage Trust 1996-D, and were not included in either Aames Mortgage Trust
1997-A or Aames Mortgage Trust 1996-D.
(o) Notwithstanding anything to the contrary in this Agreement,
(i) if 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, and as a result the
cost to the Lender of making such Advance is increased by an amount which the
Lender deems material, the Lender shall not be obligated to make such Advance
unless the Borrower agrees to pay the Lender any additional amounts necessary to
compensate the Lender for such increased cost, as notified by the Lender to the
Borrower, and (ii) the Lender shall have no obligation to make any Advance
hereunder if 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. The Lender shall promptly notify the
Borrower of any such determination by the Lender of any of the foregoing.
(p) If any payment hereunder becomes due and payable, or any
action hereunder is required to be taken, on a day other than a Business Day,
the date for such payment or action shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall
accrue at the then applicable rate during such extension.
Section 3. Purpose of Advances. Each Advance shall be used to
finance or refinance Mortgage Loans originated by the Borrower or to acquire
Mortgage Loans from affiliates of the Borrower or unaffiliated third parties, in
each case in arm's-length transactions.
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Section 4. Mortgage Files and Custodian; Secured Obligations. (a)
In connection with each Advance, the Borrower shall deliver, or heretofore has
delivered, to Bankers Trust Company of California, N.A., as custodian (the
"Custodian") on behalf of the Lender, the documents and instruments listed in
Section 2 of that certain Custodial Agreement, dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the "Custodial
Agreement"), among the Borrower, the Lender, and the Custodian, and the Borrower
shall further cause to be delivered to the Custodian the documents and
instruments described in the last sentence of Section 2 of the Custodial
Agreement as and to the extent required to be delivered to the Custodian
pursuant thereto. All such Mortgage Loans, 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, are hereinafter referred to as the "Collateral". Pursuant
to the Custodial Agreement, the Custodian shall hold the Mortgage Loan Documents
on behalf of the Lender pursuant to terms of the Custodial Agreement and shall
deliver to the Lender a Certification (as defined in the Custodial Agreement) to
the effect that it has reviewed such Mortgage Loan Documents in the manner
required by the Custodial Agreement and identifying any deficiencies in such
Mortgage Loan Documents as so reviewed.
(b) The Borrower hereby pledges and grants a security interest in
all of its respective right, title and interest in and to the Collateral, now
owned or hereafter acquired, 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 5. 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 its ownership of property or the
conduct of its business requires such licensure or qualification and
where failure to be so licensed or qualified would have a material
adverse effect on the business of the Borrower, on the Collateral, on
the ability of the Borrower to pay or perform the Secured Obligations or
on the rights and remedies of the Lender hereunder or under the Secured
Note, the Custodial Agreement or the Guarantee, and the Borrower is in
compliance in all material respects with each such state's applicable
statutes, laws, rules and regulations. It has the requisite corporate
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, the Secured Note
and the Custodial Agreement.
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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, the Secured Note and
the Custodial Agreement do not conflict with any term or provision of
its articles of incorporation or by-laws 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 or 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 GAAP. No financial
statement or other financial information as of a date later than
September 30, 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 the Borrower of this Agreement, the Secured
Note or the Custodial Agreement, 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,
the Secured Note or the Custodial Agreement or the validity or
enforceability of this Agreement, the Secured Note or the Custodial
Agreement, 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, the Custodial Agreement or the Secured
Note, (B) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, the Custodial 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, the Secured Note or
the Custodial Agreement.
(vii) There has been no material adverse change in the
business, operations, financial condition, properties or prospects of
the Borrower since September 30, 1996.
(viii) This Agreement, the Secured Note and the Custodial
Agreement 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.
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(ix) Upon receipt by the Custodian of the Mortgage Loan
Documents with respect to any Mortgage Loan and for so long as the
Custodian maintains actual physical possession of such Mortgage Loan
Documents, the Custodian shall have, for the benefit of the Lender, a
fully-perfected first priority security interest in the Collateral with
respect to such Mortgage Loan; provided however until such time as
assignments of mortgage with respect to the Mortgage Loans are recorded
in the appropriate office in the name of the Custodian (1) the Custodian
may not independently be able to enforce a mortgage against the related
mortgaged property or the related mortgagor, (2) 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 (3) any notice
which may be given to the record holder of a mortgage, including,
without limitation, notices regarding the non-payment of real estate
taxes, would instead be given to the Borrower.
(b) With respect to every Mortgage Loan delivered or to be
delivered to the Custodian, the Borrower makes the representations and
warranties set forth in Schedule 1 hereof.
Section 6. 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 Document 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.
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Section 7. 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. 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.
(b) Limitation on Liens on Collateral. The Borrower will
not 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
Mortgage Loan Documents. The Borrower will not (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 Document or the bankruptcy of the obligor thereunder.
(d) 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.
(e) Limitation on Foreclosure. The Borrower will not take
title to real estate mortgaged in connection with a Mortgage Loan,
whether by means of a
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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.
(f) Notices. The Borrower will notify the Lender promptly,
in reasonable detail and in accordance with Section 21 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 the
aggregate market value of the Collateral or on the security interests
created hereunder, (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(l), Section 8(b) or Section 12 hereof
and (iv) of any amendments or waivers to the covenants applicable to the
Guarantor under that certain Indenture, dated as of February 1, 1995 (as
amended from time to time, the "Aames Note Indenture"), between the
Guarantor and Bankers Trust Company of California, N.A., as trustee, and
relating to the issuance by the Guarantor of $23,000,000 of 10.50%
Senior Notes due 2002 (the "Senior Notes").
(g) Compliance with Law. At all times after the Custodian has
received a Mortgage Loan from the Borrower and until payment in full of
the related Advances, the Borrower will not commit any act in violation
of applicable laws, or regulations promulgated pursuant thereto.
(h) Further Inquiry in Event of Earthquake. In the event an
earthquake occurs in, or affecting in any material respect, any
geographic area (which may be identified by zip code) in which property
is located that secures a Mortgage Loan that is proposed to be pledged,
or has been pledged, as Collateral hereunder, and the Lender believes
that, in light of the magnitude, duration and scope of the earthquake,
the earthquake is reasonably likely to have caused material structural
damage to one or more of such properties securing such Mortgage Loans,
the Lender may request that the Borrower visually inspect such
properties. In the event that the Borrower does not complete such
inspection and notify the Lender of the results thereof no later than
twenty Business Days following a request therefor, or such inspection
reveals that the property is reasonably likely to have sustained
material structural damage, (A) in the case of a Mortgage Loan that is
proposed to be pledged as Collateral hereunder, the Lender shall not be
obligated to make an Advance in respect of such Mortgage Loan, and (B)
in the case of a Mortgage Loan that has been pledged as Collateral
hereunder, such Mortgage Loan shall be deemed to be a Mortgage Loan in
respect of which the Lender may require prepayment pursuant to Section
8(b) hereof (any Mortgage Loan referred to in the preceding clauses (A)
and (B), together with any Mortgage Loan secured by property as to which
the period of twenty Business Days referred to in the preceding sentence
has not yet run, a "Specified Mortgage Loan").
(i) Line of Credit. The Borrower shall maintain in full force
and effect the Mortgage Loan Warehousing Agreement, dated as of December
27, 1995,
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among the Borrower, the Guarantor, the lenders from time to time parties
thereto and NationsBank of Texas, N.A., as co-agent and administrative
agent, and First Interstate Bank of California, as co-agent, as amended
by that certain First Amendment thereto dated as of February 20, 1996
(the "NationsBank Credit Agreement"), providing for a credit commitment
of not less than $150,000,000 (or a substitute bank credit line with
such lenders, providing for a credit commitment of not less than
$150,000,000 and upon such terms as shall be satisfactory to the Lender)
(the NationsBank Credit Agreement or such substitute credit agreement
being referred to herein as the "Bank Credit Agreement"), and the
Borrower shall not consent to any amendment, supplement or modification
to the Bank Credit Agreement which would have a material adverse effect
on the Lender's rights and remedies hereunder or under the Intercreditor
Agreement, without the prior written consent of the Lender.
