EXHIBIT 10.46
REVOLVING CREDIT AND SECURITY AGREEMENT
(the "Agreement")
between
COUNTRYWIDE WAREHOUSE LENDING
("Lender")
and
PREFERRED HOME MORTGAGE COMPANY
("Borrower")
dated as of
OCTOBER 22, 2004
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
Section 1.1 Defined Terms ............................................................................... 1
Section 1.2 Principles of Construction .................................................................. 1
ARTICLE 2
AMOUNTS AND TERMS OF CREDIT
Section 2.1 Agreement to Lend ............................................................................ 1
Section 2.2 Credit Limit ................................................................................. 2
Section 2.3 Description of Collateral .................................................................... 2
Section 2.4 Maximum Amount of Advance .................................................................... 2
Section 2.5 Use of Proceeds .............................................................................. 3
Section 2.6 Interest ..................................................................................... 3
Section 2.7 Note ......................................................................................... 3
Section 2.8 Guarantee .................................................................................... 3
ARTICLE 3
PROCEDURES FOR REQUEST AND MAKING OF ADVANCES
Section 3.1 Additional Procedures Set Forth in Handbook ................................................. 3
Section 3.2 Request for Advance ......................................................................... 3
Section 3.3 Delivery of Collateral Documents ............................................................ 4
Section 3.4 Haircut ..................................................................................... 4
Section 3.5 Over/Under Account .......................................................................... 4
Section 3.6 Disbursement of Funds ....................................................................... 6
Section 3.7 Approved Payees ............................................................................. 6
ARTICLE 4
PAYMENTS
Section 4.1 Principal ................................................................................... 7
Section 4.2 Acceleration Event .......................................................................... 7
Section 4.3 Reduction of Collateral Value as Alternative Remedy ......................................... 8
Section 4.4 Designation as Noncompliant Mortgage Loan as Alternative Remedy ............................. 8
Section 4.5 Illegality or Impracticability .............................................................. 8
Section 4.6 Payments Pursuant to Sale to Investor ....................................................... 8
Section 4.7 Application of Payments from Borrower ....................................................... 8
Section 4.8 Method of Payment ........................................................................... 9
Section 4.9 Notification of Payment ..................................................................... 9
Section 4.10 Authorization to Debit ...................................................................... 9
Section 4.11 Book Account ................................................................................ 10
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ARTICLE 5
FEES AND EXPENSES
Section 5.1 Payment of Fees ............................................................................. 10
Section 5.2 Reimbursement of Expenses ................................................................... 10
ARTICLE 6
SECURITY AGREEMENT
Section 6.1 Grant of Security Interest .................................................................. 10
Section 6.2 Servicing Rights ............................................................................ 10
Section 6.3 Delivery of Additional Collateral or Mandatory Prepayment .................................. 11
Section 6.4 Custody of Collateral Documents ............................................................. 11
Section 6.5 Release of Collateral ....................................................................... 12
Section 6.6 Repurchase Transactions ..................................................................... 12
ARTICLE 7
CONDITIONS PRECEDENT
Section 7.1 Initial Advance ............................................................................ 13
Section 7.2 All Advances ................................................................................ 14
Section 7.3 Intercreditor Agreements .................................................................... 15
Section 7.4 Satisfaction of Conditions .................................................................. 15
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Section 8.1 Representations and Warranties Concerning Borrower .......................................... 15
Section 8.2 Representations and Warranties Concerning Collateral ........................................ 17
Section 8.3 Continuing Representations and Warranties ................................................... 20
ARTICLE 9
AFFIRMATIVE COVENANTS
Section 9.1 Payment of Note ............................................................................ 20
Section 9.2 Financial Statements and Other Reports ..................................................... 20
Section 9.3 Inspection of Properties and Books ......................................................... 21
Section 9.4 Notice ..................................................................................... 21
Section 9.5 Additional Financing ....................................................................... 22
Section 9.6 Servicing of Mortgage Loans ................................................................ 22
Section 9.7 Evidence of Collateral ..................................................................... 22
Section 9.8 Protection of Security ..................................................................... 22
Section 9.9 Further Assurances ......................................................................... 22
Section 9.10 Fidelity Bonds and Insurance ............................................................... 22
Section 9.11 Wet Mortgage Loans ......................................................................... 23
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ARTICLE 10
NEGATIVE COVENANTS
Section 10.1 Liabilities and Advances ................................................................... 23
Section 10.2 Deferral of Subordinated Debt .............................................................. 23
Section 10.3 Loss of Eligibility ........................................................................ 23
Section 10.4 Financial Ratios ........................................................................... 23
Section 10.5 Loans to Officers, Employees and Shareholders .............................................. 24
Section 10.6 Liens ...................................................................................... 24
Section 10.7 Indebtedness ............................................................................... 24
Section 10.8 Consolidation, Merger and Sale of Assets ................................................... 24
Section 10.9 Payment of Dividends and Retirement of Stock ............................................... 24
Section 10.10 Collateral ................................................................................. 24
Section 10.11 Secondary Marketing, Underwriting, Third Party Origination and
Interest Rate Risk Management Practices.................................................... 25
ARTICLE 11
DEFAULTS AND REMEDIES
Section 11.1 Events of Default .......................................................................... 25
Section 11.2 Remedies ................................................................................... 26
Section 11.3 Sale of Collateral ......................................................................... 27
Section 11.4 No Obligation to Pursue Remedy ............................................................. 27
Section 11.5 Reimbursement of Costs and Expenses ........................................................ 28
Section 11.6 Application of Proceeds .................................................................... 28
Section 11.7 Right of Set-Off ........................................................................... 28
Section 11.8 Reasonable Assurances ...................................................................... 29
ARTICLE 12
INDEMNIFICATION
Section 12.1 Indemnification ............................................................................ 29
Section 12.2 Payment of Taxes ........................................................................... 29
ARTICLE 13
TERM AND TERMINATION
Section 13.1 Term ....................................................................................... 30
Section 13.2 Voluntary Termination ...................................................................... 30
Section 13.3 Extension of Term .......................................................................... 30
ARTICLE 14
GENERAL
Section 14.1 Integration ................................................................................ 30
Section 14.2 Amendments ................................................................................. 30
Section 14.3 No Waiver .................................................................................. 30
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Section 14.4 Remedies Cumulative ........................................................................ 30
Section 14.5 Assignment ................................................................................. 30
Section 14.6 Successors and Assigns ..................................................................... 31
Section 14.7 Participations ............................................................................. 31
Section 14.8 Invalidity ................................................................................. 31
Section 14.9 Additional Instruments ..................................................................... 31
Section 14.10 Survival ................................................................................... 31
Section 14.11 Notices .................................................................................... 31
Section 14.12 Personal Identification Number ............................................................. 31
Section 14.13 Governing Law .............................................................................. 31
Section 14.14 Agreement to Arbitrate Claims .............................................................. 32
Section 14.15 Counterparts ............................................................................... 32
Section 14.16 Headings ................................................................................... 32
Section 14.17 Joint and Several Liability of each Borrower ............................................... 33
EXHIBITS
Exhibit A: Glossary of Defined Terms
Exhibit B: Note
Exhibit C: Personal or corporate Guarantee (if applicable, attached)
Exhibit D: Form of Collateral Data Record
Exhibit E: Other Mortgage Loan Documents
Exhibit F: Form of Bailee Agreement
Exhibit G: Irrevocable Closing Instructions
Exhibit H: Secretary's Certificate
Exhibit I: Corporate Resolutions
Exhibit J: Officer's Certificate
Exhibit K: Assignment of Closing Protection Letter
Exhibit L: Assignment of Fidelity Bond and Errors and Omission Policy
Exhibit M: Form of Intercreditor Agreement
Exhibit N: Power of Attorney
Exhibit O: Form of Trust Receipt
Exhibit P: AutoFund Authorization Request
Exhibit Q: Request to Add New Wire Instructions
Exhibit R: Amendment to Revolving Credit and Security Agreement -
Cashier Checks and Funding Drafts
Exhibit S: Acknowledgement of Password Confidentiality Agreement
Exhibit T: Electronic Tracking Agreement - Warehouse Lender
Exhibit U: Wiring instructions for Over/Under Account withdrawals
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REVOLVING CREDIT
AND SECURITY AGREEMENT
THIS REVOLVING CREDIT AND SECURITY AGREEMENT (the "Agreement") is made and
entered into, as of October 22, 2004 (the "Effective Date"), by and between
Countrywide Warehouse Lending, a California corporation ("Lender"), and
Preferred Home Mortgage Company, a Florida corporation ("Borrower").
RECITALS
A. Borrower has requested Lender to provide Borrower with a line
of credit from which Borrower may, from time to time, obtain
advances of funds from Lender for the purpose of originating
or acquiring residential mortgage loans.
B. As security for such advances, Borrower has agreed to grant to
Lender a security interest in and lien upon certain mortgage
loans originated and/or acquired by Borrower.
C. Lender has agreed to establish the line of credit requested by
Borrower subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual rights and obligations provided
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Borrower and Lender agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1 DEFINED TERMS. As used in this Agreement, capitalized terms shall have
the meanings set forth in EXHIBIT A, unless the context otherwise
requires. All such defined terms shall, unless specifically provided to
the contrary, have the defined meanings set forth herein when used in
any other agreement, certificate or document made or delivered pursuant
hereto.
1.2 PRINCIPLES OF CONSTRUCTIONS.
(a) ACCOUNTING TERMS. Accounting terms not otherwise defined
herein shall have the meanings given under GAAP.
(b) NUMBER. All terms defined in this Agreement may be used in the
singular or the plural, as the context requires.
(c) SUCCESSORS AND ASSIGNS. Reference to any party shall mean that
party and its successors and assigns permitted by the terms of
this Agreement.
ARTICLE 2
AMOUNT AND TERMS OF CREDIT
2.1 AGREEMENT TO LEND. Subject to the terms and conditions of this
Agreement (including SECTION 13.2 hereof) and provided that no Event of
Default or Potential Default has occurred and is continuing, Lender
agrees, from time to time during the term of this Agreement, to make
Advances to Borrower; provided, however, that the total aggregate
principal amount of Advances outstanding at any one time shall not
exceed the Aggregate Credit Limit, the aggregate principal amount of
any type of Advance shall not exceed the applicable Tranche Sublimit
and the
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aggregate principal amount of Wet Mortgage Loans shall not exceed the
Wet Mortgage Loans Sublimit.
2.2 CREDIT LIMIT. The Aggregate Credit Limit and each Tranche Sublimit
shall be as set forth in the Commitment Letter. Lender shall have the
right, in its sole discretion, to reduce permanently, from time to time
and without refund of any fee or other amount previously paid by
Borrower, the Aggregate Credit Limit and/or each Tranche Sublimit. In
the event of any reduction pursuant to this SECTION 2.2, Lender shall
give Borrower not fewer than sixty (60) days prior written notice
thereof, which notice shall designate (a) the effective date of such
reduction, (b) the amount of the reduction and (c) the credit limit(s)
to which such reduction amount shall apply. Lender shall not be liable
to Borrower for any costs, losses or damages arising from or relating
to a reduction by Lender in the Aggregate Credit Limit or any Tranche
Sublimit.
2.3 DESCRIPTION OF COLLATERAL.
(a) REQUIRED COLLATERAL. With respect to each Advance, Borrower
shall cause to be maintained with Lender Collateral consisting
of a Mortgage Loan(s) with a Collateral Value not less than,
at any date, the outstanding principal balance of the related
Advance. With respect to each Advance, the Pledged Mortgage
Loan shall be:
(i) if the Advance is a Tranche A Advance, a Conventional
Conforming Mortgage Loan;
(ii) if the Advance is a Tranche B Advance, a Government
Mortgage Loan;
(iii) if the Advance is a Tranche C Advance, a Jumbo
Mortgage Loan;
(iv) if the Advance is a Tranche D Advance, a Super Jumbo
Mortgage Loan;
(v) if the Advance is a Tranche E Advance, an Expanded
Criteria Mortgage Loan;
(vi) if the Advance is a Tranche F Advance, a Subprime
Mortgage Loan;
(vii) if the Advance is a Tranche G Advance, a Closed-End
Second Lien Mortgage Loan;
(viii) if the Advance is a Tranche H Advance, a HELOC
Mortgage Loan; or
(ix) if the Advance is a Tranche I Advance, a
Nonperforming/Subperforming Mortgage Loan.
Lender, in its sole discretion, shall determine the correct
loan type for each Pledged Mortgage Loan.
(b) WET MORTGAGE LOANS AS COLLATERAL. The aggregate principal
balance of all outstanding Advances secured by Wet Mortgage
Loans shall not, at any time, exceed the Wet Mortgage Loans
Sublimit.
2.4 MAXIMUM AMOUNT OF ADVANCE. Each Advance shall not exceed the lesser of:
(a) the applicable Tranche Sublimit, as determined by the type of
Advance;
(b) the Aggregate Credit Limit, minus the aggregate principal
amount of all other Advances outstanding, if any; and
(c) the Collateral Value of the related Pledged Mortgage Loan(s).
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2.5 USE OF PROCEEDS. Borrower shall use the proceeds of each Advance solely
for the purpose of originating and/or acquiring the related Pledged
Mortgage Loan(s).
2.6 INTEREST.
(a) RATE OF INTEREST. Borrower shall pay Lender interest on each
outstanding Advance from the date of disbursement until, but
not including, the date of payment, at an annual rate equal to
the sum of the Applicable Rate plus the applicable Margin;
provided, however, that if a Pledged Mortgage Loan securing an
Advance is deemed to be a Noncompliant Mortgage Loan,
thereafter such Advance shall bear interest at an annual rate
equal to the sum of the Applicable Rate plus the Tranche J
Margin. Notwithstanding the foregoing, any Advance not paid
when due (whether at stated maturity, upon acceleration or
otherwise) shall bear interest from the date due until paid in
full at an annual rate equal to the Default Rate.
(b) TIME FOR PAYMENT. Accrued interest for each Advance shall be
due and payable on a monthly basis until the date on which the
outstanding principal amount of the Advance is required to be
paid. On the date that the Advance is required to be paid, all
accrued interest not otherwise paid by Borrower shall be due
and payable.