Section 8. 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 5 hereof or Schedule 1
hereto or any inaccuracy in a Mortgage Loan Schedule (as defined in the
Custodial Agreement), the party discovering such breach shall promptly give
notice of such discovery to the other and to the Custodian.
(b) The Lender has the right to require, in its sole 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
Schedule 1 hereto (including, without limitation, any Specified Mortgage Loan),
or in respect of which there is a material inaccuracy in the related Mortgage
Loan Schedule, no later than one Business Day after notice from the Lender to
the Borrower of such breach.
Section 9. Release of Mortgage Files following Payment of Secured
Obligations. The Lender agrees to cause to be delivered the documents and
instruments held by the Custodian on the Lender's behalf pursuant to Section 4
hereof upon request of the Borrower upon payment in full of the Secured
Obligations.
Section 10. Servicing. The Borrower shall service and administer
the Mortgage Loans with due care and in accordance with customary and prudent
servicing procedures for mortgage loans of a similar type.
Section 11. 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 12. Collateral Report. Whether for delinquency or
otherwise pursuant to Section 2(l) hereof, the Borrower shall provide the
Lender, in electronic format (a) no later than two (2) days prior to each
proposed Funding Date, and (b) no later than five (5) days following the end of
each month, with an accurate listing and description of each Mortgage Loan held
by the Custodian as Collateral as of the date of such notice, in the case of
clause (a)
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of this sentence, or as of the last day of such month, in the case of clause (b)
of this sentence. The Borrower shall provide to the Lender on the date of
delivery of any replacement Mortgage Loans, as described in Section 2(l), a
listing and description thereof in electronic format.
Section 13. Events of Default. Any 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(l),
Section 2(m), Section 2(n), Section 8(b) or Section 12 hereof;
(c) Failure of the Borrower to observe or perform any other
agreement contained in this Agreement thirty days after the occurrence
of such failure to observe or perform;
(d) Any representation or warranty made by the Borrower
herein (other than in Section 5(b) hereof and Schedule 1 hereto with
respect to the Mortgage Loans, as to which the Borrower shall prepay the
Advances or provide substitute Collateral in accordance with Section
8(b) or Section 12 hereof, as applicable) 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 or the Custodial Agreement, or any representation or warranty
made or deemed made by the Guarantor in the Guarantee, 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 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 such subsidiary or the Guarantor 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 or the Guarantor for the benefit of
creditors; the appointment of a receiver or trustee for the Borrower or
any subsidiary or the Guarantor, or for any part of the Borrower or such
subsidiary's or the
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Guarantor's assets; the institution by the Borrower or any subsidiary 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 any subsidiary or the
Guarantor; the institution of any such proceeding against the Borrower
or any subsidiary or the Guarantor if the Borrower or such subsidiary or
the Guarantor shall fail to secure dismissal thereof within thirty (30)
days thereafter; the consent by the Borrower or any subsidiary or the
Guarantor to any type of insolvency proceeding against the Borrower or
such subsidiary or the Guarantor (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 13(f);
(g) Any materially adverse change in the business,
operations, financial condition, properties or prospects of the Borrower
or of any subsidiary or the Guarantor 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;
(h) Failure by the Borrower to service the Mortgage Loans
in substantial compliance with the servicing standards set forth in
Section 10 hereof;
(i) The Custodial Agreement or the Guarantee ceases to be
in full force and effect, or any party thereto so asserts in writing;
(j) Default by the Guarantor in any payment of principal of
or interest on the Senior Notes or in the observance or performance of
any other agreement or condition relating to the Senior Notes or
contained in the Aames Note Indenture or any other instrument or
agreement evidencing, securing or relating thereto; or the occurrence of
any other event or the existence of any other condition, the effect of
which event or condition is to cause, or to permit the holder or holders
of the Senior Notes to cause, with the giving of notice if required,
such Senior Notes to become due prior to the stated maturity of the
Senior Notes; or
(k) (A) any event of default shall have occurred and be
continuing under the Bank Credit Agreement, whether or not waived, (B)
any default shall occur in the payment of any principal of or interest
on (i) the Senior Notes or (ii) the Borrower's $115,000,000 Aames
Financial Corporation 5-1/2% Convertable Subordinated Debentures, due
March 15, 2006 (the "Subordinated Debentures"), beyond the applicable
grace period, if any (not to exceed 30 days), provided in respect
thereof, (C) any default shall occur in the payment of any principal of
or interest on any other indebtedness of the Borrower (other than the
Advances, the indebtedness under the Bank Credit Agreement, the Senior
Notes or the Subordinated Debentures), aggregating $2,000,000 or more,
or in the payment of any guarantee by the Guarantor
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or any of its Subsidiaries of any indebtedness of another person
aggregating $2,000,000 or more, beyond the applicable grace period, if
any (not to exceed 30 days), provided in the instrument creating such
indebtedness or guarantee, or (D) any other default or event shall have
occurred with respect to any of the foregoing indebtedness or such
guarantees the effect of which is to cause, or permit the holder or
holders of such indebtedness or the beneficiary or beneficiaries of such
guarantees (or a trustee or agent therefor) to cause, such indebtedness
to become due before its scheduled maturity date or such guarantees to
become payable.
Section 14. 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 13(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 on
the Secured Note 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 of all files of the
Borrower relating to the Collateral and all documents relating to the Collateral
which are then or may thereafter come in to 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, servicing
retained or servicing released, 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 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 14 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. Upon disposition of the Collateral and repayment in full to the Lender
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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.
Section 15. Indemnification and Expenses. (a) 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 Note, the Custodial Agreement, the
Guarantee, 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, the Secured Note, the Custodial Agreement, the Guarantee, 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 or 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, the Secured Note, the Custodial Agreement,
the Guarantee 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 as and when billed by the Lender
all of the reasonable 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, the Secured Note, the Custodial
Agreement, the Guarantee 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, (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 and (iii) all the fees
and expenses incurred by the Custodian in connection with its duties under the
Custodial Agreement.
(c) The Borrower's agreements in this Section 15 shall survive
the payment in full of the Secured Note and the expiration or termination of
this Agreement.
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Section 16. 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 may be exercised only during the occurrence and
continuance of any Event of Default hereunder.
Section 17. 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 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 18. Limitation on Duties Regarding Preservation 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 19. Powers Coupled with an Interest. All authorizations
and agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
Section 20. 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 21. Notices. All written communications hereunder shall
be mailed, telecopied or delivered to the respective addresses as listed in the
Custodial Agreement or to such other address as shall be designated by a party
in a written notice to the other parties. All such notices and communications
shall be effective when delivered to the party to which such notice is to be
given.
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Section 22. Certain Definitions. The following capitalized terms
are defined in the corresponding sections specified below:
"Aames Note Indenture" - Section 7(f).
"Advance" - Section 1.
"Agreement" - Introductory Clause.
"Bank Credit Agreement" - Section 7(i).
"Business Day" - Section 1.
"Borrower" - Introductory Clause.
"Certificates" - Recitals.
"Certification" - Section 4(a).
"Collateral" - Section 4(a).
"Custodial Agreement" - Section 4(a).
"Custodian" - Section 4(a).
"Default" - Section 13.
"Designated Trust" - Recitals.
"Event of Default" - Section 13.
"Fixed Rate Mortgage Loans" - Recitals.
"Floating Rate Mortgage Loans" - Recitals.