(c) COMPUTATIONS. All computations of interest and fees payable
hereunder shall be based upon a year of three-hundred sixty
(360) days.
2.7 NOTE. Borrower's obligation to pay the principal of and interest on all
Advances made by Lender is evidenced by the Note of even date herewith.
All Advances under this Agreement shall constitute a single
indebtedness, and all of the Collateral shall be security for the Note
and for performance of all obligations of Borrower to Lender.
2.8 GUARANTEE. As additional support for the Advances, Borrower agrees to
execute and deliver, or cause to be executed and delivered, to Lender
such Guarantees and/or additional security agreements as Lender may
request, in its sole discretion.
ARTICLE 3
PROCEDURES FOR REQUEST AND MAKING OF ADVANCES
3.1 ADDITIONAL PROCEDURES SET FORTH IN HANDBOOK. In making a request for an
Advance, Borrower shall comply with those procedures set forth in this
Agreement and the Handbook. Lender shall have the right to revise or
supplement the Handbook to conform to current legal requirements or
Lender practices by giving notice of three (3) business days thereof to
Borrower.
3.2 REQUEST FOR ADVANCE. Borrower shall initiate a request for an Advance
by delivering to Lender, electronically or in writing, a Collateral
Data Record for each Mortgage Loan intended to secure an Advance not
later than the Advance Request Deadline; provided, however, that
Borrower shall provide Lender not fewer than one (1) Business Days
notice if Borrower intends to borrow an Advance or Advances equal to or
greater than ten million dollars ($10,000,000). Thereafter, Lender
shall confirm to Borrower the terms of such Advance electronically or
in writing. Lender shall have the right to revise or supplement the
form of the Collateral Data Record by giving prior written notice via
Lenders web-site thereof to Borrower. If Borrower fails to borrow an
Advance after Borrower has submitted a Collateral Data Record in
connection with such borrowing, Borrower shall pay Lender the Breakage
Fee and reimburse Lender for any out-of-pocket losses, costs and
expenses incurred by Lender in connection with such failure to borrow
the Advance, including, without limitation, costs relating to
re-employment of funds obtained by Lender and fees payable to terminate
the arrangements through which such funds were obtained. In addition,
if following disbursement by Lender of any funds relating to an
Advance, Borrower cancels or
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otherwise fails to borrow such Advance, Borrower shall pay Lender
interest on such amount from the date of disbursement until, but not
including, the date the funds are returned to Lender.
3.3 DELIVERY OF COLLATERAL DOCUMENTS.
(a) DRY MORTGAGE LOANS. Prior to the funding of any Advance
secured from the date of funding by a Dry Mortgage Loan,
Borrower shall deliver to Lender or its Custodian, or
authorize and direct the Closing Agent to deliver to Lender or
its Custodian, with respect to each Dry Mortgage Loan, the
Collateral Documents along with those additional documents set
forth in SECTIONS 7.1 AND 7.2, as applicable.
(b) WET MORTGAGE LOANS. If Lender makes an Advance secured by a
Wet Mortgage Loan, prior to the funding of such Advance,
Borrower shall deliver to Lender or its Custodian, or
authorize and direct the Closing Agent to deliver to Lender or
its Custodian, with respect to each Wet Mortgage Loan, those
documents set forth in SECTIONS 7.1 AND 7.2, as applicable;
provided, however, that Borrower shall deliver to Lender or
its Custodian, all related Collateral Documents within the Wet
Mortgage Loans Maximum Dwell Time.
(c) GOVERNMENT MORTGAGE LOANS. For all loans not committed to
Countrywide Correspondent Lending Division, if a Government
Mortgage Loan is pledged as Collateral for an Advance,
Borrower shall deliver to Lender or its Custodian, within
forty five (45) calendar days following the date of funding of
such Advance, a mortgage insurance policy issued under an FHA
insurance program or a guaranty for the full and timely
payment of principal and interest issued by the VA, as
applicable, or evidence of such insurance or guaranty, as
applicable, including proof of payment of the premium and the
case number so Lender can access the information on the
computer system maintained by FHA or the VA.
(d) OTHER MORTGAGE LOAN DOCUMENTS. With respect to each Pledged
Mortgage Loan, Borrower shall hold in trust for Lender those
mortgage loan documents set forth in EXHIBIT E hereto.
3.4 HAIRCUT. With respect to each Advance, Borrower shall ensure that there
are sufficient funds on deposit in the Over/Under Account such that
following the withdrawal of the Haircut by Lender, the balance of the
Over/Under Account is equal to or greater than the minimum required
balance, as set forth in the Commitment Letter.
3.5 OVER/UNDER ACCOUNT.
(a) MINIMUM BALANCE. Borrower shall at all times maintain a
balance in the Over/Under Account of not less than that amount
set forth in the Commitment Letter. Lender shall not be
required to segregate and hold funds deposited by or on behalf
of Borrower in the Over/Under Account separate and apart from
Lender's own funds or funds deposited by or held for other
borrowers. Upon ten (10) days prior written notice to
Borrower, Lender may increase the minimum balance Borrower is
required to maintain in the Over/Under Account.
(b) DEPOSITS.
(i) BORROWER. Borrower shall deposit funds in the
Over/Under Account in accordance with the terms of
this Agreement, including, without limitation,
SECTIONS 3.4 AND 3.5(A).
(ii) LENDER. Lender shall credit to the Over/Under Account
all amounts in excess of those amounts due to Lender
in accordance with the Principal Agreements on the
date Lender receives or has received both (1) a
payment by Borrower or an
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Investor pursuant to a Purchase Commitment and (2) a
Purchase Advice relating to such payment without
discrepancy; provided, however, that funds and
Purchase Advices received by Lender after that time
set forth in the Commitment Letter, shall be deemed
to have been received on the next Business Day.
Lender shall use reasonable efforts to notify
Borrower in the event there is a discrepancy between
a wire transfer and the related Purchase Advice, and
thereafter, Borrower shall notify Lender as to
whether Lender should accept such payment despite the
discrepancy between the amount received and the
related Purchase Advice; provided, however, that if
an Event of Default or Potential Default has occurred
and is continuing, Lender is not obligated to receive
approval from Borrower prior to accepting any amounts
received and releasing the related Collateral.
(iii) SETTLEMENT STATEMENT. Lender shall deliver to
Borrower via facsimile or make available to Borrower
via the Internet within twenty-four (24) hours
following settlement of an Advance, or as soon
thereafter as is reasonably possible, a settlement
statement, which includes an explanation of all
amounts credited by Lender to the Over/Under Account.
(c) WITHDRAWALS.
(i) BORROWER. If the amount credited to the Over/Under
Account creates a balance in excess of the minimum
balance required pursuant to SECTION 3.5(A) above,
Borrower may submit a written request to Lender for
return or payment of such excess funds. If Lender
shall determine, in its reasonable discretion, that
such amounts are not required to be retained in the
Over/Under Account or paid to Lender, Lender shall
deliver such funds to that account designated by
Borrower.
(ii) LENDER. Lender may, from time to time and without
separate authorization by Borrower, withdraw funds
from the Over/Under Account in accordance with the
terms of this Agreement, including, without
limitation:
(1) with respect to any Advance, to deliver the
Haircut to the Closing Agent;
(2) to reimburse itself for any costs and
expenses incurred by Lender in connection
with this Agreement, as permitted herein;
(3) to pay itself any interest or principal that
is due and owing;
(4) to return funds to Borrower as provided in
SECTION 3.5(C)(I);
(5) as security for the payment of the Note and
of any other indebtedness of Borrower to
Lender outstanding from time to time and for
the performance of all of Borrower's
obligations hereunder; and
(6) without limiting the generality of SECTION
3.5(C)(II)(5), as security for an Advance as
provided in SECTION 6.3(A) or as repayment
of an Advance as provided in SECTION 6.3(B).
(d) FAILURE TO MAINTAIN BALANCE. If, at any time, Borrower fails
to maintain in the Over/Under Account the balance set forth in
the Commitment Letter, in addition to any other rights and
remedies that Lender may have against Borrower, Borrower will
be obligated to pay Lender accrued interest on that portion of
the balance that Borrower has failed to maintain, at the
Default Rate, from the time that such balance failed to be
maintained until the time funds are deposited into or held in
the Over/Account to comply with Borrower's obligations
hereunder. Without limiting the generality of the foregoing,
it is
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understood and agreed that should the balance in the
Over/Under Account become negative, Borrower will continue to
owe Lender accrued interest as provided herein.
(e) SECURITY INTEREST. Any funds of Borrower at any time deposited
or held in the Over/Under Account, whether such funds are
required to be deposited and held in the Over/Under Account
pursuant to this SECTION 3.5 or otherwise, are hereby pledged
as security in accordance with SECTION 6.1 hereof.
3.6 DISBURSEMENT OF FUNDS.
(a) BY WIRE TRANSFER. To make an Advance, Lender shall wire funds,
as applicable, upon compliance by Borrower with the terms of
this Agreement; provided, however, that Lender shall not wire
funds to any Closing Agent or warehouse lender that is not an
Approved Payee. The wiring of funds by Lender to any Closing
Agent or warehouse lender that is not an Approved Payee shall
not make such Closing Agent or warehouse lender an Approved
Payee. Any funds disbursed by Lender to Borrower or its
Approved Payee by wire transfer shall be subject to all
applicable federal, state and local laws and regulations and
policy of the Board of Governors of the Federal Reserve System
on Reduction of Payments System Risk as such policy may be
changed or amended from time to time. Borrower acknowledges
that as a result of such applicable law and policy, the
transmission of a disbursement by wire transfer may be
delayed.
(b) ADVANCE LIMITATION TO CLOSING AGENT. Lender may refuse to wire
funds to a Closing Agent pursuant to its policies as
documented in the Handbook.
(c) RETURN OF FUNDS. If a Wet Mortgage Loan pledged against an
Advance is not closed within forty-eight (48) hours following
delivery of the funds, Borrower shall direct Closing Agent to
immediately return to Lender, such funds. Further, Borrower
shall pay Lender all fees and interest accrued thereon
immediately upon notification from Lender.
3.7 APPROVED PAYEES.
(a) CLOSING AGENTS. In order for a Closing Agent to be designated
an Approved Payee with respect to any Advance, Borrower must
submit to Lender the following documents:
(i) if the title company issuing the title policy that
covers the applicable Pledged Mortgage Loan has not
issued to Lender a blanket Closing Protection Letter,
which covers closings conducted by this Closing Agent
in the jurisdiction where this closing will take
place:
(1) a valid blanket Closing Protection Letter,
in a form acceptable to Lender, issued to
Borrower or Lender by the title company,
which is issuing the title insurance policy
that covers the related Pledged Mortgage
Loan, that covers closings conducted by the
Closing Agent in the jurisdiction where this
closing will take place and if applicable,
an assignment to Lender of such Closing
Protection Letter, substantially in the form
of EXHIBIT K hereto; or
(2) a valid Closing Protection Letter, in a form
acceptable to Lender, issued to Borrower or
Lender by the title company, which is
issuing the title insurance policy that
covers the related Pledged Mortgage Loans,
that covers the closing of this specific
Pledged Mortgage Loan and if applicable, an
assignment to Lender of such Closing
Protection Letter, substantially in the form
of EXHIBIT K hereto; or
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(3) if Closing Protection Letters are not
available or are limited in their
applicability in the jurisdiction where the
closing takes place, any other documents
Lender may reasonably require, including
without limitation an assignment to Lender
of Borrower's rights under its fidelity bond
and errors and omissions policy,
substantially in the form of EXHIBIT K
hereto; and
(ii) Reserved.
(b) WAREHOUSE LENDERS. In order for a warehouse lender to be
designated an Approved Payee with respect to any Advance,
Borrower must submit to Lender a written request, including
the name and address of the warehouse lender, demonstrating a
need for such designation. Notwithstanding the foregoing,
Lender reserves the right to refuse to designate any warehouse
lender as an Approved Payee. Borrower understands and agrees
that any designation of a warehouse lender as an Approved
Payee may result in the modification of the terms and
conditions under which Lender will continue to make Advances
to Borrower.
(c) APPROVAL PROCESS. Lender shall review the applicable documents
and notify Borrower within two (2) Business Days as to whether
such Closing Agent or warehouse lender has been designated by
Lender, in its sole and reasonable discretion, to be an
Approved Payee with respect to such Advance. Lender may
withdraw its approval of any Closing Agent or warehouse lender
as an Approved Payee at any time, in its sole and reasonable
discretion.
ARTICLE 4
PAYMENTS
4.1 PRINCIPAL PAYMENTS AND PREPAYMENTS. The outstanding principal amount of
each Advance, with interest accrued and unpaid thereon, shall be
payable in full upon the earliest to occur of (a) the Settlement Date
of the Pledged Mortgage Loan; (b) the Maturity Date; (c) the occurrence
of any Acceleration Event with respect to such Advance; or (d) the
expiration or termination of this Agreement. Borrower may prepay any
Advance hereunder in whole or in part at any time, without payment of
any pre-payment penalty or premium, and such prepaid sums shall
thereafter be available to be reborrowed by Borrower under the terms
and conditions of this Agreement.
4.2 ACCELERATION EVENTS. The occurrence of any of the following events
shall be an Acceleration Event with respect to an Advance:
(a) the Pledged Mortgage Loan securing the Advance is deemed to be
a Defective Mortgage Loan;
(b) With the exception of Mortgage Loans pledged to Countrywide's
Correspondent Lending Division, in the event thirty (30)
calendar days elapse from the date the Collateral Documents
relating to the Pledged Mortgage Loan with respect to which
the Advance was made were delivered to an Investor and such
Investor has not returned the Collateral Documents or
purchased the Pledged Mortgage Loan, unless an extension is
granted by Lender, in its sole discretion;
(c) Ten (10) Business Days elapse from the date a Collateral
Document relating to the Pledged Mortgage Loan with respect to
which the Advance was made was delivered to Borrower for
correction or completion, without being returned to Lender or
its designee;
(d) Borrower fails to deliver to Lender the related Collateral
Documents within the Wet Mortgage Loans Maximum Dwell Time or
any Collateral Document delivered to Lender,
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upon examination by Lender, is found not to be in compliance
with the requirements of this Agreement or the related
Purchase Commitment and is not corrected within the Wet
Mortgage Loans Maximum Dwell Time; or
(e) The sale of the Pledged Mortgage Loan with respect to which
such Advance was made.
4.3 REDUCTION OF COLLATERAL VALUE AS ALTERNATIVE REMEDY. In Lender's sole
discretion, in lieu of requiring full repayment of an outstanding
Advance upon the occurrence of an Acceleration Event or maturity,
Lender may elect to reduce the Collateral Value of the related Pledged
Mortgage Loan (to as low as zero) and accordingly require a full or
partial principal repayment of such Advance or the delivery of
additional Collateral.
4.4 DESIGNATION AS NONCOMPLIANT MORTGAGE LOAN AS ALTERNATIVE REMEDY. In
Lender's sole discretion, in lieu of requiring full repayment of an
outstanding Advance upon the occurrence of an Acceleration Event or
maturity, Lender may elect to deem the related Pledged Mortgage Loan a
Noncompliant Mortgage Loan, provided that (a) after such Pledged
Mortgage Loan is deemed to be a Noncompliant Mortgage Loan, the
aggregate original Collateral Value of all Noncompliant Mortgage Loans
does not exceed the Tranche J Sublimit; (b) the Collateral Value of the
Noncompliant Mortgage Loan is greater than the outstanding principal
balance of the related Advance or Borrower provides additional
Collateral or repays part of the Advance as provided in SECTION 6.3;
and (c) Borrower delivers to Lender all documentation relating to the
Pledged Mortgage Loan reasonably requested by Lender.
4.5 ILLEGALITY OR IMPRACTICABILITY. Notwithstanding anything to the
contrary in this Agreement, if any law, regulation, treaty or directive
or any change therein or in the interpretation or application thereof,
or any circumstance affecting the London interbank market or the
repurchase market for mortgage loans or mortgage-backed securities,
shall make it unlawful or impractical for Lender to make or maintain
Advances as contemplated by this Agreement (a) the commitment of Lender
hereunder to make or to continue Advances shall be cancelled and (b)
each Advance then outstanding shall be due and payable upon the earlier
to occur of (i) the date required by any financial institution
providing funds to Lender, (ii) sale of the Pledged Mortgage Loan
securing such Advance in accordance with the terms of this Agreement,
and (iii) the date as of which Lender determines that so maintaining
Advances is unlawful or impractical. Lender shall not be liable to
Borrower for any costs, losses or damages arising from or relating from
any actions taken by Lender pursuant to this SECTION 4.5.
4.6 PAYMENTS PURSUANT TO SALE TO INVESTOR. Borrower shall direct each
Investor purchasing a Pledged Mortgage Loan to pay directly to Lender,
by wire transfer of immediately available funds, the purchase price set
forth in the applicable Purchase Commitment. In addition, with the
exception of Mortgage Loans pledged to Countrywide's Correspondent
Lending Division, Borrower shall provide Lender with a Purchase Advice
relating to such payment. Borrower shall not attempt to modify or
otherwise change the wire instructions for payment of the purchase
price provided to Investor by Lender or Custodian. Lender shall apply
all amounts received for the account of Borrower in accordance with
SECTION 3.5(B)(II) above. Lender may reject any amount received from an
Investor and not release the related Pledged Mortgage Loan if (a)
Lender does not receive a Purchase Advice in respect of any wire
transfer or (b) such funds are not sufficient to pay all principal,
interest and other costs relating to such Pledged Mortgage Loan owed by
Borrower to Lender; If the amount received from the Investor does not
equal or exceed all principal, interest and other costs owed by
Borrower relating to such Pledged Mortgage Loan, Lender may deduct such
amounts from the Over/Under Account or demand payment of such amount
from Borrower. If Borrower receives any funds intended for Lender,
Borrower shall hold such funds in trust for Lender and immediately pay
to Lender all such amounts by wire transfer of immediately available
funds.
4.7 APPLICATION OF PAYMENTS FROM BORROWER. Payments made directly by
Borrower to Lender shall be applied in the following order of priority:
8
(a) FIRST, to all costs, expenses and fees incurred or charged by
Lender under this Agreement that are not related to a specific
Advance;
(b) SECOND, to any amounts due and owing to Lender pursuant to
SECTION 6.3;
(c) THIRD, to all costs, expenses and fees incurred or charged by
Lender under this Agreement that are related to the Advance in
connection with which the payment is made;
(d) FOURTH, to interest accrued on the outstanding amount of the
Advance in connection with which the payment is made;
(e) FIFTH, to interest due and owing on the outstanding amount of
any other Advance, applied first to the Advance with the
earliest date;
(f) SIXTH, to the outstanding principal amount of the Advance in
connection with which the payment is made; and
(g) SEVENTH, to the outstanding principal amount of any other
Advance that is due and owing, applied first to the Advance
with the earliest date.
After the payment has been applied as set forth above, Lender shall
deposit in the Over/Under Account any amounts that remain.
4.8 METHOD OF PAYMENT. Except as otherwise specifically provided herein,
all payments hereunder must be received by Lender on the date when due
and shall be made in United States dollars by wire transfer of
immediately available funds to such account designated by Lender from
time to time. Whenever any payment to be made hereunder or under the
Note shall be stated to be due on a day that is not a Business Day, the
due date thereof shall be extended to the next succeeding Business Day,
and with respect to payments of principal, the interest thereon shall
be payable at the applicable rate during such extension. All payments
made by or on behalf of Borrower with respect to any Advance shall be
applied to Borrower's account in accordance with SECTION 3.5(B)(II)
above and shall be made in such amounts as may be necessary in order
that all such payments after withholding for or on account of any
present or future taxes, levies, imports, duties or other similar
charges of whatsoever nature imposed by any government or any political
subdivision or taxing authority hereof, other than any taxes on or
measured by the net income of Lender pursuant to the state, federal and
local tax laws of the jurisdiction where Lender's principal office or
offices or lending office or offices are located, compensate Lender for
any additional cost or reduced amount receivable of making or
maintaining advances as a result of such taxes, imports, duties or
other charges. All payments to be made by or on behalf of Borrower with
respect to any Advance shall be made without set-off, counterclaim or
other defense.
4.9 NOTIFICATION OF PAYMENT. With the exception of Mortgage Loans pledged
to Countrywide's Correspondent Lending Division, Borrower shall provide
Lender not fewer than one (1) Business Days notice if Borrower or an
Investor intends to remit a payment to Lender equal to or greater than
ten million dollars ($10,000,000).
4.10 AUTHORIZATION TO DEBIT. Borrower hereby expressly authorizes Lender to
debit the Over/Under Account and any account maintained by Borrower
with any depository institution in respect of the Pledged Mortgage
Loans, including without limitation, any operating, settlement or
custodial account, for any and all amounts due Lender hereunder.
Further, Lender may offset from the Over/Under Account any amounts owed
by Borrower to Lender's parent, subsidiaries or its Affiliates,
including, without limitation, any amounts that Borrower may owe to
Countrywide Home Loans, Inc. ("Countrywide") under the Loan Purchase
Agreement (including any amendments, addenda and assignments related
thereto) by and between Borrower and Countrywide. To the
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extent Lender's parent, subsidiaries or its Affiliates intend to offset
from the Over/Under Account, Lender shall notify Borrower of such
offset three business days prior to taking of such offset.
4.11 BOOK ACCOUNT. Lender shall maintain an account on its books of all
Advances made to Borrower and not yet repaid. Access to such
information shall be available to Borrower via the Internet or by
telephone or facsimile, if Borrower is unable to access the information
electronically. Notwithstanding the foregoing, Borrower shall be
responsible for maintaining its own account of Advances made and
amounts due to Borrower and for paying such amounts when due; failure
of Borrower to do so shall not excuse Borrower's timely performance of
all payment obligations under this Agreement.
ARTICLE 5
FEES AND EXPENSES
5.1 PAYMENT OF FEES. Borrower shall pay to Lender those fees set forth in
this Agreement or the Commitment Letter when they become due and owing,
including the Breakage Fee, Commitment Fee, Defective Loan Fee,
Document Deposit Fee, File Fee, Noncompliant Mortgage Loan Fee,
Shipping Fee, Wet Deficiency Fee and Wire Transfer Fee. Without
limiting the generality of the foregoing, the initial Commitment Fee
shall be paid on or before the Effective Date and if this Agreement is
renewed, thereafter on or before the anniversary of the Effective Date.
Lender shall be entitled to withdraw from the Over/Under Account or
retain from payments made by Borrower or an Investor, subject to
SECTION 4.6 above, any fees permitted under this Agreement that are due
and owing. If such amounts on deposit in the Over/Under Account or
payments received in connection with an Advance are not sufficient to
pay Lender all amounts owed, Lender shall notify Borrower and Borrower
shall pay to Lender, within one (1) Business Day, all unpaid amounts.
5.2 REIMBURSEMENT OF EXPENSES. Borrower shall pay all out-of-pocket costs
and expenses of Lender, including, without limitation, attorneys' fees,
in connection with the enforcement and administration of this
Agreement, the Note and other documents and instruments related hereto
or thereto and the making and repayment of the Advances and the payment
of interest thereon.
ARTICLE 6
SECURITY AGREEMENT
6.1 GRANT OF SECURITY INTEREST. As security for the payment of the Note and
of any other indebtedness of Borrower to Lender outstanding from time
to time and for the performance of all of Borrower's obligations
hereunder, Borrower hereby pledges, assigns and grants to Lender a
first priority security interest in and lien upon the Collateral.
6.2 SERVICING RIGHTS. Provided that no Event of Default or Potential
Default has occurred and is continuing, Borrower shall be entitled to
service, receive and collect directly all sums payable in respect of
the Pledged Mortgage Loans, except (a) amounts payable to Borrower for
the purchase by any Investor under a Purchase Commitment of any Pledged
Mortgage Loans that are funded in whole or in part with the proceeds of
any Advance, which amounts shall be paid directly to Lender, or (b) as
otherwise set forth in the Commitment Letter. Notwithstanding the
foregoing. Lender shall be entitled to service, receive and collect all
sums payable in respect of all the Pledged Mortgage Loans following the
occurrence of any Event of Default or Potential Default for a specific
Pledged Mortgage Loan if such Pledged Mortgage Loan is deemed to be a
Noncompliant Mortgage Loan or Defective Mortgage Loan. In such cases
(a) Lender may, in its own name or in the name of Borrower or
otherwise, demand, xxx for, collect or receive any money or property at
any time payable or receivable on account of or in exchange for the
Pledged Mortgage Loan(s), but shall be under no obligation to do so;
(b) Borrower shall, if Lender so requests, pay to Lender all amounts
received by Borrower upon or in respect of the Pledged Mortgage Loan(s)
or other Collateral, advising Lender as to the source of such funds;
and (c) all
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amounts so received and collected by Lender shall be held by it as part
of the Collateral. If Lender assumes the servicing of all or part of
the Pledged Mortgage Loans, Borrower agrees to cooperate with Lender
and do or accomplish all acts or things necessary to effect the
transfer of the servicing to Lender, at Borrower's sole expense, and to
pay Lender twenty dollars ($20.00) per month, or portion thereof, for
each Pledged Mortgage Loan serviced by Lender.
6.3 DELIVERY OF ADDITIONAL COLLATERAL OR MANDATORY PREPAYMENT. Lender shall
have the right to redetermine the Collateral Value of each Pledged
Mortgage Loan on a daily basis. If Lender shall determine, in its
reasonable discretion, at any time, that the Collateral Value of a
Pledged Mortgage Loan is less than the outstanding principal balance of
the related Advance or the aggregate Collateral Value of the Pledged
Mortgage Loans is less than the aggregate outstanding principal balance
of the Advances, Borrower shall, at Lender's sole option, immediately:
(a) deliver to Lender for pledge hereunder additional Mortgage
Loans satisfactory to Lender and/or cash, such that the
Collateral Value of the additional Mortgage Loans and cash are
equal to or greater than the difference between the Collateral
Value of the then existing Pledged Mortgage Loans and the
aggregate outstanding principal balance of the Advances; or
(b) repay one or more Advances in an amount sufficient to reduce
the outstanding principal balance thereof to or below the
Collateral Value of the Pledged Mortgage Loan(s).
Notwithstanding the foregoing, Lender may, in its sole discretion,
withdraw from the Over/Under Account amounts to serve as additional
security for an Advance pursuant to SECTION 6.3(A) above or to repay an
Advance pursuant to SECTION 6.3(B) above.
6.4 CUSTODY OF COLLATERAL DOCUMENTS.
(a) CUSTODIAL ARRANGEMENTS. Lender may appoint any Person to act
as the Custodian to hold possession of the Collateral
Documents (or a portion thereof) and to take actions at the
direction of Lender. Borrower hereby consents to any and all
such appointments and agrees to deliver the Collateral
Documents to the Custodian upon the direction of Lender.
Borrower further agrees that (i) the Custodian shall be
exclusively the agent, bailee and/or custodian of Lender; (ii)
receipt of the Collateral Documents by the Custodian shall be
constructive receipt by Lender and shall perfect Lender's
security interest in the Collateral Documents; (iii) Borrower
shall not have and shall not attempt to exercise any degree of
control over the Custodian or any Collateral Document held by
the Custodian; and (iv) Lender shall not be liable for any act
or omission by the Custodian selected by Lender with
reasonable care.
(b) TEMPORARY WITHDRAWAL OF COLLATERAL DOCUMENTS FOR CORRECTION.
Lender may, at its option and in its sole but reasonable
discretion, permit Borrower to withdraw, for a period not to
exceed ten (10) Business Days, specified Collateral Documents
for the purpose of correcting or completing such documents;
provided, however, that Borrower sign a Trust Receipt and the
Collateral Documents relating to only one (1) Pledged Mortgage
Loan shall be released to Borrower at any time.
Notwithstanding the foregoing, Lender shall be deemed to be in
possession of any Collateral Documents released pursuant to
this SECTION 6.4(B), and the security interest granted to
Lender in the related Pledged Mortgage Loan shall continued
unimpaired until the Collateral Documents are returned to, or
the proceeds thereof are received by, Lender.