"Funding Date" - Section 1.
"Funding Period" - Recitals.
"Funding Termination Date" - Section 2(a).
"Guarantee": - Section 1(d).
"Guarantor" - Introductory Clause.
"Interest Payment Date" - Section 2(g).
"Lender" - Introductory Clause.
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"LIBOR" - Section 2(c).
"Maturity Date" - Section 2(d).
"Maximum Funding Amount" - Section 1.
"Mortgage Loan Documents" - Section 4(a).
"Mortgage Loans" - Recitals.
"NationsBank Credit Agreement" - Section 7(i).
"NY UCC" - Section 2(d).
"Pre-Cut-Off Date Advances" - Section 2(m).
"Secured Note" - Section 2(i).
"Secured Obligations" - Section 4(b).
"Senior Notes" - Section 7(f).
"Specified Mortgage Loan" - Section 7(h).
Section 23. 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 24. No Waiver; Cumulative Remedies. The Lender shall not
by any act (except by a written instrument pursuant to Section 11 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, 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 25. Assignment. The 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.
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Section 26. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and all
of which taken together shall constitute one and the same instrument.
Section 27. 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 28. Hypothecation or Pledge of Collateral. Nothing in
this Agreement shall preclude 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 or the Custody
Agreement with respect to the Collateral or impair the Borrower's right to
redeem the Collateral.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first above written.
Borrower: AAMES CAPITAL CORPORATION
By: /s/ XXXXXXX X. XXXXXXXXXXX
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Executive Vice President and
Chief Financial Officer
Lender: PRUDENTIAL SECURITIES CREDIT
CORPORATION
By: /s/ XXXXXXXXX X. XXXXXXXX
----------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxx
Title:
22
Schedule 1
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
IN RESPECT OF THE MORTGAGE LOANS
The Borrower represents and warrants to the Lender as to each
Mortgage Loan as follows:
(a) The information in respect of the Mortgage Loan set forth in
the related Mortgage Loan Schedule is true and correct;
(b) The Mortgage Loan is being and will be serviced by the
Borrower or by a third-party subservicer reasonably acceptable to the Lender;
(c) The mortgage note related to the Mortgage Loan bears a
fixed-rate of interest or a floating rate of interest tied to six-month LIBOR or
one-year CMT;
(d) The Mortgage Loan and all accompanying documents are complete
and authentic and all signatures are genuine, and the mortgage related to the
Mortgage Loan is a valid and subsisting first, second or (but only if such
Mortgage Loan is a Fixed Rate Mortgage Loan) third lien on real property subject
(i) in the case of any second Mortgage Loan, only to a lien of a first mortgage
on such real property, (ii) in the case of any third Mortgage Loan, only to a
lien of a first and a second mortgage on such real property and (iii) in all
cases to the exceptions to title set forth in the title insurance policy or the
other evidence of title in respect of the related Mortgage Loan, which
exceptions are generally acceptable to prudent home equity mortgage lending
companies, and such other exceptions to which similar properties are commonly
subject and which do not individually, or in the aggregate, materially and
adversely affect the benefits of the security intended to be provided by such
mortgage;
(e) To the best of the Borrower's knowledge, there is no
delinquent tax or assessment lien on any real property mortgaged in connection
with the related Mortgage Loan;
(f) All parties to the Mortgage Loan Documents had legal capacity
to execute them and each such document has been duly and properly executed by
such parties; the Mortgage Loan arose from a bona fide loan and is not subject
to any right of rescission, set-off, counterclaim or defense, including the
23
defense of usury (each rescission period under applicable federal, state or
local law having expired), nor will the operation of any of the terms of the
related mortgage note or the related mortgage, or the exercise of any right
thereunder, render either such mortgage note or such mortgage (i) unenforceable
in whole or in part, or (ii) subject to any right of rescission, set-off,
counterclaim or defense, including the defense of usury, and no such right of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto;
(g) To the best of the Borrower's knowledge, there is no
mechanics' lien or claim for work, labor or material affecting any real property
mortgaged in connection with the related Mortgage Loan which is or may be a lien
prior to, or equal with, the lien of mortgage securing the related Mortgage Loan
except those which are insured against by a title insurance policy;
(h) All disclosures relating to the Mortgage Loan 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 of Rescission required by said statute and regulation have
been properly made and given, and the Mortgage Loan, at the time it was made,
otherwise complied in all material respects with applicable state and federal
laws and regulations, including, without limitation, equal credit opportunity
laws;
(i) With respect to the Mortgage Loan, a written commitment for a
lender's title insurance policy, issued in standard American Land Title
Association or California Land Title Association form, or other form acceptable
in a particular jurisdiction, by a title insurance company generally acceptable
to prudent mortgage lending companies and authorized to transact business in the
state in which the real property mortgaged in connection with such Mortgage Loan
is situated (together with a condominium endorsement, if applicable, in an
amount at least equal to the original principal amount of such Mortgage Loan),
insuring the mortgagee's interest under the related Mortgage Loan as the holder
of a valid first or second mortgage lien of record on the real property
described in the mortgage (subject to the exception noted in paragraph (r)), was
effective on the date of the origination of such Mortgage Loan and as of the
related Funding Date for an Advance in connection with such Mortgage Loan; such
commitment will be valid and thereafter the policy issued pursuant to such
commitment shall continue in full force and effect;
(j) The improvements upon the real property mortgaged in
connection with the related Mortgage Loan are covered by a valid and existing
hazard insurance policy (that also provides for fire and extended coverage) with
a generally acceptable carrier;
(k) If obtainable, a flood insurance policy is in effect with
respect to the real property, mortgaged in connection with the related Mortgage
Loan and located in a flood zone, with a generally acceptable carrier for a
commercially reasonable amount;
(l) The Mortgage Loan Documents for the Mortgage Loan are the
legal, valid and binding obligation of the maker thereof and are enforceable in
accordance with their terms, except only as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether considered in a proceeding or action in equity or
at law);
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(m) The Borrower has performed any and all acts required to be
performed to preserve the rights and remedies of the Lender in any insurance
policies applicable to the Mortgage Loans including, without limitation, any
necessary notifications of insurers, assignments of policies or interests
therein, and establishments of co-insured, joint loss payee and mortgagee rights
in favor of the Lender;
(n) The terms of the original mortgage note and the original
mortgage related to the Mortgage Loan have not been impaired, altered or
modified in any material respect, except by a written instrument and a certified
copy (as defined in Section 2 of the Custodial Agreement) of which has been
delivered to the Lender or the Custodian; the substance of any such alteration
or modification is reflected on the Mortgage Loan Schedule; the original
mortgage was recorded (or will be duly submitted for recordation as of the time
of origination of the related Mortgage Loan and the Lender or the Custodian has
been provided with such a certified copy thereof), and all subsequent
assignments of such mortgage have been recorded (or will be duly submitted for
recordation and the Lender or the Custodian has been provided with such a
certified copy thereof) in the appropriate jurisdictions wherein such
recordation is necessary to perfect the lien thereof as against creditors of the
Borrower;
(o) No monetary default has occurred in any provisions of the
Mortgage Loan that would have caused or will cause a prepayment of Advances made
in respect of the Mortgage Loan pursuant to Section 12 of the Agreement, no
non-monetary default has occurred in any provisions of the Mortgage Loan, no
instrument of release or waiver has been executed in connection with the
Mortgage Loan, and no borrower in respect of such Mortgage Loan has been
released, in whole or in part;
(p) All taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments or ground rents which
previously became due and owing have been paid, or an escrow of funds has been
established in an amount sufficient to pay for every such item which remains
unpaid;