(c) DELIVERY OF COLLATERAL DOCUMENTS TO INVESTORS. Upon the
written request of Borrower, Lender may, at its option and in
its sole but reasonable discretion, deliver to the Investor
set forth in the related Purchase Commitment, or its
custodian, the Collateral Documents relating to a specified
Pledged Mortgage Loan. All such Pledged Mortgage Loans and
11
the related Collateral Documents shall at all times be covered
by one or more Bailee Agreements, and Lender or its designee
will not release Collateral Documents to an Investor unless
Lender or its Custodian has received a signed Bailee Agreement
from the Investor. Notwithstanding the foregoing, Lender shall
be deemed to be in possession of any Collateral Documents
released pursuant to this SECTION 6.4(C), and the security
interest granted to Lender in the related Pledged Mortgage
Loan shall continued unimpaired until the Collateral Documents
are returned to, or proceeds thereof are received by, Lender.
If the Investor does not purchase a Pledged Mortgage Loan as
contemplated by the related Purchase Commitment, Borrower,
upon the request of Lender, shall assist Lender in the
recovery of any Collateral Documents not returned by the
Investor to Lender.
(d) DELIVERY OF COLLATERAL DOCUMENTS RELATING TO MORTGAGE-BACKED
SECURITIES. Upon the written request of Borrower, Lender may,
at its option and in its sole but reasonable discretion,
deliver to the certifying custodian the Collateral Documents
relating to those Pledged Mortgage Loans that will be pooled
to support a Mortgage-Backed Security. All such Pledged
Mortgage Loans and the related Collateral Documents shall at
all times by covered by a Bailee Agreement, and Lender or its
designee will not release Collateral Documents to a certifying
custodian unless Lender or its designee has received a signed
tri-party custodial agreement from such custodian, in a form
acceptable to Lender. Lender shall have no obligation to
release any Collateral Documents to any certifying custodian
that will not sign a custodial agreement acceptable to Lender.
Notwithstanding the foregoing, Lender shall be deemed to be in
possession of any Collateral Documents released pursuant to
this SECTION 6.4(D), and the security interest granted to
Lender in the related Pledged Mortgage Loan shall continued
unimpaired until the Collateral Documents are returned to, or
proceeds thereof are received by, Lender. Borrower shall pay
for all costs of the certifying custodian and use its best
efforts to ensure that the issuer delivers the Mortgage-Backed
Securities to the certifying custodian.
6.5 RELEASE OF COLLATERAL. Provided that no Event of Default or Potential
Default has occurred and is continuing, Borrower may redeem a Pledged
Mortgage Loan from pledge, by either:
(a) paying, or causing an Investor to pay, to Lender, subject to
SECTIONS 4.6 AND 4.7 above, an amount greater than or equal to
(i) the Collateral Value of the Pledged Mortgage Loan to be
released, but in no event less than the amount of the Advance
made with respect to such Mortgage Loan, plus (ii) accrued
interest relating to the Advance secured by such Mortgage
Loan, plus (iii) accrued fees relating to the Pledged Mortgage
Loan or the Advance secured by such Mortgage Loan; or
(b) delivering to Lender for pledge hereunder additional Mortgage
Loan(s) satisfactory to Lender and/or cash, in aggregate
amounts sufficient to cover the amount by which the aggregate
amount of Advances then outstanding hereunder (plus accrued
interest and accrued fees with respect thereto) exceeds the
Collateral Value of the existing Pledged Mortgage Loan(s),
excluding the Pledged Mortgage Loan(s) to be released.
Upon receipt of the applicable amount, as set forth above, Lender shall
deliver the related Collateral Documents to Borrower or Borrower's
designee, if such documents have not already been delivered pursuant to
a Bailee Agreement.
6.6 REPURCHASE TRANSACTIONS. Up and until the date that any Pledged
Mortgage Loan is required to be sold by Borrower to an Investor, Lender
may engage in repurchase transactions with respect to any or all of the
Pledged Mortgage Loans or otherwise pledge, hypothecate, assign,
transfer or convey any or all of the Pledged Mortgage Loans with a
counterparty of Lender's reasonable choice (such transactions, "Repo
Transactions"). In connection with any Repo Transaction, Borrower
hereby conveys legal title to the Pledged Mortgage Loans subject to
such transaction
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for the limited purpose of effecting such transaction. Lender agrees to
take all actions necessary to cause any Pledged Mortgage Loan subject
to a Repo Transaction to be free and clear of any liens, rights, or
obligations under such transaction on or prior to the date that such
loan is to be sold by Borrower to the related investor. All Repo
Transactions will occur without any additional obligations, costs or
fees to Borrower and such transactions shall not affect the obligations
of Lender under this Agreement, including without limitation, the
obligations to deliver Collateral to the related Investors. In
addition, Lender agrees to indemnify and hold harmless Borrower in the
event Lender breaches its obligations under this SECTION 6.6.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 INITIAL ADVANCE. As conditions precedent to Lender's obligation to make
the initial Advance hereunder:
(a) Borrower shall have delivered to Lender, in form and substance
satisfactory to Lender:
(i) this Agreement signed by Borrower;
(ii) the Commitment Letter signed by Borrower;
(iii) the Note signed by Borrower;
(iv) Reserved
(v) a Power of Attorney signed by Borrower;
(vi) a certified copy of Borrower's articles or
certificate of incorporation and bylaws (or
corresponding organizational documents if Borrower is
not a corporation) and a certificate of good standing
issued by the appropriate official in Borrower's
jurisdiction of organization, dated no less recently
than one (1) month prior to the date hereof;
(vii) a certificate of Borrower's corporate secretary,
substantially in the form of EXHIBIT H hereto, dated
as of the Effective Date, as to the incumbency and
authenticity of the signatures of the officers of
Borrower executing the Principal Agreements and the
resolutions of the board of directors of Borrower,
substantially in the form of EXHIBIT I hereto;
(viii) independently audited financial statements of
Borrower (and its Subsidiaries, on a consolidated
basis) for each of the two (2) fiscal years most
recently ended (if available), containing a balance
sheet and related statements of income, stockholders'
equity and cash flows, all prepared in accordance
with GAAP, applied on a basis consistent with prior
periods, and otherwise acceptable to Lender;
(ix) if more than six (6) months has passed since the
close of the most recently ended fiscal year, interim
financial statements of Borrower covering the period
from the first day of the current fiscal year to the
last day of the most recently ended month;
(x) Reserved
(xi) copies of Borrower's errors and omissions insurance
policy or mortgage impairment insurance policy and
blanket bond coverage policy or certificates of
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insurance for such policies, all in form and content
satisfactory to Lender, showing compliance by
Borrower with SECTION 9.10 below;
(xii) Reserved
(xiii) an Acknowledgement of Confidentiality of Password
Agreement;
(xiv) an Electronic Tracking Agreement - Warehouse Lender;
(xv) if required by Lender, an Amendment to Revolving
Credit and Security Agreement - Cashier Checks and
Funding Drafts; and -
(xvi) the initial Commitment Fee.
(b) Borrower shall provide Lender with any requested information
or documentation in order for Lender to file Uniform
Commercial Code Financial Statements (UCC-1) and/or such other
instruments as may be necessary to perfect the security
interest of Lender in the Collateral.
(c) Lender shall have satisfactorily completed its due diligence
review of Borrower's operations, business, financial condition
and underwriting and origination of Mortgage Loans.
7.2 ALL ADVANCES. As conditions precedent to Lender's obligation to make
any Advance hereunder, including the initial Advance:
(a) Borrower shall have delivered to Lender, in form and substance
satisfactory to Lender and not later than the Advance Request
Deadline:
(i) a Collateral Data Record for the Pledged Mortgage
Loan, which Collateral Data Record may be an
individual record or part of a group report and shall
be authenticated by Borrower with the PIN or the
handwritten signature of an authorized officer of
Borrower;
(ii) the Collateral Documents relating to the Pledged
Mortgage Loan, unless such Pledged Mortgage Loan is a
Wet Mortgage Loan;
(iii) a copy of a Purchase Commitment for the related
Pledged Mortgage Loan, unless the Commitment Letter
states otherwise;
(iv) written evidence that all Commitment Requirements
have been satisfied; and
(v) such other documents pertaining to the Advance as
Lender may reasonably request, from time to time.
(b) an amount equal to the Haircut plus the minimum required
balance, as set forth in SECTION 3.5(A), shall be on deposit
in the Over/Under Account;
(c) Borrower shall have paid all Commitment Fees that are due;
(d) Borrower shall have designated an Approved Payee, if
applicable, to whom such funds shall be delivered;
(e) the representations and warranties of Borrower set forth in
ARTICLE 8 hereof shall be true and correct in all material
respects as if made on and as of the date of each Advance;
14
(f) Borrower shall have performed all agreements to be performed
by them hereunder and under the Guaranty, respectively, and
after giving effect to the requested Advance, there shall
exist no Event of Default or Potential Default hereunder; and
(g) Borrower shall not have (i) incurred any material liabilities,
direct or contingent, other than in the ordinary course of its
business, since the dates of Borrower's most recent financial
statements theretofore delivered to Lender or (ii) experienced
any other material adverse change in its business or
operations.
7.3 INTERCREDITOR AGREEMENTS. Within sixty (60) calendar days following the
Effective Date, Borrower shall deliver to Lender an Intercreditor
Agreement, substantially in the form set forth in EXHIBIT M hereto,
signed by each creditor that provides warehouse lines of credit,
repurchase facilities or similar mortgage finance arrangements to
Borrower. If Borrower fails to do so, Borrower understands and agrees
that Lender may, in its sole discretion, determine that such failure
adversely affects the creditworthiness of Borrower and may modify the
terms and conditions under which it will continue to make Advances to
Borrower. Lender shall not be liable to Borrower for any costs, losses
or damages arising from or relating to any changes made by Lender to
the terms and conditions under which it will continue to make Advances
to Borrower.
7.4 SATISFACTION OF CONDITIONS. The making of any Advance prior to or
without the fulfillment by Borrower of all the conditions precedent
thereto, whether or not known to Lender, shall not constitute a waiver
by Lender of the requirements that all conditions, including the
non-performed conditions, shall be required to be satisfied with
respect to all Advances. All conditions precedent hereunder are imposed
solely and exclusively for the benefit of Lender and may be freely
waived or modified in whole or in part by Lender. Any waiver or
modification asserted by Borrower to have been agreed by Lender must be
in writing. Lender reserves the right to modify the terms and
conditions under which it will continue to make Advances to Borrower
based upon any change in the creditworthiness of Borrower or the
performance of Borrower under this Agreement. Lender shall not be
liable to Borrower for any costs, losses or damages arising from or
relating to any changes made by Lender to the terms and conditions
under which it will continue to make Advances to Borrower or Lender's
reasonable determination that Borrower has not satisfactorily complied
with any applicable condition precedent.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 REPRESENTATIONS AND WARRANTIES CONCERNING BORROWER. Borrower represents
and warrants to and covenants with Lender that the following are true
and correct as of the Effective Date through and until the date on
which all obligations of Borrower under this Agreement and the Note are
fully satisfied:
(a) DUE INCORPORATION AND GOOD STANDING. Borrower is duly
organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has the full
legal power and authority to own its property and to carry on
its business as currently conducted and is duly qualified to
do business and is in good standing in each jurisdiction in
which the transaction of its business makes such qualification
necessary.
(b) AUTHORIZATION. The execution, delivery and performance by
Borrower of the Principal Agreements and all other documents
and transactions contemplated thereby, are within Borrower's
corporate powers, have been duly authorized by all necessary
corporate action and do not constitute or will not result in
(i) a breach of any of the terms, conditions or provisions of
Borrower's articles or certificate of incorporation or bylaws
(or corresponding organizational documents if Borrower is not
a corporation); (ii) a material breach of any legal
restriction or any agreement or instrument to which Borrower
is now a party or by which it is bound; (iii) a material
default or an acceleration under any of the
15
foregoing; or (iv) the violation of any law, rule, regulation,
order, judgment or decree to which Borrower or its property is
subject.
(c) ENFORCEABLE OBLIGATION. The Principal Agreements and all other
documents contemplated thereby constitute legal, binding and
valid obligations of Borrower, enforceable in accordance with
their respective terms, except as limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditor's rights.
(d) APPROVALS. The execution and delivery of the Principal
Agreements and all other documents contemplated thereby and
the performance of Borrower's obligations thereunder do not
require any license, consent, approval, authorization or other
action of any Person, including any state, federal,
governmental or regulatory authority, or if required, such
license, consent, approval, authorization or other action has
been obtained prior to the Effective Date.
(e) COMPLIANCE WITH LAWS. Borrower is not in violation of any
provision of any law, or of any judgment, award, rule,
regulation, order, decree, writ or injunction of any court or
public regulatory body or authority that might have a material
adverse effect on the business, operations, assets or
financial condition of Borrower.
(f) FINANCIAL CONDITION. All financial statements of Borrower and
each Guarantor delivered to Lender fairly and accurately
present the financial condition of the parties for whom such
statements are submitted. The financial statements of Borrower
have been prepared in accordance with GAAP consistently
applied throughout the periods involved, and there are no
contingent liabilities not disclosed thereby that would
adversely affect the financial condition of Borrower. Since
the close of the period covered by the latest financial
statement delivered to Lender with respect to Borrower, there
has been no material adverse change in the assets, liabilities
or financial condition of Borrower nor is Borrower aware of
any facts that, with or without notice or lapse of time or
both, would or could result in any such material adverse
change. No event has occurred, including, without limitation,
any litigation or administrative proceedings, and no condition
exists or, to the knowledge of Borrower, is threatened, that
(i) might render Borrower unable to perform its obligations
under the Principal Agreements and all other documents
contemplated thereby; (ii) would constitute a Potential
Default or Event of Default; or (iii) might adversely affect
the financial condition of Borrower or the validity, priority
or enforceability of the Principal Agreements or any other
documents contemplated thereby.
(g) OTHER CREDIT FACILITIES. The only other credit facilities,
including repurchase agreements for mortgage loans and
mortgage-backed securities, of Borrower that are presently in
effect and are secured by mortgage loans or provide for the
purchase, repurchase or early funding of mortgage loan sales,
are with Persons disclosed to Lender at the time of
application, or thereafter disclosed to and approved by
Lender, that have executed and delivered an Intercreditor
Agreement (or will execute and deliver an Intercreditor
Agreement within sixty (60) days following the Effective Date
in accordance with SECTION 7.3) or warehouse lenders that are
Approved Payees.
(h) TITLE TO ASSETS. Borrower has good, valid, insurable (in the
case of real property) and marketable title to all of its
properties and other assets, whether real or personal,
tangible or intangible, reflected on the financial statements
delivered to Lender with respect to Borrower, except for such
properties and other assets that have been disposed of in the
ordinary course of business, and all such properties and other
assets are free and clear of all liens except as disclosed in
such financial statements.
(i) SOLVENCY. Borrower is solvent and will not take any action
that constitutes an act, or would give rise to an event, of
insolvency after giving effect to the transactions
contemplated by the Principal Agreements, and Borrower, after
giving effect to the
16
transactions contemplated by the Principal Agreements, will
have an adequate amount of capital to conduct its business in
the foreseeable future.
(j) LITIGATION. There are no actions, claims, suits or proceedings
pending, or to the knowledge of Borrower, threatened or
reasonably anticipated against or affecting Borrower in any
court or before any arbitrator, government commission, board,
bureau or other administrative agency that, if adversely
determined, may reasonably be expected to result in any
material and adverse change in the business, operations,
assets, licenses, qualifications or financial condition of
Borrower.
(k) PAYMENT OF TAXES. Borrower has filed all tax returns and
reports required to be filed and has paid all taxes,
assessments, fees and other governmental charges levied upon
it or its property or income that are due and payable,
including interest and penalties, or has provided adequate
reserves for the payment thereof.
(l) NO DEFAULTS. Borrower is not in default under any indenture,
mortgage, deed of trust, agreement or other instrument or
contractual or legal obligation to which it is a party or by
which it is bound.
(m) ERISA. Borrower is in compliance in all material respects with
the requirements of ERISA, and no Reportable Event has
occurred under any Plan maintained by Borrower.
(n) APPROVED MORTGAGEE. Borrower is an approved FHA, VA, GNMA,
FNMA and/or FHLMC seller, mortgagee and/or servicer, as
represented in the Lender's Customer Profile and Application,
and is in good standing with these agencies.
(o) TRUE AND COMPLETE DISCLOSURE. Borrower has made full
disclosure to Lender of all information that could adversely
affect the execution, delivery and performance by Borrower of
its obligations under the Principal Agreements. All
information furnished to Lender by or on behalf of Borrower in
connection with the Principal Agreements or any transaction
contemplated thereby, including, without limitation, all
information set forth in the Credit Application, was true,
accurate and complete in all material respects on the date
furnished, and there has been no material adverse change in
the condition, financial or otherwise, of Borrower from the
time such information was provided to Lender.
(p) PRIORITY OF LIENS. Borrower owns all Pledged Mortgage Loans,
and Lender shall have, and this Agreement creates in favor of
Lender, a valid, enforceable, perfected first priority lien
and security interest in the Pledged Mortgage Loans and other
Collateral, prior to the rights of all third Persons and
subject to no other liens.
(q) INVESTMENT COMPANY ACT. Borrower is not an "investment
company" or a company controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
(r) SUBSIDIARIES. Borrower has no Subsidiaries.
8.2 REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. Borrower
represents and warrants to and covenants with Lender that the following
are true and correct with respect to each Pledged Mortgage Loan as of
the related Advance Date through and until the date on which such
Pledged Mortgage Loan is released as Collateral by Lender:
(a) ELIGIBLE LOAN. The Mortgage Loan is a Conventional Conforming
Mortgage Loan, Government Mortgage Loan, Jumbo Mortgage Loan,
Super Jumbo Mortgage Loan, Expanded Criteria Mortgage Loan,
Subprime Mortgage Loan, Closed-End Second Lien Mortgage Loan,
HELOC Mortgage Loan or Nonperforming/Subperforming Mortgage
Loan, as applicable. The Mortgage Loan is a legal, valid and
binding obligation of the
17
Mortgagor thereunder, enforceable in accordance with its terms
and subject to no offset, defense or counterclaim, obligating
Mortgagor to make the payments specified therein.
(b) PURCHASE COMMITMENT. Unless otherwise stated in the Commitment
Letter, the Mortgage Loan is covered by a Purchase Commitment
that permits assignment thereof to Lender, does not exceed the
availability under such Purchase Commitment, conforms to the
requirements and specifications set forth in such Purchase
Commitment and the related regulations, rules, requirements
and/or handbooks of the applicable Investor and is eligible
for sale to and insurance or guaranty by, respectively, the
applicable Investor and any applicable Insurer.
(c) COLLATERAL DATA RECORD. The information contained in the
Collateral Data Record is true, correct and complete.
(d) ORIGINATION AND SERVICING. The Mortgage Loan has been
originated and serviced in material compliance with all
industry standards, applicable Investor and Insurer
requirements and all applicable federal, state and local
statutes, regulations and rules, including, without
limitation, the Federal Truth-in-Lending Act of 1968, as
amended, and Regulation Z thereunder, the Federal Fair Credit
Reporting Act, the Federal Equal Credit Opportunity Act, the
Federal Real Estate Settlement Procedures Act of 1974, as
amended, and Regulation X thereunder, and all applicable
usury, licensing, real property, consumer protection and other
laws.
(e) MORTGAGE LOAN DOCUMENTS. The Mortgage Loan is evidenced by
instruments acceptable to FHA, VA, FNMA, FHLMC or the
Investor, as applicable, given the type of Mortgage Loan. The
Collateral Documents and other mortgage loan documents have
been duly executed and delivered by the Mortgagor and create
valid and legally binding obligations of the Mortgagor,
enforceable in accordance with their terms, except as may be
limited by bankruptcy or other laws affecting the enforcement
of creditor's rights generally, and there are no rights of
rescission, set-offs, counterclaims or other defenses with
respect thereto.
(f) LIEN POSITION. The Mortgage Loan is secured by a valid first
priority lien on the Mortgaged Property under the laws of the
state where the related mortgaged property in located;
provided, however, that if the Mortgage Loan is a Closed-End
Second Lien Mortgage Loan or HELOC Mortgage Loan, it is
secured by a valid second lien on the Mortgaged Property.
(g) NO FUTURE ADVANCES. The full original principal amount of each
Mortgage Loan, net of any discounts, has been fully advanced
or disbursed to the Mortgagor named therein, unless otherwise
expressly agreed by the parties in writing. There is no
requirement for future advances and any and all requirements
as to completion of any on-site or off-site improvements and
as to disbursements of any escrow funds therefor have been
satisfied.
(h) NO DEFAULT. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the related
Mortgage Note, and no event has occurred that, with the
passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation
or event of acceleration. Borrower has not waived any default,
breach, violation or event of acceleration.
(i) NO WAIVER. The terms of the Mortgage Loan have not been
waived, impaired, changed or modified, except to the extent
such amendment or modification has been disclosed to Lender in
writing and does not affect the salability of the Mortgage
Loan pursuant to the applicable Purchase Commitment.
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(j) TAXES AND INSURANCE. All taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents that previously became due
and owing have been paid or a escrow of funds has been
established in an amount sufficient to pay for every such item
that remains unpaid.
(k) PRIVATE MORTGAGE INSURANCE. Each Conventional Conforming
Mortgage Loan is insured by a policy of private mortgage
insurance in the amount required by FNMA or FHLMC, as
applicable, and by an Insurer and all provisions of such
private mortgage insurance policy have been and are being
complied with, such policy is in full force and effect and all
premiums due thereunder have been paid. There are no defenses,
counterclaims or rights of setoff affecting the Conventional
Conforming Mortgage Loan or affecting the validity or
enforceability of any private mortgage insurance applicable to
such Mortgage Loan.
(l) GOVERNMENT MORTGAGE LOANS. If the Mortgage Loan is represented
by Borrower to have, or to be eligible for, FHA insurance,
such Mortgage Loan is insured, or eligible to be insured,
pursuant to the National Housing Act. If the Mortgage Loan is
represented by Borrower to be guaranteed, or to be eligible
for guarantee, by the VA, such Mortgage Loan is guaranteed, or
eligible to be guaranteed, under the provisions of Chapter 37
of Title 38 of the United States Code. As to each FHA
insurance certificate or each VA guaranty certificate,
Borrower has complied with applicable provisions of the
insurance for guaranty contract and federal statutes and
regulations, all premiums or other charges due in connection
with such insurance or guarantee have been paid, there has
been no act or omission that would or may invalidate any such
insurance or guaranty, and the insurance or guaranty is, or
when issued, will be in full force and effect with respect to
such Government Mortgage Loan. There are no defenses,
counterclaims or rights of setoff affecting the Government
Mortgage Loan or affecting the validity or enforceability of
the FHA insurance or VA guaranty applicable to such Mortgage
Loan.
(m) HAZARD INSURANCE. The Mortgage Loan is covered by a policy of
hazard insurance, flood insurance and insurance against other
insurable risks and hazards as required by the applicable
Investor and the agreements applicable to such Mortgage Loan,
in amounts not less than the outstanding principal balance of
the Mortgage Loan or such maximum lesser amount as permitted
by the applicable Investor and applicable law, all in a form
usual and customary in the industry and that is in full force
and effect, and all amounts required to have been paid under
any such policy have been paid.
(n) TITLE INSURANCE. A valid and enforceable title insurance
policy has been issued or a commitment to issue such title
insurance policy has been obtained for the Mortgage Loan in an
amount not less than the original principal amount of such
Mortgage Loan, which title insurance policy insures that the
Mortgage relating thereto is a valid first lien or second
lien, as applicable, on the property therein described and
that the mortgaged property is free and clear of all
encumbrances and liens having priority over the first lien of
the Mortgage (unless the Mortgage Loan is a Closed-End Second
Lien Mortgage Loan or HELOC Mortgage Loan) and otherwise in
compliance with the requirements of the applicable Investor.
The title insurance company that issued the applicable Closing
Protection Letter has also issued or has committed to issue
the title insurance policy.
(o) ASSIGNMENT. The Assignment (i) has been duly authorized by all
necessary corporate action by Borrower, duly executed and
delivered by Borrower and is the legal, valid and binding
obligation of Borrower enforceable in accordance with its
terms, and (ii) complies with all applicable laws including
all applicable recording, filing and registration laws and
regulations and is adequate and legally sufficient for the
purpose intended to be accomplished thereby, including,
without limitation, the assignment of all of the rights,
powers and benefits of Borrower as mortgagee.
19
(p) NO FRAUD. No error, omission, misrepresentation, negligence,
fraud or similar occurrence has taken place with respect to
the Mortgage Loan on the part of any person, including,
without limitation, the Mortgagor, any appraiser, any builder
or developer or any other party involved in the origination of
the Mortgage Loan or in the application of any insurance in
relation to such Mortgage Loan.
8.3 CONTINUING REPRESENTATIONS AND WARRANTIES. By submitting a Collateral
Data Record hereunder, Borrower shall be deemed to have represented and
warranted the truthfulness and completeness of the statements set forth
in SECTIONS 8.1 AND 8.2.
ARTICLE 9
AFFIRMATIVE COVENANTS
Borrower hereby covenants and agrees with Lender that during the term of this
Agreement and for so long as there remain any obligations of Borrower to be paid
or performed under the Principal Agreements:
9.1 PAYMENT OF NOTE. Borrower shall pay or cause to be paid the principal,
interest and all other amounts due and payable hereunder and under the
Note in accordance with the terms hereof and thereof.
9.2 FINANCIAL STATEMENTS AND OTHER REPORTS.
(a) INTERIM STATEMENTS. Borrower shall deliver to Lender, within
thirty (30) days after the end of each period indicated in the
Commitment Letter, financial statements of Borrower, including
statements of income and changes in shareholders' equity for
the period from the beginning of such fiscal year to the end
of such month or quarter, as required in the Commitment
Letter, and the related balance sheet as of the end of such
month or quarter, as required in the Commitment Letter, all in
reasonable detail and certified by the chief financial officer
of Borrower, subject, however, to year-end audit adjustments;
(b) ANNUAL STATEMENTS. Borrower shall deliver to Lender, within
ninety (90) days after the end of each fiscal year of
Borrower, audited financial statements of Borrower, including
statements of income and changes in shareholders' equity for
such fiscal year and the related balance sheet as at the end
of such fiscal year, all in reasonable detail and accompanied
by an opinion of a certified public accounting firm reasonably
satisfactory to Lender including a management representation
letter signed by the chief financial officer of Borrower
stating that the financial statements fairly present the
financial condition and results of operations of Borrower as
of the end of, and for, such year;
(c) OFFICER'S CERTIFICATE. Together with the financial statements
required to be delivered pursuant to SECTIONS 9.2(A) AND (B),
Borrower shall deliver to Lender an officer's certificate
substantially in the form of EXHIBIT J hereto;
(d) Reserved
(e) HEDGING REPORT. Borrower shall deliver to Lender, not later
than 10:00 a.m., Pacific time, on each Monday, or Tuesday if
Monday is not a Business Day, or as reasonably requested by
Lender, a reconciliation report, in a form reasonably
satisfactory to Lender, including, without limitation, all
outstanding Advances, related Purchase Commitments,
availability under unused Purchase Commitments and all amounts
outstanding and available under other warehouse lines of
credit; and
(f) OTHER REPORTS. Borrower shall deliver to Lender, within thirty
(30) days of filing or receipt (i) copies of all regular or
periodic financial or other reports, if any, that Borrower
files with any governmental, regulatory or other agency and
(ii) copies of all audits, examinations
20
and reports concerning the operations of Borrower from any
Investor, Insurer or licensing authority. Borrower shall also
deliver to Lender, with reasonable promptness, copies of such
other reports in respect of the Pledged Mortgage Loans and
such further information regarding the business, operations,
properties or financial condition of Borrower, in such detail
and at such times as Lender, in its reasonable discretion, may
request. Borrower understands and agrees that all reports and
information provided to Lender by or relating to Borrower may
be disclosed to Lender's Affiliates.