(q) There is no proceeding pending or, to the best of the
Borrower's knowledge, threatened, for the total or partial condemnation of the
real property mortgaged in connection with the related Mortgage Loan, nor is
such a proceeding currently occurring; such property is in average repair; such
property has not been damaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty or otherwise damaged so as to affect
adversely the value of such real property as security for the Mortgage Loan or
the use for which the premises were intended;
(r) To the best of the Borrower's knowledge, all of the
improvements which were included for the purpose of determining the appraised
value of the real property mortgaged in connection with the related Mortgage
Loan lie wholly within the boundaries and building restriction lines of such
property, and no improvements on adjoining properties encroach upon such real
property except those identified in the related title insurance policy and which
are affirmatively insured against;
-3-
25
(s) To the best of the Borrower's knowledge, no improvement
located on or being part of the real property mortgaged in connection with the
related Mortgage Loan is in violation of any applicable zoning law or
regulation. To the best of the Borrower's knowledge, all inspections, licenses
and certificates required to be made or issued with respect to all occupied
portions of such real property and, with respect to the use and occupancy of the
same, including (but not limited to) certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities and such real property is lawfully occupied under applicable law;
(t) The mortgage note related to the Mortgage Loan is not and has
not been secured by any collateral, pledged account or other security except the
lien of the corresponding mortgage;
(u) No Mortgage Loan was originated under a buy down plan
(whereby the seller of the mortgaged property or any third party, other than the
mortgagor, has agreed, or is obligated, to supplement or pay a portion of the
mortgagor's mortgage payments in respect of such Mortgage Loan);
(v) There is no obligation on the part of the Borrower or any
other party to make payments in addition to those made by the borrower in
respect of the Mortgage Loan, except for payments in the nature of escrow
payments, including, without limitation, taxes and insurance payment, to be made
by such borrower;
(w) No Mortgage Loan has a shared appreciation feature, or other
contingent interest feature;
(x) With respect to the Mortgage Loan secured by a second
priority mortgage, either (i) no consent for the Mortgage Loan is required by
the holder of the related first mortgage, or (ii) such consent has been obtained
and is part of the Mortgage Loan Documents;
(y) All parties which have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the real property mortgaged in connection with the Mortgage Loan is located, and
(2)(A) organized under the laws of such state, or (B) qualified to do business
in such state, or (C) federal savings and loan associations or national banks
having principal offices in such state, or (D) not doing business in such state
so as to require qualification or licensing;
(z) The mortgage related to the Mortgage Loan contains a
customary provision for the acceleration of the payment of the unpaid principal
balance of the Mortgage Loan in the event the real property mortgaged in
connection with the Mortgage Loan is sold without the prior consent of the
mortgagee thereunder;
-4-
26
(aa) The mortgage related to the Mortgage Loan contains customary
and enforceable provisions which render the rights and remedies of the holder
thereof adequate for the realization against the real property mortgaged in
connection with such Mortgage Loan of the benefits of the security, including,
(i) in the case of a mortgage designated as a deed of trust, by trustee's sale,
and (ii) otherwise by judicial or non-judicial foreclosure. There is no
homestead or other exemption available to the mortgagor which would materially
interfere with the right to sell such real property at a trustee's sale or the
right to foreclose such mortgage;
(bb) There is no monetary default, breach, violation or event of
acceleration existing under the mortgage or the mortgage note for the related
Mortgage Loan and no event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a monetary default,
breach, violation or event of acceleration that has or will cause a prepayment
of Advances made in respect of such Mortgage Loan pursuant to Section 12 of the
Agreement; there is no non-monetary default, breach, violation or event of
acceleration existing under the mortgage or the mortgage note for the related
Mortgage Loan and no event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a non-monetary
default, breach, violation or event of acceleration; and the Borrower has not
waived any monetary or non-monetary default, breach, violation or event of
acceleration in respect of the mortgage or the mortgage note for the related
Mortgage Loan;
(cc) The Mortgage Loans were not selected by the Borrower on any
basis intended to adversely affect the value of the Lender's security interest
therein;
(dd) A full appraisal was performed in connection with the real
property mortgaged in connection with the Mortgage Loan;
(ee) To the best of the Borrower's knowledge, (i) there has not
occurred, nor has any person or entity alleged that there has occurred, upon the
real property securing the Mortgage Loan, any spillage, leakage, discharge or
release into the air, soil or groundwater of any hazardous or toxic substance or
regulated wastes, and (ii) there exists no violation of any local, state or
federal environmental law, rule or regulation with respect to the real property
securing the Mortgage Loan;
(ff) The Mortgage Loan meets the eligibility requirements of the
insurer, if any, providing credit enhancement for the Designated Trust; and
(gg) The Borrower held good and indefeasible title to, and was
the sole owner of, the Mortgage Loan subject to no liens, charges, mortgages,
participations, encumbrances or rights of others or other liens released
simultaneously with such pledge.
-5-
27
Exhibit A
SECURED NOTE
$125,000,000.00 November 22, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, AAMES CAPITAL CORPORATION, a California
corporation (the "Borrower"), hereby promises to pay to the order of PRUDENTIAL
SECURITIES CREDIT CORPORATION, a Delaware corporation (the "Lender"), whose
address is Xxx Xxx Xxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, in lawful money of the
United States of America, the lesser of (a) ONE HUNDRED TWENTY-FIVE MILLION
DOLLARS ($125,000,000.00) and (b) the outstanding principal amount of all
Advances (as defined in the Agreement hereinafter referred to) made by the
Lender to the undersigned pursuant to the that certain Interim Loan and Security
Agreement, dated as of November 22, 1996 (as amended or otherwise modified from
time to time, the "Agreement"), by and between the Lender and the Borrower, plus
interest thereon from the date of each such Advance as provided in the
Agreement. All such payment obligations (whether in respect of the aggregate
principal amount of outstanding Advances made, interest thereon, or other
payment obligations of the Borrower under the Agreement) shall be made in lawful
money of the United States of America, in immediately available funds, on the
dates and in the amounts specified in, or determined in accordance with, the
Agreement.
The holder of this Secured Note 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 hereto, 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 holder hereof to make such
recordation (or any error in such recordation) shall not affect the obligations
of the Borrower hereunder or under the Agreement.
It is intended that the rate of interest herein shall never
exceed the maximum rate, if any, which may be legally charged on the loan
evidenced by this Secured Note (the "Maximum Rate"), and if the provisions for
interest contained in this Secured Note would result in a rate higher than the
Maximum Rate, interest shall nevertheless be limited to the Maximum Rate, and
any amounts which may be paid toward interest in excess of the Maximum Rate
shall be applied to the reduction of principal, or, at the option of the Lender,
returned to the Borrower.
All payments hereon shall be made, and all notices to the Lender
required or authorized hereby shall be given, at the office of the Lender at the
address designated in the Agreement, or to such other place as the Lender may
from time to time direct by written notice to the Borrower. Payments remitted by
the Borrower via wire transfer initiated after 4:00 p.m. New York City time
shall be deemed to be received on the next Business Day.
The Borrower agrees to pay all the Lender's costs of collection
and enforcement (including reasonable attorneys' fees and disbursements of
Lender's counsel) in respect of this
28
Secured Note when incurred, including, without limitation, reasonable attorneys'
fees through appellate proceedings.
Capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to them in the Agreement. Notwithstanding the
pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees
that the Borrower's obligations under this Secured Note are recourse obligations
of the Borrower to which the Borrower pledges its full faith and credit.