9.3 INSPECTION OF PROPERTIES AND BOOKS. Borrower shall keep accurate and
complete records of the Pledged Mortgage Loans. Borrower shall permit
authorized representatives of Lender to discuss the business,
operations, assets and financial condition of Borrower with its
officers and employees and to examine its books of account and make
copies and/or extracts thereof, upon reasonable notice to Borrower at
Borrower's place of business during normal business hours. Borrower
will provide its accountants with a copy of this Agreement promptly
after the execution hereof and will instruct its accountants to answer
candidly and fully any and all questions that any authorized
representative of Lender may address to them in reference to the
financial condition or affairs of Borrower. Borrower may have its
representatives in attendance at any meetings between the officers or
other representatives of Lender and Borrower's accountants held in
accordance with this authorization.
9.4 NOTICE. Borrower shall give Lender prompt written notice, in reasonable
detail, of:
(a) any and all changes to the information set forth in the Credit
Application;
(b) any action, suit or proceeding instituted by or against
Borrower in any federal or state court or before any
commission or other regulatory body (federal, state or local,
foreign or domestic), or any such action, suit or proceeding
threatened against Borrower that, if adversely determined may
reasonably be expected to result in a material and adverse
change to the business, operations, assets, licenses,
qualifications or financial condition of Borrower;
(c) the filing, recording or assessment of any federal, state or
local tax lien against it, or any of its assets;
(d) the occurrence of any Potential Default or Event of Default;
(e) the actual or threatened suspension, revocation or termination
of Borrower's licensing or eligibility, in any respect, as an
approved, licensed lender, seller, mortgagee or servicer;
(f) the suspension, revocation or termination of any existing
credit or investor relationship to facilitate the sale and/or
origination of residential mortgage loans;
(g) any demand by an Investor or Insurer for the repurchase of a
mortgage loan or indemnification in the aggregate in excess of
six hundred and fifty thousand ($650,000) dollars;
(h) any potential or existing Pledged Mortgage Loan where a
director, officer or other employee of Borrower is the
Mortgagor or guarantor or where the related Mortgaged Property
is being sold by a director, officer or other employee of
Borrower;
(i) any Pledged Mortgage Loan ceases to be eligible Collateral for
the security of the Advances;
(j) any Investor that threatens to set-off amounts owed by
Borrower to such Investor against Pledged Mortgage Loans;
21
(k) any change in the Executive Management of Borrower; and
(l) any other action, event or condition of any nature that may
lead to or result in a material adverse effect on the
business, operations, assets or financial condition of
Borrower or that, without notice or lapse of time or both,
would constitute a default under any agreement, instrument or
indenture to which Borrower is a party or to which Borrower,
its properties or assets may be subject.
9.5 ADDITIONAL FINANCING. If Borrower intends to enter into any financing
or repurchase arrangement, Borrower shall notify Lender not fewer than
fifteen (15) Business Days prior to the execution of such arrangement,
and Lender shall have the right to approve or disapprove such
arrangement, in its sole and absolute discretion, Borrower does not
need to obtain Lender's prior written approval to add financing or
repurchase agreement if the reason Borrower is adding such additional
financing or repurchase agreement is due to Lender's reduction of the
Aggregate Credit Limit pursuant to Section 2.2.
9.6 SERVICING OF MORTGAGE LOANS. Subject to SECTION 6.2 above, Borrower
shall service all Pledged Mortgage Loans at Borrower's expense and
without charge of any kind to Lender. Borrower may delegate its
obligations hereunder to service the Pledged Mortgage Loans (subject to
SECTION 6.2) to an independent servicer satisfactory to Lender pursuant
to a servicing agreement approved in writing by Lender. In any event,
Borrower or its delegate shall service such Pledged Mortgage Loans with
the degree of care and in accordance with the servicing standards
generally prevailing in the industry, including those required by FNMA,
FHLMC and GNMA.
9.7 EVIDENCE OF COLLATERAL. Borrower shall indicate on its computer records
that each Pledged Mortgage Loan has been included in the Collateral
and, at the request of Lender, place on each of its written records
pertaining to the Pledged Mortgage Loans a legend, in form and content
satisfactory to Lender, indicating that such Pledged Mortgage Loan has
been assigned to Lender.
9.8 PROTECTION OF SECURITY. Borrower shall allow Lender (a) to inspect any
Mortgaged Property relating to a Pledged Mortgage Loan; (b) to appear
in or intervene in any proceeding or matter affecting any Pledged
Mortgage Loan or other Collateral or the value thereof; (c) to
initiate, commence, appear in and defend any foreclosure, action,
bankruptcy or proceeding which could affect the security of the
Collateral or the value thereof, or the rights and powers of Lender;
(d) to contest by litigation or otherwise any lien asserted against the
Pledged Mortgage Loans or other Collateral or against the related
Mortgaged Property, the improvements, or the personal property
identified therein; and/or (e) to make payments on account of such
encumbrances, charges, or liens and to service any assigned Mortgage
Loan and take any action it may deem appropriate to collect any
Collateral or any part thereof or to enforce any rights with respect
thereto. All costs and expenses, including attorneys' fees (including,
but not limited to, those incurred on appeal), that Lender may incur
with respect to any of the foregoing and any expenditures it may make
to protect or preserve the Collateral or the rights of Lender, shall be
for the account of Borrower. Borrower shall repay the same to Lender
upon demand with interest, at the Default Rate, from the date any such
expenditure shall have been made until it is repaid.
9.9 FURTHER ASSURANCES. Borrower shall, at its expense, promptly procure,
execute and deliver to Lender, upon request, all such other and further
documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements of Borrower in this
Agreement.
9.10 FIDELITY BONDS AND INSURANCE. Borrower shall maintain an insurance
policy, in a form and substance satisfactory to Lender, covering
against loss or damage relating to or resulting from any breach of
fidelity by Borrower, or any officer, director, employee or agent of
Borrower, any loss or destruction of documents (whether written or
electronic), fraud, theft, misappropriation and errors and omissions.
This policy shall name Lender as insured and loss payee and provide
coverage in an amount equal to the greater of three hundred thousand
dollars ($300,000) or that
22
required by FNMA in Section 1.01 of the FNMA Guaranteed Mortgage Backed
Securities Sellers' and Servicers' Guide, whichever is greater. The
deductible on such insurance policy shall not exceed ten thousand
dollars ($10,000). Following approval by Lender of a specific insurance
policy, Borrower shall not amend, cancel, suspend or otherwise change
such policy without the prior written consent of Lender.
9.11 WET MORTGAGE LOANS. In connection with the funding of each Wet Mortgage
Loan, Borrower shall provide to the applicable Closing Agent, in
addition to the Irrevocable Closing Instructions, final closing
instructions, which shall, without limitation, make reference to the
Irrevocable Closing Instructions and stipulate the title insurance
company that will be issuing the applicable title insurance policy and
Closing Protection Letter; provided, however, that Borrower shall not
use these final closing instructions to modify or attempt to modify the
terms of the Irrevocable Closing Instructions unless such modifications
are agreed to in advance and in writing by Lender. Borrower shall not
otherwise modify or attempt to modify the terms of the Irrevocable
Closing Instructions without Lender's prior written approval. If the
Closing Agent is not a title insurance company, Borrower shall also (a)
confirm that the closing is covered by a blanket Closing Protection
Letter issued to Lender by the title insurance company stipulated in
the final closing instructions; or (b) provide to Lender (1) a Closing
Protection Letter covering the closing issued to Borrower by the title
insurance company stipulated in the final closing instructions and (2)
an Assignment of Closing Protection Letter relating to the above
referenced Closing Protection Letter naming Lender as the assignee.
ARTICLE 10
NEGATIVE COVENANTS
Borrower hereby covenants and agrees with Lender that during the term of this
Agreement and for so long as there remain any obligations of Borrower to be paid
or performed under this Agreement or under the Note, Borrower shall comply with
the following:
10.1 LIABILITIES AND ADVANCES. Borrower shall not lend money or credit or
make any advances to any Person or acquire any stock, obligations or
securities of, or any interest in, or make any capital contribution to
any other Person in an amount greater than five hundred thousand
($500,000) dollars, except for Mortgage Loans or other loans extended
in the ordinary course of Borrower's mortgage banking business;
provided, however, that notwithstanding the foregoing, Borrower shall
be entitled to make a loan or provide credit to, or acquire the stock
of or provide capital contributions to, any Affiliate of Borrower
provided that such loan, credit, stock acquisition or capital
contribution, whether in the aggregate or on an individual basis, does
not cause an Event of Default. Borrower shall not, either directly or
indirectly, without the prior written consent of Lender, assume,
guarantee, endorse, or otherwise become liable for the obligation of
any Person except by endorsement of negotiable instruments for deposit
or collection in the ordinary course of business.
10.2 DEFERRAL OF SUBORDINATED DEBT. Borrower shall not, either directly or
indirectly, without the prior written consent of Lender, pay in advance
of the stated maturity thereof any Subordinated Debt of Borrower or, if
an Event of Default hereunder shall have occurred, make any payment of
any kind thereafter on such Subordinated Debt until all obligations of
Borrower hereunder and under the Note have been paid and performed in
full.
10.3 LOSS OF ELIGIBILITY. Borrower shall not, either directly or indirectly,
without the prior written consent of Lender, take, or fail to take, any
action that would cause Borrower to lose all or any part of its status
as an eligible lender, seller, mortgagee or servicer or willfully
terminate its status as an eligible lender, seller, mortgagee or
servicer without forty-five (45) days notice to Lender.
10.4 TANGIBLE NET WORTH; LIQUIDITY; FINANCIAL RATIOS. Borrower shall not
permit, at any time, its Tangible Net Worth and Liquidity to be less
than the amounts specified in the Commitment Letter.
23
Further, Borrower shall not permit, at any time, any Financial Ratios
as may be set forth in the Commitment Letter to be less than the
requirements therein.
10.5 LOANS TO OFFICERS, EMPLOYEES AND SHAREHOLDERS. Borrower shall not,
either directly or indirectly, without the prior written consent of
Lender, make any personal loans or advances to any officers, employees
or shareholders in an aggregate amount exceeding five hundred thousand
($500,000) dollars.
10.6 LIENS. Borrower shall not create, incur, assume or suffer to exist any
lien upon the Pledged Mortgage Loans or other Collateral, other than as
granter to Lender herein, or create, incur, assume or suffer any lien
upon any of its other property and assets other than:
(a) liens for taxes not yet due or taxes being contested in good
faith and by appropriate proceedings for which adequate
reserves have been established; or
(b) liens in favor of FNMA, GNMA or FHLMC on the right of Borrower
to service Mortgage Loans sold to Agencies.
10.7 INDEBTEDNESS. Borrower shall not create, incur, assume or suffer to
exist or otherwise become or be liable in respect of any Debt in an
amount greater than two hundred fifty thousand $250,000) dollars except
for:
(a) the Advances hereunder and any other Debt to Lender;
(b) Debt disclosed on the financial statements furnished to Lender
prior to the Effective Date;
(c) Subordinated Debt;
(d) trade debt incurred in the ordinary course of business, paid
within thirty (30) calendar days after the same has become due
and payable or that is being contested in good faith, provided
provision is made to the satisfaction of Lender for the
eventual payment thereof in the event it is found that such
contested trade debt is payable by Borrower; and
(e) Debt secured by liens permitted under SECTION 10.6 above.
10.8 CONSOLIDATION, MERGER AND SALE OF ASSETS. Borrower shall not (a) wind
up, liquidate or dissolve its affairs; (b) enter into any transaction
of merger or consolidation; or (c) convey, sell, lease or otherwise
dispose of, or agree to do any of the foregoing at any future time, all
or any part of its property or assets, without prior written approval
of Lender, except that Borrower may, in the ordinary course of
business, sell equipment that is uneconomic or obsolete and acquire
Mortgage Loans for resale and sell Mortgage Loans.
10.9 PAYMENT OF DIVIDENDS AND RETIREMENT OF STOCK. If a Potential Default or
Event of Default has occurred and is continuing or will occur as a
result thereof, Borrower shall not, without the prior written consent
of Lender, (a) declare or pay any dividends upon its shares of stock
now or hereafter outstanding, except dividends payable in the capital
stock of Borrower, or make any distribution of assets to its
shareholders, whether in cash, property or securities, or (b) acquire,
purchase, redeem or retire shares of its capital stock now or hereafter
outstanding for value.
10.10 COLLATERAL. Borrower shall not:
(a) amend or modify, or waive any of the terms and conditions of,
or settle or compromise any claim in respect of, any Pledged
Mortgage Loan; or
24
(b) sell, assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge or otherwise encumber
(except pursuant to this Agreement) any of the Pledged
Mortgage Loans or other Collateral or any interest therein.
10.11 SECONDARY MARKETING, UNDERWRITING, THIRD PARTY ORIGINATION AND INTEREST
RATE RISK MANAGEMENT PRACTICES. Borrower shall not, without the prior
written approval of Lender, change any secondary marketing,
underwriting, third party origination and interest rate risk management
practices of Borrower that exist as of the date hereof. The fact that
Borrower may from time to time disclose to Lender in writing proposed
changes in such practices after the date hereof shall not be deemed
Lender's consent to or written approval thereof unless a duly
authorized Lender has indicated written approval of such changes and it
shall be deemed an Event of Default if Borrower has failed to obtain
such written approval prior to implementation of such changes.