The Borrower, and any indorsers or guarantors hereof (including,
without limitation, the Guarantor), (a) severally waive diligence, presentment,
protest and demand and also notice of protest, demand, dishonor and nonpayments
of this Secured Note, (b) expressly agree that this Secured Note, or any payment
hereunder, may be extended from time to time, and consent to the acceptance of
further Collateral, the release of any Collateral for this Secured Note, the
release of any party primarily or secondarily liable hereon, and (c) expressly
agree that it will not be necessary for the Lender, in order to enforce payment
of this Secured Note, to first institute or exhaust the Lender's remedies
against such Borrower or any other party liable hereon or against any Collateral
for this Secured Note. No extension of time for the payment of this Secured
Note, or any installment hereof, made by agreement by the Lender with any person
now or hereafter liable for the payment of this Secured Note, shall affect the
liability under this Secured Note of the Borrower, even if the Borrower is not a
party to such agreement; provided, however, that the Lender and the Borrower, by
written agreement between them, may affect the liability of the Borrower.
Any reference herein to the Lender shall be deemed to include and
apply to every subsequent holder of this Secured Note.
Reference is made to the Agreement for provisions concerning
mandatory principal repayments, Collateral, acceleration and other material
terms affecting this Secured Note.
THIS SECURED NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE)
WHOSE LAWS THE BORROWER EXPRESSLY ELECTS TO APPLY TO THIS SECURED NOTE. THE
BORROWER AGREES THAT ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT
OF THIS SECURED NOTE MAY BE COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW
YORK, BOROUGH OF MANHATTAN, OR IN XXX XXXXXXXX XXXXX XX XXX XXXXXX XXXXXX FOR
THE SOUTHERN DISTRICT OF NEW YORK.
AAMES CAPITAL CORPORATION
By: _______________________________
Name:
Title:
-2-
29
Schedule to Secured Note
Schedule of Advances
Amount
of Total
Amount of Principal Principal
Date Advance Repaid Outstanding
---- ------- --------- -----------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
------------- $---------------- $---------------- ----------------
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30
Exhibit B-1
NOTICE OF EXTENSION OF AGREEMENT NO. __________
Prudential Securities Credit Corporation
Xxx Xxx Xxxx Xxxxx, 00xx Xxxxx
Whole Loan Operations
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Mr. Xxx Xxxxx
Telecopy: 000-000-0000
Confirmation: 000-000-0000
1. Pursuant to the Interim Loan and Security Agreement, dated as
of November 22, 1996 (as amended from time to time, the "Agreement"), between
you and Aames Capital Corporation (the "Borrower"), the undersigned Borrower
hereby requests:
(i) that the Funding Period be extended to the period from
[insert date] to but excluding [insert date] (the "Termination Date");
(ii) that the Maximum Funding Amount be for the Funding Period as
so extended [be increased/decreased to] [remain][ [$__________]; and
(iii) that the Designated Trust in respect of the Advances to be
made during the Funding Period as so extended be [insert name of trust].
The undersigned Borrower agrees that, upon acceptance by the Lender of this
Notice of Extension of Agreement No. ___ by signing and dating the same below,
the Borrower will be bound by the terms of the Agreement as amended by this
Notice of Extension of Agreement in the manner set forth in this paragraph 1.
2. The undersigned Borrower hereby certifies that the following
statements are true and correct on the date hereof and shall be true and correct
on the date of the extension of the Funding Termination Date requested herein,
before and after giving effect thereto:
A. Each of the representations and warranties contained in the
Agreement, the Custodial Agreement and the Guarantee is true and
correct in all material respects; provided that the reference to
September 30, 1996 in Section 5(a)(iv) of the Agreement shall be
deemed to be a reference to [insert date of most recently
delivered financial statements]; and
B. No Default or Event of Default has occurred and is continuing.
3. Unless otherwise defined in this Notice of Extension of
Agreement No. ___, terms defined in the Agreement shall have their defined
meanings when used herein.
31
4. Except as expressly modified by this Notice of Extension of
Agreement No. ___, the Agreement shall be in full force and effect.
5. This Notice of Extension of Agreement No. ___ and the rights
and obligations of the parties hereunder and under the Agreement as amended
hereby shall be governed by, and construed and interpreted in accordance with,
the laws of the State of New York.
6. The undersigned Borrower is delivering herewith to the Lender
an opinion of counsel to the Borrower, substantially in the form of Exhibit B-2
to the Agreement [and an Endorsement to the Secured Note, substantially in the
form of Exhibit B-3 to the Agreement.]1
IN WITNESS WHEREOF, the undersigned Borrower has caused this
Notice of Extension of Agreement No. ___ to be executed and delivered by its
proper and duly authorized officers as of the day and year first above written.
AAMES CAPITAL CORPORATION
By: _______________________________
Name:
Title:
AGREED TO AND ACCEPTED:
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By: ________________________
Name:
Title:
Date: ______________________
------------------
1 Required if the Maximum Funding Amount is being increased to an amount greater
than the then maximum principal amount of the Secured Note.
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32
Exhibit B-2
[LETTERHEAD OF COUNSEL TO THE BORROWER AND THE GUARANTOR]
_____________, 199__
Prudential Securities Credit Corporation
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Gentlemen:
I am counsel to Aames Capital Corporation, a California
corporation (the "Borrower"), and Aames Financial Corporation, a Delaware
corporation (the "Guarantor"), and have acted as such in connection with the
execution and delivery of the following documents:
(i) the Interim Loan and Security Agreement, dated as of November
22, 1996 (the "Interim Loan Agreement"), between Prudential Securities
Credit Corporation (the "Lender") and the Borrower;
(ii) the Secured Note (the "Note") dated November__, 1996, made
by the Borrower in favor of the Lender [and the Endorsement, dated
__________ __, 199_, to the Secured Note (the "Endorsement")];
(iii) the Custodial Agreement, dated as of November 22, 1996,
(the "Custodial Agreement"), among the Borrower, the Lender and Bankers
Trust Company of California, N.A. (the "Custodian");
(iv) the Intercreditor and Joint Shipment Agreement, dated as of
November 22, 1996 (the "Intercreditor Agreement"), among NationsBank of
Texas, N.A. and the Custodian, as joint custodians, the Lender and the
Borrower;
(v) the Guarantee, dated as of November 22, 1996 (the
"Guarantee"), made by the Guarantor in favor of the Lender; and
(vi) the Notice of Extension of Agreement No. __ , dated
__________, 199_ (the "Notice of Extension"), between the Borrower and
the Lender.
33
This opinion is being delivered to you pursuant to Section 2(a)
of the Interim Loan Agreement. Capitalized terms used herein and not defined
herein shall have the meanings assigned to them in the Interim Loan Agreement.
I have examined executed copies of the Interim Loan Agreement,
the Note, the Intercreditor Agreement, the Custodial Agreement, the Guarantee
[,the Endorsement] and the Notice of Extension. I have also examined originals
or photostatic or certified copies of all such corporate records of the
Borrower, and such certificates of public officials, certificates of corporate
officers, and other documents, as I have deemed appropriate and necessary as a
basis for the opinions hereinafter expressed. In making my examination and
rendering the opinions hereinafter expressed I have assumed that each party to
each of the Interim Loan Agreement, the Intercreditor Agreement and the
Custodial Agreement (other than the Borrower) has the corporate power to enter
into and perform all of its obligations thereunder, (ii) the due authorization,
execution and delivery of each of the Interim Loan Agreement, the Intercreditor
Agreement and the Custodial Agreement by the parties thereto (other than the
Borrower) and (iii) the validity and binding effect on the parties thereto
(other than the Borrower) of each of the Interim Loan Agreement, the
Intercreditor Agreement and the Custodial Agreement.
The opinions expressed below with respect to enforceability are
subject to the following additional qualifications:
(a) The effect of bankruptcy, insolvency, reorganization,
moratorium, receivership, or other similar laws of general applicability
relating to or affecting creditors' rights generally in the event of
bankruptcy, insolvency, reorganization, moratorium or receivership.
(b) The application of general principles of equity, including,
but not limited to, the right of specific performance (regardless of
whether enforceability is considered in a proceeding in equity or at
law).