ARTICLE 11
DEFAULTS AND REMEDIES
11.1 EVENTS OF DEFAULT. The occurrence of any of the following conditions or
events shall be an Event of Default:
(a) failure of Borrower to pay any principal, interest or other
amount due under the Principal Agreements within two (2)
Business Days following the applicable due date;
(b) breach or default by Borrower with respect to any other
material term of any other indebtedness or of any loan
agreement, note, mortgage, security agreement, indenture,
guaranty or other agreement to which Borrower is a party or by
which it is bound, if the effect of such failure, default or
breach is to cause, or to permit any holder thereof to cause,
indebtedness of Borrower in the aggregate amount of two
hundred fifty thousand ($250,000) dollars or more to become or
be declared due prior to its stated maturity;
(c) the aggregate original Collateral Value of those Pledged
Mortgage Loans that are deemed to be Noncompliant Mortgage
Loans is greater than or equal to the Tranche J Sublimit;
(d) three (3) or more Pledged Mortgage Loans are deemed to be
Defective Mortgage Loans or the aggregate original Collateral
Value of those Pledged Mortgage Loans that are deemed to be
Defective Mortgage Loans is five hundred thousand ($500,000)
dollars ;
(e) any of Borrower's representations or warranties made in
SECTION 8.1 or in any statement or certificate at any time
given by Borrower in writing pursuant hereto or in connection
herewith shall be false in any material respect on the date as
of which made and such default shall not have been remedied
within three (3) Business Days after receipt of notice from
Lender to do so;
(f) Borrower shall default (i) in the performance of or compliance
with any term contained in ARTICLES 9 AND 10 of this Agreement
or referred to in SECTIONS 11.1(A) THROUGH (E) above; or (ii)
in the performance of or compliance of any other provision of
this Agreement and such default shall not have been remedied
within thirty (30) days after receipt of notice from the
Lender of such default;
(g) an Insolvency Event shall have occurred with respect to
Borrower or any Guarantor; or
(h) one or more judgments or decrees shall be entered against
Borrower involving a liability of $500,000 or more, and all
such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within thirty (30)
days after entry thereof;
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(i) any Plan maintained by Borrower or any subsidiary of Borrower
shall be terminated within the meaning of Title IV of ERISA or
a trustee shall be appointed by an appropriate United States
District Court to administer any Plan, or the Pension Benefit
Guaranty Corporation (or any successor thereto) shall
institute proceedings to terminate any Plan or to appoint a
trustee to administer any Plan if as of the date thereof
Borrower's liability or any such subsidiary's liability (after
giving effect to the tax consequences thereof) to the Pension
Benefit Guaranty Corporation (or any successor thereto) for
unfunded guaranteed vested benefits under the Plan exceeds the
then current value of assets accumulated in such Plan by more
than $250,000 (or in the case of a termination involving
Borrower as a "substantial employer" (as defined in Section
4001(a)(2) of ERISA) the withdrawing employer's proportionate
share of such excess shall exceed such amount);
(j) Borrower as employer under a Plan that is a multiemployer plan
shall have made a complete or partial withdrawal from such
Plan and the plan sponsor of such Plan shall have notified
such withdrawing employer that such employer has incurred a
withdrawal liability in an annual amount exceeding fifty
thousand dollars ($250,000); or
(k) Borrower shall purport to disavow its obligations hereunder or
shall contest the validity or enforceability of the Principal
Agreements or Lender's security interest in any Pledged
Mortgage Loan or other Collateral; or
With respect to any Event of Default which requires a determination to
be made as to whether such Event of Default has occurred, such
determination shall be made in Lender's sole and reasonable discretion
and Borrower hereby agrees to be bound by and comply with any such
determination by Lender.
11.2 REMEDIES. Upon the occurrence of an Event of Default, Lender may, by
written notice to Borrower declare all or any portion of the Advances
to be due and payable whereupon the same shall become due and payable,
together with all accrued interest thereon, and the obligation of
Lender to make Advances shall thereupon terminate. Further, it is
understood and agreed that upon the occurrence of an Event of Default,
Borrower shall strictly comply with the negative covenants contained in
Article 10 hereunder and in no event shall Borrower declare and pay any
dividends, incur additional debt, make payments on existing debt or
otherwise distribute or transfer any of Borrower's property and assets
to any Person without the prior written consent of Lender. Upon the
occurrence of any Event of Default, Lender may also:
(a) enter the office(s) of Borrower and take possession of any of
the Collateral including any records that pertain to the
Collateral;
(b) foreclose upon or otherwise enforce its security interest in
and lien on all of the Collateral or on any portion thereof to
secure all payments and performance of obligations owed by
Borrower under this Agreement;
(c) communicate with and notify Mortgagors of the Pledged Mortgage
Loans and obligors under other Collateral or on any portion
thereof, whether such communications and notifications are in
verbal, written or electronic form, including, without
limitation, communications and notifications that the
Collateral has been assigned to Lender and that all payments
thereon are to be made directly to Lender or its designee;
settle compromise, or release, in whole or in part, any
amounts owing on the Pledged Mortgage Loans or other
Collateral or any portion of the Collateral, on terms
acceptable to Lender; enforce payment and prosecute any action
or proceeding with respect to any and all Collateral; and
where any Pledged Mortgage Loans or other Collateral is in
default, foreclose upon and enforce security interests in,
such Collateral by any available judicial procedure or without
judicial process and sell property acquired as a result of any
such foreclosure;
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(d) collect payments from Mortgagors and/or assume servicing of,
or contract with a third party to service, any or all Pledged
Mortgage Loans requiring servicing and/or perform any
obligations required in connection with Purchase Commitments,
such third party's fees to be paid by Borrower. In connection
with collecting payments from Mortgagors and/or assuming
servicing of any or all Pledged Mortgage Loans, Lender may
take possession of and open any mail addressed to Borrower,
remove, collect and apply all payments for Borrower, sign
Borrower's name to any receipts, checks, notes, agreements or
other instruments or letters or appoint an agent to exercise
and perform any of these rights;
(e) exercise all rights and remedies of a secured creditor under
the Uniform Commercial Code of the State of California and/or
the state in which Borrower's principal place of business is
located, including but not limited to selling the Collateral
at public or private sale. Lender shall give Borrower not less
than ten (10) days' notice of any such public sale or of the
date after which private sale may be held. Borrower agrees
that ten (10) days' notice shall be reasonable notice. At any
such sale, the Collateral may be sold as an entirety or in
separate parts, as Lender may determine. Lender may, without
notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same
may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the
Collateral so sold may be retained by Lender until the selling
price is paid by the purchaser thereof, but Lender shall not
incur any liability in case of the failure of such purchaser
to take up and pay for the Collateral so sold and, in case of
any such failure, such Collateral may again be sold upon like
notice. Lender shall have the right upon any such public sale
or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of
said Collateral so sold, free of any right or equity of
redemption, which equity of redemption Borrower hereby
releases. Lender may, however, instead of exercising the power
of sale herein conferred upon it, proceed by a suit or suits
at law or in equity to collect all amounts due upon all or any
portion of the Collateral or to foreclose the pledge and sell
all or any portion of the Collateral under a judgment or
decree of a court or courts of competent jurisdiction, or
both.
(f) proceed against Borrower on the Note or against the Guarantors
under the Guaranty or both; and/or
(g) pursue any rights and/or remedies available at law or in
equity against Borrower or the Guarantors or both.
11.3 SALE OF COLLATERAL. Following an Event of Default, Lender may
securitize or otherwise sell the Collateral and Lender shall incur no
liability as a result of such transaction. For the avoidance of doubt,
Lender may sell the Collateral as part of a pool comprised of, all or
part of, the Collateral and other mortgage loans owned by Lender; in
such instance, the value of the Collateral shall be determined on a pro
rata basis. Borrower hereby waives any claims it may have against
Lender arising by reason of the fact that the price at which the
Collateral may have been sold at such private sale was less than the
price which might have been obtained at a public sale or was less than
the aggregate amount of the outstanding Advances and the unpaid
interest accrued thereon, even if Lender accepts the first offer
received and does not offer the Collateral, or any part thereof, to
more than one offeree.
11.4 NO OBLIGATION TO PURSUE REMEDY. Borrower waives any right to require
Lender to (a) proceed against any Person, (b) proceed against or
exhaust all or any of the Collateral or pursue its rights and remedies
as against the Collateral in any particular order, or (c) pursue any
other remedy in its power. Lender shall not be required to take any
steps necessary to preserve any rights of Borrower against holders of
mortgages prior in lien to the lien of any Mortgage Loan included in
the Collateral or to preserve rights against prior parties. No failure
on the part of Lender to
27
exercise, and no delay in exercising, any right, power or remedy
provided hereunder, at law or in equity shall operate as a waiver
thereof; nor shall any single or partial exercise by Lender of any
right, power or remedy provided hereunder, at law or in equity preclude
any other or further exercise thereof or the exercise of any other
right, power or remedy. Without intending to limit the foregoing, all
defenses based on the statute of limitations are hereby waived by
Borrower. The remedies herein provided are cumulative and are not
exclusive of any remedies provided at law or in equity.
11.5 REIMBURSEMENT OF COSTS AND EXPENSES. Lender may, but shall not be
obligated to, advance any sums or do any act or thing necessary to
uphold and enforce the lien and priority of, or the security intended
to be afforded by, any Pledged Mortgage Loan, including, without
limitation, payment of delinquent taxes or assessments and insurance
premiums. All advances, charges, costs and expenses, including
reasonable attorneys' fees and disbursements, incurred or paid by
Lender in exercising any right, power or remedy conferred by this
Agreement, or in the enforcement hereof, together with interest
thereon, at the Default Rate, from the time of payment until repaid,
shall become a part of principal balance outstanding under the Note.
11.6 APPLICATION OF PROCEEDS. The proceeds of any sale or other enforcement
of Lender's security interest in all or any part of the Collateral
shall be applied by Lender:
(a) FIRST, to the payment of the costs and expenses of such sale
or enforcement, including reasonable compensation to Lender's
agents and counsel, and all expenses, liabilities and advances
made or incurred by or on behalf of Lender in connection
therewith;
(b) SECOND, to the payment of any other amounts due (other than
principal and interest) under the Note or this Agreement;
(c) THIRD, to the payment of interest accrued and unpaid on the
Note;
(d) FOURTH, to the payment of the outstanding principal balance of
the Note; and
(e) FIFTH, to the payment to Borrower, or to its successors or
assigns, or as a court of competent jurisdiction may direct,
of any surplus then remaining from such proceeds. If the
proceeds of any such sale are insufficient to cover the costs
and expenses of such sale, as aforesaid, and the payment in
full of the Note and all other amounts due hereunder, Borrower
shall remain liable for any deficiency.
11.7 RIGHTS OF SET-OFF. Lender shall have the following rights of set-off:
(a) If Borrower shall default in the payment of the Note, any
interest accrued thereon, or any other sums which may become
payable thereunder or hereunder when due, or in the
performance of any of its other obligations or liabilities
under the Note or this Agreement, Lender shall have the right,
at any time, and from time to time, without notice, to set-off
and to appropriate or apply any and all deposits of money or
property or any other indebtedness at any time held or owing
by Lender to or for the credit of the account of Borrower
against and on account of the obligations and liabilities of
Borrower under the Note and this Agreement, irrespective of
whether or not Lender shall have made any demand hereunder and
whether or not said obligations and liabilities shall have
matured; provided, however, that the aforesaid right to
set-off shall not apply to any deposits of escrow monies being
held on behalf of the Mortgagors under Pledged Mortgage Loans
or other third parties.
(b) In addition to the right in subsection (a) above,
notwithstanding anything to the contrary contained herein,
Borrower expressly acknowledges and agrees that Lender and its
Affiliates, including, without limitation, Countrywide CLD
(collectively, "Countrywide Related Entities") shall have the
right to offset against any amounts owed by any
28
Countrywide Related Entity to Borrower against any amounts
owed by Borrower to any Countrywide Related Entity under any
agreement(s) between or among Borrower and any Countrywide
Related Entity(ies), including, without limitation, any
amounts owed by Borrower to Lender under this Agreement and
the Loan Purchase Agreement. In exercising the foregoing right
to offset, any Countrywide Related Entity, including, without
limitation, Countrywide CLD, shall be entitled to withdraw or
debit from funds in the Over/Under Account which are due to or
being held for the benefit of Borrower any amount owed by
Borrower to such Countrywide Related Entity. Likewise, Lender
shall be entitled to withdraw or debit from funds in any
account maintained by any Countrywide Related Entity which are
due to or being held for the benefit of Borrower any amount
owed by Borrower to Lender. To the extent any Countrywide
Related Entity intends to offset against any amounts due
Borrower by Lender under this Agreement, Lender shall provide
Borrower with at least three (3) business days prior written
notice thereof and Borrower shall be entitled to cure any
breach or default with the Countrywide Related Entity that
gives rise to such offset within such time period and thereby
avoid such offset to the extent of the cure. By way of example
but not limitation, assuming Borrower is an approved seller of
Countrywide CLD, if Borrower owes outstanding amounts to
Countrywide CLD, Countrywide CLD may, upon one (1) business
days prior notice to Borrower, offset such amounts by
withdrawing such amounts from the funds in the Over/Under
Account which are due to or being held by Lender for the
benefit of Borrower.
11.8 REASONABLE ASSURANCES. If, at any time during the term of the
Agreement, Lender has reason to believe that Borrower is not conducting
its business in accordance with, or otherwise is not satisfying: (i)
all applicable statutes, regulations, rules, and notices of federal,
state, or local governmental agencies or instrumentalities, all
applicable requirements of Investors and Insurers and prudent industry
standards or (ii) all applicable requirements of Lender, as set forth
in this Agreement, then, Lender shall have the right to demand,
pursuant to written notice from Lender to Borrower specifying with
particularity the alleged act, error or omission in question,
reasonable assurances from Borrower that such a belief is in fact
unfounded, and any failure of Borrower to provide to Lender such
reasonable assurances in form and substance reasonably satisfactory to
Lender, within the time frame specified in such written notice, shall
itself constitute an Event of Default hereunder, without a further cure
period. Borrower hereby authorizes Lender to take such actions as may
be necessary or appropriate to confirm the continued eligibility of
Borrower for Advances hereunder, including without limitation (i)
ordering credit reports and (ii) contacting Mortgagors, licensing
authorities and Investors or Insurers.
ARTICLE 12
INDEMNIFICATION
12.1 INDEMNIFICATION. Borrower shall indemnify and hold harmless Lender and
any of its officers, directors, employees and agents and any subsequent
holder of the Note from and against any and all liabilities,
obligations, losses, damages, penalties, judgments, suits, costs,
expenses and disbursements of any kind whatsoever that may be imposed
upon, incurred by or asserted against Lender or such holder in any way
relating to or arising out of the Principal Agreements or any other
document referred to therein or any of the transactions contemplated
thereby, except for liabilities, losses and damages solely resulting
from the gross negligence or willful misconduct of Lender.
12.2 PAYMENT OF TAXES. Borrower shall pay and hold Lender and any holder of
the Note harmless from and against any and all present and future
stamp, documentary and other similar taxes with respect to the
Collateral, the Principal Agreements and other documents related
thereto and save Lender and any holder of the Note harmless from and
against any and all liabilities with respect to or resulting from any
delay or omission to pay such taxes.
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ARTICLE 13
TERM AND TERMINATION
13.1 TERM. Provided that no Event of Default or Potential Default has
occurred and is continuing, and except as otherwise provided for
herein, this Agreement shall commence on the Effective Date and
continue for a term of One (1) year Following expiration or termination
of this Agreement, all indebtedness due Lender under the Principal
Agreements shall be immediately due and payable without notice to
Borrower and without presentment, demand, protest, notice of protest or
dishonor, or other notice of default, and without formally placing
Borrower in default, all of which are hereby expressly waived by
Borrower.
13.2 VOLUNTARY TERMINATION. Lender may, with or without cause, terminate
this Agreement at any time on not less than ninety (90) days notice to
Borrower and demand payment of all outstanding Advances and other
amounts at that time (whereupon all such outstanding amounts shall be
immediately due and payable without notice to Borrower and without
presentment, demand, protest, notice of protest or dishonor, or other
notice of default, and without formally placing Borrower in default,
all of which are hereby expressly waived by Borrower.). Lender shall
not be liable to Borrower for any costs, loss or damages arising from
or relating to a termination by Lender in accordance with this SECTION
13.2 or as a result of an Event of Default.
13.3 EXTENSION OF TERM. Upon mutual agreement of Borrower and Lender, the
term of this Agreement may be extended. Such extension may be made
subject to the recognition of the terms hereunder and to any other such
conditions as Lender, in its sole discretion, may deem necessary or
advisable. Under no circumstances shall such an extension by Lender be
interpreted or construed as a forfeiture by Lender of any of its
rights, entitlements or interest created hereunder. Borrower
acknowledges and understands that Lender is under no obligation
whatsoever to extend the term of this Agreement beyond the initial
term.
ARTICLE 14
GENERAL
14.1 INTEGRATION. This Agreement, together with the other Principal
Agreements, and all other documents executed pursuant to the terms
hereof and thereof, constitute the entire agreement between the parties
with respect to the subject matter hereof.
14.2 AMENDMENTS. No modification, waiver, amendment, discharge or change of
this Agreement shall be valid unless the same is in writing and signed
by the party against whom the enforcement of such modification, waiver,
amendment, discharge or change is sought.
14.3 NO WAIVER. No failure or delay on the part of Borrower or Lender or any
holder of the Note in exercising any right, power or privilege
hereunder and no course of dealing between Borrower and Lender or any
holder of the Note shall operate as a waiver thereof nor shall any
single or partial exercise of any right, power or privilege hereunder
or under the Note preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
14.4 REMEDIES CUMULATIVE. The rights and remedies herein expressly provided
are cumulative and not exclusive of any rights or remedies that
Borrower or Lender of the holder of the Note would otherwise have. No
notice or demand on Borrower in any case shall entitle Borrower to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of Lender or the holder of the Note
to any other or further action in any circumstances without notice or
demand.
14.5 ASSIGNMENT. The Principal Agreements may not be assigned by Borrower.
The Principal Agreements, along with Lender's right, title and
interest, including its security interest, in any or all of the
Collateral, may, at any time, be transferred or assigned, in whole or
in part, by Lender, and
30
any transferee or assignee thereof may enforce the Principal Agreements
and such security interest directly against Borrower. It is anticipated
that such an assignment will be made by Lender, and Borrower hereby
irrevocably consents to such assignment. No notice of such assignment
need be given by Lender to Borrower.
14.6 SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
14.7 PARTICIPATIONS. Lender may from time to time sell or otherwise grant
participations in this Agreement and the Note, and the holder of any
such participation, if the participation agreement so provides, (i)
shall, with respect to its participation, be entitled to all of the
rights of Lender and (ii) may exercise any and all rights of setoff or
banker's lien with respect thereto, in each case as fully as though
Borrower were directly indebted to the holder of such participation in
the amount of such participation; provided, however, that Borrower
shall not be required to send or deliver to any of the participants
other than Lender any of the materials or notices required to be sent
or delivered by it under the terms of this Agreement, nor shall it have
to act except in compliance with the instructions of Lender.
14.8 INVALIDITY. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and this
Agreement shall be construed as if such invalid, illegal or
unenforceable provision had not been included.
14.9 ADDITIONAL INSTRUMENTS. Borrower shall execute and deliver such further
instruments and shall do and perform all matters and things necessary
or expedient to be done or observed for the purpose of effectively
creating, maintaining and preserving the security and benefits intended
to be afforded by this Agreement.
14.10 SURVIVAL. All representations, warranties, covenants and agreements
herein contained on the part of Borrower shall survive the making of
any Advance and the execution of the Note and shall be effective so
long as this Agreement is in effect or there remains any obligation of
Borrower hereunder or under the Note to be paid or performed.
14.11 NOTICES. All notices, demands, consents, requests and other
communications required or permitted to be given or made hereunder
shall be in writing and shall be mailed (first class, return receipt
requested and postage prepaid) or delivered in person or by overnight
delivery service or by facsimile, addressed to the respective parties
hereto at their respective addresses set forth below or, as to any such
party, at such other address as may be designated by it in a notice to
the other:
If to Borrower: That address set forth in the Commitment Letter
If to Lender: Countrywide Warehouse Lending
0000 Xxxxxxxxx Xxxxxx Xxxx Xxxx:XX-00X
Xxxx Xxxxx, XX 00000
Facsimile No: (000) 000-0000
All notices shall be conclusively deemed to have been properly given or
made when duly delivered, if delivered in person or by overnight
delivery service, or on the third (3rd) Business Day after being
deposited in the mail, if mailed in accordance herewith, or upon
transmission by the receiving party of a facsimile confirming receipt,
if delivered by facsimile.
14.12 PERSONAL IDENTIFICATION NUMBER. Borrower shall adopt a Personal
Identification Number or PIN to be entered into the computer system in
connection with all documents transmitted from
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Borrower to Lender electronically. Further, any document required to be
signed by Borrower may be signed by handwritten signature or
transmitted electronically in conjunction with the PIN, except any
written notification designating or changing the PIN and those
documents required to be delivered pursuant to SECTION 7.1(A) above,
which must be signed by hand. Borrower shall provide Lender with
written notification of its PIN and any changes thereto; provided,
however, that any change to the PIN may not become effective for twenty
four (24) hours following Lender's confirmation of receipt of such
notice by Borrower. Borrower and Lender agree that transmitting a
document in conjunction with the PIN shall have the same force and
effect as a handwritten signature and shall be sufficient to verify
that Borrower originated such document. Borrower shall employ security
procedures to ensure that all transmissions of documents accompanied by
the PIN are authorized, authentic, reliable and complete and shall
promptly notify Lender if Borrower discovers the PIN has been
improperly disclosed to any Person. Notwithstanding the foregoing or
any other breach of security, Lender shall be entitled to rely upon the
PIN of Borrower until such time as (a) Borrower provides Lender with
written instructions to the contrary and (b) Lender has sufficient time
to notify the appropriate employees and modify its computerized
systems.
14.13 GOVERNING LAW. This Agreement and the rights and obligations of the
parties under the Principal Agreements shall be construed in accordance
with and governed by the laws of the State of California, without
regard to principles of conflicts of laws.
14.14 AGREEMENT TO ARBITRATE CLAIMS. Upon written request by either party
that is submitted according to the applicable rules for arbitration,
any claim, demand or cause of action, which arises out of or is related
to this Agreement, (collectively "Claims"), shall be resolved by
binding arbitration in the County of Los Angeles, California, in
accordance with (i) the Federal Arbitration Act; (ii) the Code of
Procedure ("Code") of the National Arbitration Forum ("NAF") and (iii)
this Agreement, which shall control any inconsistency between it and
the Code. Notwithstanding the foregoing, claims for injunctive or other
relief for intellectual property violations, unfair competition and/or
the use or unauthorized disclosure of trade secrets, inventions or
other confidential information, shall be excluded from this agreement
to arbitrate ("Excluded Claims"). The NAF shall provide each party a
list of arbitrators and each party shall have the right to strike one
name. The number of arbitrators on the list will be the number of
parties plus one. The decision of an arbitrator on any Claims submitted
to arbitration shall follow applicable substantive law and be in
writing setting forth the findings of fact and law and the reasons
supporting the decision. Such decision shall be final and binding upon
the parties, subject to the right of appeal described below. Judgment
upon any arbitration award may be entered in any court having
jurisdiction. The arbitrator has exclusive authority to resolve any
dispute relating to the applicability or enforceability of this
Agreement, including the provisions of this section. Either party shall
have the right to appeal to the appropriate court any errors of law in
the decision rendered by the arbitrator. After a demand for arbitration
is made, each party may conduct a limited number of depositions
(including the production of documents) by mutual agreement or as
permitted by the arbitrator. In the event of any lawsuit or other
proceeding relating to an Excluded Claim, both parties agree to submit
to jurisdiction in California and further agree that any cause of
action relating to an Excluded Claim shall be brought in the state or
federal courts in the County of Los Angeles, California.
14.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same Agreement.
14.16 HEADINGS. The headings in this Agreement are for purposes of reference
only and shall not limit or otherwise affect the meaning or
interpretation of any provisions hereof.
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14.17 JOINT AND SEVERAL LIABILITY OF EACH BORROWER. To the extent there is
more than one Person which is named as a Borrower under this Agreement,
each such Person shall be jointly and severally liable for the rights,
covenants, obligations and warranties and representations of Borrower
as contained herein and the actions of any Person or third party shall
in no way affect such joint and several liability.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
BORROWER: PREFERRED HOME MORTGAGE COMPANY
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President and Treasurer
LENDER: COUNTRYWIDE WAREHOUSE LENDING
By: /s/ Xxxxxx Xxxxx
----------------------------------------
Name: Xxxxxx Xxxxx
Title: 1st Vice President
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EXHIBIT A
GLOSSARY OF DEFINED TERMS
ACCELERATION EVENT: Any of the conditions or events set forth in SECTION 4.2.
ACKNOWLEDGEMENT OF CONFIDENTIALITY OF PASSWORD AGREEMENT: That certain
Acknowledgement of Confidentiality of Password Agreement attached hereto as
EXHIBIT S.
ADVANCE: A disbursement by Lender under this Agreement, which shall be a Tranche
A Advance, Tranche B Advance, Tranche C Advance, Tranche D Advance, Tranche E
Advance, Tranche F Advance, Tranche G Advance, Tranche H Advance or Tranche I
Advance.
ADVANCE DATE: The date on which an Advance is funded.
ADVANCE REQUEST DEADLINE: That time, as set forth in the Commitment Letter, by
which Borrower must submit to Lender certain documents in order to obtain an
Advance.
AFFILIATE: With respect to any specified entity, any other entity controlling or
controlled by or under common control with such specified entity. For the
purposes of this definition, "control" when used with respect to a specified
entity means the power to direct the management and policies of such entity,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" having
meanings correlative to the foregoing.
AGENCY: FNMA or FHLMC.
AGGREGATE CREDIT LIMIT: The maximum aggregate principal amount of Advances that
may be outstanding at any one time, as set forth in the Commitment Letter.
AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT - CASHIER CHECKS AND
FUNDING DRAFTS: If required by Lender, that certain Amendment to Revolving
Credit and Security Agreement - Cashier Checks and Funding Drafts attached
hereto as EXHIBIT R.
APPLICABLE RATE: With respect to any date of determination, the daily rate per
annum (rounded up to three (3) decimal places) for one-month U.S. dollar
denominated deposits as offered to prime banks in the London interbank market
("One-Month LIBOR") as published on Bloomberg or in the Wall Street Journal. It
is understood that the Applicable Rate with respect to Advances shall be
initially set to the then current One-Month LIBOR in effect on the date the
Advance is funded and shall thereafter be adjusted on a daily basis to the then
current One-Month LIBOR for each day that the Advance remains outstanding.
APPROVED PAYEE: A Closing Agent or warehouse lender approved by Lender in
accordance with SECTION 3.7.
ASSIGNMENT: A duly executed assignment to Lender in recordable form of a Pledged
Mortgage Loan, of the indebtedness secured thereby and of all documents and
rights related to such Pledged Mortgage Loan.
ASSIGNMENT OF CLOSING PROTECTION LETTER: An assignment assigning and subrogating
Lender to all of Borrower's rights in a Closing Protection Letter, substantially
in the form of EXHIBIT K hereto.
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ASSIGNMENT OF FIDELITY BOND AND ERRORS AND OMISSION POLICY: An assignment
assigning and subrogating Lender to all of Borrower's rights in a Fidelity Bond
and Errors and Omissions Policy, substantially in the form of EXHIBIT L hereto.
BAILEE AGREEMENT: A bailee agreement substantially in the form of EXHIBIT F
hereto or in such other form and substance acceptable to Lender.
BANKRUPTCY CODE: Title 11 of the United States Code, now or hereafter in effect,
or any successor thereto.
BREAKAGE FEE: A fee equal to twenty-five dollars ($25.00), which is in addition
to the File Fee, payable by Borrower if Borrower fails to borrow an Advance
after Borrower has submitted a Collateral Data Record in connection with such
borrowing.
BUSINESS DAY: Any day, excluding Saturday, Sunday and any day that is a legal
holiday under the laws of the State of California.
CASH EQUIVALENTS: Any (a) securities with maturities of ninety (90) days or less
from the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit and
Eurodollar time deposits with maturities of ninety (90) days or less from the
date of acquisition and overnight bank deposits of any commercial bank having
capital, surplus and retained earnings in excess of $70,000,000, (c) repurchase
obligations of any commercial bank satisfying the requirements of clause (b) of
this definition, having a term of more than seven days with respect to
securities issued or fully guaranteed or insured by the United States
Government, (d) commercial paper of a domestic issuer rated at least A-1 or the
equivalent thereof by S&P or p-1 or the equivalent thereof by Moody's and in
either case maturing within ninety (90) days after the day of acquisition, (e)
securities with maturities of ninety (90) days or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's, (f) securities with maturities of ninety (90) days or