Based upon the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
2. The Borrower has the corporate power and legal right to
execute and deliver [the Endorsement and] the Notice of Extension, to borrow
under the Interim Loan Agreement, as amended by the Notice of Extension, and the
Note [as amended by the Endorsement], and to grant liens under the Interim Loan
Agreement, as amended by the Notice of Extension, and has taken all necessary
corporate action to authorize such borrowing and such granting of liens upon the
terms and conditions of the Interim Loan Agreement, as amended by the Notice of
Extension, and to authorize the execution and delivery of the Notice of
Extension. The Borrower is duly licensed as a licensee or is otherwise qualified
in each state in which its ownership of property or the conduct of its business
requires such licensure or qualification and where failure to be so licensed or
qualified would have a material adverse
-2-
34
effect on the business of the Borrower, on the Collateral, on the ability of the
Borrower to pay or perform the Secured Obligations or on the rights and remedies
of the Lender under the Interim Loan Agreement, the Note, the Custodial
Agreement, the Intercreditor Agreement or the Guarantee, and the Borrower is, to
our knowledge, in compliance in all material respects with each such state's
applicable statutes, laws, rules and regulations. No consent of any other Person
(including, without limitation, stockholders of the Borrower), and no consent,
license, permit, approval or authorization of, or registration or declaration
with, any governmental authority, bureau of agency is required connection with
the execution and delivery of [the Endorsement and] the Notice of Extension or
the enforceability of each of the Interim Loan Agreement, as amended by the
Notice of Extension, and the Note [as amended by the Endorsement].
3. Each of the Interim Loan Agreement, as amended by the Notice
of Extension, the Note [as amended by the Endorsement], the Intercreditor
Agreement and the Custodial Agreement constitutes the legal, valid, and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its respective terms.
4. The Guarantee constitutes the legal, valid, and binding
obligation of the Guarantor enforceable against the Guarantor in accordance with
its terms.
5. The execution and delivery of the Notice of Extension and the
performance of each of the Interim Loan Agreement, as amended by the Notice of
Extension, and the Note [as amended by the Endorsement] will not violate any
provision of any existing Federal laws or the laws of the State of California or
of the charter or by-laws of the Borrower or of any mortgage, indenture,
contract or other undertaking to which, to the best of my knowledge (after due
inquiry), the Borrower is a party or which is binding upon it or its assets,
and, to the best of my knowledge (after due inquiry), will not result in the
creation or imposition of any lien, charge or encumbrance on any of its assets
pursuant to the provisions of any of the foregoing.
6. No litigation or administrative proceeding of or before any
governmental authority or court is currently pending, or, to the best of my
knowledge (after due inquiry), threatened, against the Borrower or its assets,
the liability with respect to which is likely to be material to the financial
position or results of operations of the Borrower.
7. Assuming that the Lender acquired the promissory notes (the
"Mortgage Notes") evidencing the Mortgage Loans for value, the Interim Loan
Agreement, as amended by the Notice of Extension, creates in favor of the Lender
a security interest under the Uniform Commercial Code (the "UCC") as currently
in effect in New York in all rights of the Borrower in the Mortgage Notes.
Provided that on the date hereof (i) the Custodian has acquired and maintains
continuous possession of
-3-
35
the Mortgage Notes within the State of California and (ii) the Custodian is
acting on behalf of the Lender in accordance with the terms of the Custodial
Agreement and no other agreements or understandings, written or oral, govern the
relationship between the Custodian and the Lender, then, the security interest
in the Mortgage Notes granted by the Borrower to the Lender will be, on the date
of possession of the Mortgage Notes by the Custodian, perfected and prior to any
other security interest which can be perfected under the Uniform Commercial Code
as currently in effect in California.
I am admitted to practice law in the State of California, and the
foregoing opinions are limited to the Federal laws of the United States, the
Delaware General Corporation Law and the laws of the State of California. I note
that the Interim Loan Agreement, the Note, the Custodial Agreement and the
Guarantee are governed by the law of the State of New York and, with your
consent, I have assumed for purposes of Paragraphs 3, 4 and the first sentence
of Paragraph 11 of this opinion that the the law of the State of New York is
identical to the law of the State of California.
Sincerely yours,
-4-
36
Exhibit B-3
SECURED NOTE
ENDORSEMENT NO. ___
_____________, 199_
The undersigned Borrower hereby agrees with Prudential Securities
Credit Corporation (the "Lender") that the Secured Note of the Borrower, dated
November 22, 1996, as it may have been previously amended by endorsement, in the
maximum principal amount of $__________, to which this Secured Note Endorsement
No. __ is attached, is hereby amended by changing the maximum principal amount
of the Secured Note to $_________.
This Secured Note Endorsement No. __ is given as a renewal,
rearrangement and extension of the obligations of the Borrower to the Lender
under the Secured Note and is not given in substitution therefor or
extinguishment thereof. The Borrower hereby authorizes the Lender to attach this
Secured Note Endorsement No. __ to the Secured Note.
Borrower: AAMES CAPITAL CORPORATION
By:_____________________________
Name:
Title:
Lender: PRUDENTIAL SECURITIES CREDIT
CORPORATION
By:______________________________
Name:
Title:
37
Exhibit C
[Letterhead of Counsel to Aames Capital Corporation]
November 22, 1996
Bankers Trust Company of California, N.A.
0 Xxxx Xxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Prudential Securities Credit Corporation
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Gentlemen:
I am counsel to Aames Capital Corporation, a California
corporation (the "Borrower"), and Aames Financial Corporation, a Delaware
corporation (the "Guarantor"), and have acted as such in connection with the
execution and delivery of the following documents:
(i) the Interim Loan and Security Agreement, dated as of November
22, 1996 (the "Interim Loan Agreement"), between Prudential Securities
Credit Corporation (the "Lender") and the Borrower;
(ii) the Secured Note (the "Note") dated November 22, 1996, made
by the Borrower in favor of the Lender;
(iii) the Custodial Agreement, dated as of November 22, 1996 (the
"Custodial Agreement"), among the Borrower, the Lender and Bankers Trust
Company of California, N.A. (the "Custodian");
(iv) the Intercreditor and Joint Shipment Agreement, dated as of
November 22, 1996 (the "Intercreditor Agreement"), among NationsBank of
Texas, N.A. and the Custodian, as joint custodians, the Lender and the
Borrower; and
38
(v) the Guarantee, dated as of November 22, 1996 (the
"Guarantee"), made by the Guarantor in favor of the Lender.
This opinion is being delivered to you pursuant to subsection
1(d)(iii)(A) of the Interim Loan Agreement. Capitalized terms used herein and
not defined herein shall have the meanings assigned to them in the Interim Loan
Agreement.
I have examined executed copies of the Interim Loan Agreement,
the Note, the Custodial Agreement, the Intercreditor Agreement and the
Guarantee. I have also examined originals or photostatic or certified copies of
all such corporate records of the Borrower, and such certificates of public
officials, certificates of corporate officers, and other documents, as I have
deemed appropriate and necessary as a basis for the opinions hereinafter
expressed. In making my examination and rendering the opinions hereinafter
expressed I have assumed that each party to each of the Interim Loan Agreement,
the Intercreditor Agreement and the Custodial Agreement (other than the
Borrower) has the corporate power to enter into and perform all of its
obligations thereunder, (ii) the due authorization, execution and delivery of
each of the Interim Loan Agreement, the Intercreditor Agreement and the
Custodial Agreement by the parties thereto (other than the Borrower) and (iii)
the validity and binding effect on the parties thereto (other than the Borrower)
of each of the Interim Loan Agreement, the Intercreditor Agreement and the
Custodial Agreement.
The opinions expressed below with respect to enforceability are
subject to the following additional qualifications:
(a) The effect of bankruptcy, insolvency, reorganization,
moratorium, receivership, or other similar laws of general applicability
relating to or affecting creditors' rights generally in the event of
bankruptcy, insolvency, reorganization, moratorium or receivership.
(b) The application of general principles of equity, including,
but not limited to, the right of specific performance (regardless of
whether enforceability is considered in a proceeding in equity or at
law).
Based upon the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
2. The Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
3. The Borrower has the corporate power and legal right to enter
into each of the Interim Loan Agreement, the Note, the Intercreditor Agreement
and the Custodial Agreement, to borrow under the Interim Loan Agreement and the
Note and to grant liens under the Interim Loan Agreement and has taken all
necessary corporate action to authorize
-2-
39
such borrowing and such granting of liens upon the terms and conditions of the
Interim Loan Agreement and to authorize the execution, delivery and performance
of the Interim Loan Agreement, the Note, the Intercreditor Agreement and the
Custodial Agreement. The Borrower is duly licensed as a licensee or is otherwise
qualified in each state in which its ownership of property or the conduct of its
business requires such licensure or qualification and where failure to be so
licensed or qualified would have a material adverse effect on the business of
the Borrower, on the Collateral, on the ability of the Borrower to pay or
perform the Secured Obligations or on the rights and remedies of the Lender
under the Interim Loan Agreement, the Note, the Custodial Agreement, the
Intercreditor Agreement or the Guarantee, and the Borrower is, to our knowledge,
in compliance in all material respects with each such state's applicable
statutes, laws, rules and regulations. No consent of any other Person
(including, without limitation, stockholders of the Borrower), and no consent,
license, permit, approval or authorization of, or registration or declaration
with, any governmental authority, bureau or agency is required in connection
with the execution and delivery or enforceability of each of the Interim Loan
Agreement, the Note, the Intercreditor Agreement and the Custodial Agreement.
4. The Guarantor has the corporate power and legal right to enter
into the Guarantee and to guaranty obligation pursuant thereto and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Guarantee. The Guarantor is duly licensed as a licensee or is otherwise
qualified in each state in which its ownership of property or the conduct of its
business requires such licensure or qualification and where failure to be so
licensed or qualified would have a material adverse effect on the business of
the Guarantor, on the Collateral, on the ability of the Guarantor to pay or
perform its obligations under the Guarantee or on the rights and remedies of the
Lender under the Interim Loan Agreement, the Note, the Custodial Agreement, the
Intercreditor Agreement or the Guarantee, and the Guarantor is, to our
knowledge, in compliance in all material respects with each such state's
applicable statutes, laws, rules and regulations. No consent of any other Person
(including, without limitation, stockholders of the Guarantor), and no consent,
license, permit, approval or authorization of, or registration or declaration
with, any governmental authority, bureau or agency is required in connection
with the execution and delivery or enforceability of the Guarantee.
5. Each of the Interim Loan Agreement, the Note, the
Intercreditor Agreement and the Custodial Agreement constitutes the legal, valid
and binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
6. The Guarantee constitutes the legal, valid, and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms.
7. The execution, delivery and performance by the Borrower of
each of the Interim Loan Agreement, the Note, the Intercreditor Agreement and
the Custodial Agreement will not violate any provision of any existing law, rule
or regulation of the Federal government or the State of California or of the
charter or by-laws of the Borrower or of any mortgage,
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indenture, contract or other undertaking to which, to the best of my knowledge
(after due inquiry), the Borrower is a party or which is binding upon it or its
assets, and, to the best of my knowledge (after due inquiry), will not result in
the creation or imposition of any lien, charge or encumbrance on any of its
assets pursuant to the provisions of any of the foregoing.
8. The execution, delivery and performance by the Guarantor of
the Guarantee will not violate any provision of any existing law, rule or
regulation of the Federal government or the State of California or of the
charter or by-laws of the Guarantor or of any mortgage, indenture, contract or
other undertaking to which, to the best of my knowledge (after due inquiry), the
Guarantor is a party or which is binding upon it or its assets, and, to the best
of my knowledge (after due inquiry), will not result in the creation or
imposition of any lien, charge or encumbrance on any of its assets pursuant to
the provisions of any of the foregoing.
9. No material litigation or administrative proceeding of or
before any governmental authority or court is presently pending, or, to the best
of my knowledge (after due inquiry), threatened, against the Borrower or the
Guarantor or its respective assets.
10. Assuming that the Lender acquired the promissory notes (the
"Mortgage Notes") evidencing the Mortgage Loans for value, the Interim Loan
Agreement creates in favor of the Lender a security interest under the Uniform
Commercial Code (the "UCC") as currently in effect in New York in all rights of
the Borrower in the Mortgage Notes. Provided that on the date hereof (i) the
Custodian has acquired and maintains continuous possession of the Mortgage Notes
within the State of California and (ii) the Custodian is acting on behalf of the
Lender in accordance with the terms of the Custodial Agreement and no other
agreements or understandings, written or oral, govern the relationship between
the Custodian and the Lender, then, the security interest in the Mortgage Notes
granted by the Borrower to the Lender will be, on the date of possession of the
Mortgage Notes by the Custodian, perfected and prior to any other security
interest which can be perfected under the Uniform Commercial Code as currently
in effect in California.
I am admitted to practice law in the State of California, and the
foregoing opinions are limited to the Federal laws of the United States, the
Delaware General Corporation Law and the laws of the State of California. I note
that the Interim Loan Agreement, the Note, the Custodial Agreement and the
Guarantee are governed by the law of the State of New York and, with your
consent, I have assumed for purposes of Paragraphs 5, 6 and the first sentence
of Paragraph 11 of this opinion that the the law of the State of New York is
identical to the law of the State of California.
Sincerely yours,
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Exhibit D
NOTICE OF BORROWING NO. ________
Prudential Securities Credit Corporation
Xxx Xxx Xxxx Xxxxx, 00xx Xxxxx
Whole Loan Operations
New York, New York
Attention: Xx. Xxxxxxxx Xxxxxxx
Telecopy: 000-000-0000
Confirmation: 000-000-0000
Pursuant to the Interim Loan and Security Agreement, dated as of
November 22, 1996 (as amended from time to time, the "Agreement"), between you
and Aames Capital Corporation (the "Borrower"), the undersigned Borrower hereby
gives notice of its election to request an Advance and, in connection therewith,
sets forth below the following information (all capitalized terms used herein
shall have the meaning specified therefor in the Agreement):
1. The Advance is being made in respect of Mortgage Loans to be sold
to [Name of Trust] (the "Designated Trust").
2. The principal amount of the requested Advance is $___________.
3. The Business Day on which this Advance is to be made is
___________, 199__ (the "Funding Date") [no earlier than [three]
following the date hereof].
4. The date on which this Advance shall mature is ___________, 199__
[the Funding Termination Date], or, if earlier, the date upon
which the Certificates related to the Mortgage Loans funded by
such Advance shall be issued by the Designated Trust.
5. Attached hereto is a copy of the Mortgage Loan Schedule (as
defined in the Custodial Agreement) being submitted to the
Custodian in connection with the Advance requested hereby.
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The undersigned hereby certifies that the following statements
are true and correct on the date hereof and shall be true and correct on the
date of the Advance requested herein, before and after giving effect thereto:
A. Each of the representations and warranties contained in the
Agreement and the Custodial Agreement are true and correct in
all material respects; and
B. No Default or Event of Default has occurred and is continuing.
AAMES CAPITAL CORPORATION
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
Date:___________________________________, 199__
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Exhibit E
NOTICE OF EXTENSION
Reference is made to the Interim Loan and Security Agreement,
dated as of November 22, 1996 (as amended from time to time, the "Agreement"),
among Prudential Securities Credit Corporation (the "Lender") and Aames Capital
Corporation (the "Borrower").
The Lender hereby notifies the Borrower pursuant to Section 2(d)
of the Agreement that with respect to the Advance made on _________ __, 199_,
the Lender hereby extends the date on which the Advance matures through
__________ __, 199_1, on which date such Advance shall be due and payable.
PRUDENTIAL SECURITIES CREDIT CORPORATION
By _____________________________
Title:
Date:________________________
--------------
1 Insert date no more than 30 days following the then-existing Maturity
Date for such Advance.
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Exhibit F
GUARANTEE
GUARANTEE, dated as of November 22, 1996, by AAMES FINANCIAL
CORPORATION, a Delaware corporation (the "Guarantor"), in favor of PRUDENTIAL
SECURITIES CREDIT CORPORATION ("Lender").
1. Guarantee. To induce Lender to enter into an Interim Loan and
Security Agreement, dated as of the date hereof (the "Interim Loan Agreement"),
with Aames Capital Corporation, Inc., a California corporation ("Borrower"), the
Guarantor unconditionally guarantees to Lender, its successors, endorsees, and
permitted assigns, the prompt payment when due of all present and future
obligations and liabilities of all kinds of Borrower to Lender arising out of
the Interim Loan Agreement (the "Obligations").
2. Absolute Guarantee. The Guarantor's obligations under this
Guarantee shall not be affected by the genuineness, validity, regularity, or
enforceability of the Obligations or of any instrument evidencing the
Obligations, or by the existence, validity, enforceability, perfection, or
extent of any collateral for the Obligations, or by any other circumstance
relating to the Obligations which might otherwise constitute a discharge of or
defense to this Guarantee. Lender makes no representation or warranty to the
Guarantor regarding such matters, and has no duty or responsibility to disclose
to the Guarantor any circumstances that may now or hereafter affect such
matters. Lender shall not be obligated to file any claim relating to the
Obligations if Borrower becomes subject to a bankruptcy, reorganization, or
similar proceeding, and the failure of Lender so to file shall not affect the
Guarantor's obligations hereunder. If any payment by Borrower to Lender on
account of the Obligations is rescinded or must otherwise be returned for any
reason whatsoever, the Guarantor shall remain liable hereunder for such
Obligations as if such payment had not been made. The Guarantor's obligations
under this Guarantee constitute a guarantee of payment and not of collection.
3. Consents, Waivers, and Renewals. Lender may at any time and
from time to time, either before or after the maturity thereof, without notice
to or further consent of the Guarantor, extend the time of payment of, exchange,
or surrender any collateral for, or renew, any of the Obligations, and may also
make any agreement with Borrower or with any other individual or entity liable
on any of the Obligations, or interested therein, for the extension, renewal,
payment, compromise, discharge, or release thereof, in whole or in part, or for
any modification of the terms thereof or of any agreement between Lender and
Borrower or any such other individual or entity, without impairing or affecting
this Guarantee. Lender may seek payment of any of the Obligations from the
Guarantor, whether or not Lender shall have resorted to any collateral for the
Obligations or shall have proceeded against Borrower or any other obligor
principally or secondarily obligated for any of the Obligations.
4. Expenses. The Guarantor shall pay on demand all out-of-pocket
expenses (including the reasonable fees and expenses of Lender's counsel)
incurred in the
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enforcement or protection of the rights of Lender under this Guarantee, and any
collateral for the Obligations shall secure such payment; provided, however,
that the Guarantor shall not be liable for any expenses of Lender if no payment
under this Guarantee is due.
5. No Subrogation. Notwithstanding any payment or payments made
by the Guarantor hereunder, or any set-off or application of funds of the
Guarantor by the Lender, the Guarantor waives any right that it may have to be
subrogated to any of the rights of the Lender against the Borrower or against
any collateral security for guarantee or right of offset held by the Lender for
the payment of the Obligations or to otherwise seek reimbursement, indemnity or
contribution or any other payment from the Borrower in respect of payments made
by the Guarantor hereunder.
6. Continuing Guarantee. This Guarantee is absolute,
unconditional, and irrevocable and shall remain in full force and effect and be
binding upon the Guarantor and its successors and permitted assigns until all of
the Obligations have been satisfied in full. If any present or future
Obligations are guaranteed by individuals or entities in addition to the
Guarantor, the death, release, or discharge, in whole or part or the bankruptcy,
liquidation, termination, or dissolution of one or more of them shall not
discharge or affect the liabilities of the Guarantor hereunder.
7. No Waiver; Cumulative Rights. No failure on the part of Lender
to exercise, and no delay in exercising, any right, remedy, or power under this
Guarantee shall operate as a waiver thereof, nor shall any single or partial
exercise by Lender of any right, remedy, or power hereunder preclude any other
or future exercise of any right, remedy, or power. Each and every right, remedy,
and power hereby granted to Lender or allowed it by law or other agreement shall
be cumulative and not exclusive of any other, and may be exercised by Lender
from time to time.
8. Waiver of Notice. Except as required otherwise herein, the
Guarantor waives notice of the acceptance of this Guarantee, presentment to or
demand of payment from anyone liable for any of the Obligations, notice of
dishonor or non-payment, protest, diligence, suit, notice of any sale of any
collateral for the Obligations, notice of the taking of any action by Lender
against Borrower, the Guarantor, or others, and all other notices that may
otherwise be required by law.
9. Representations and Warranties.
(a) The Guarantor is duly organized and validly existing under
the law of the State of Delaware and has full corporate power and authority to
execute, deliver, and perform this Guarantee.
(b) The execution, delivery, and performance of this Guarantee
have been and remain duly authorized by all necessary corporate action and do
not contravene any provision of the Guarantor's certificate of incorporation or
by-laws, as amended to date, or any law, regulation, rule, decree, order,
judgment, or contractual restriction binding on the Guarantor or its assets.
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(c) All consents, licenses, authorizations, and approvals of, and
registrations and declarations with, any governmental authority or regulatory
body necessary for the due execution, delivery, and performance of this
Guarantee have been obtained and remain in full force and effect and all
conditions thereof have been duly complied with, and no other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required in connection with the execution, delivery, or performance of this
Guarantee.
(d) This Guarantee constitutes the legal, valid, and binding
obligation of the Guarantor and is enforceable against the Guarantor in
accordance with its terms, subject as to enforceability to bankruptcy,
insolvency, reorganization, moratorium, conservatorship, receivership, and other
laws of general applicability relating to or affecting creditors' rights and to
equitable principles of general application.
10. Assignment. The Guarantor may not assign its rights,
interests, or obligations under this Guarantee to any other person without the
prior written consent of Lender.
11. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WITHIN SUCH STATE.
12. Notices. Any notice or communication to the Guarantor in
respect of this Guarantee shall be sufficiently given if in writing and
delivered in person or sent by certified or registered mail or the equivalent
(with return receipt requested), by courier, or by facsimile addressed to the
following:
Aames Financial Corporation
0000 Xxxxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Chairman and CEO
Telephone: 000-000-0000
Telecopy: 000-000-0000
with a copy to:
Aames Financial Corporation
0000 Xxxxxxxx Xxxxxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Legal Department
Telephone: 000-000-0000
Telecopy: 000-000-0000
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Any such notice or communication shall specifically identify the amounts to
which this Guarantee relates, and shall be sufficiently given only upon actual
receipt by the Guarantor. Any notice or communication by the Guarantor to Lender
in respect of this Guarantee shall be sufficiently given if in writing and
delivered in the manner provided in the Interim Loan Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Guarantee has been duly executed and
delivered by the Guarantor to Lender as of the date first above written.
AAMES FINANCIAL CORPORATION
By:_________________________
Name:
Title:
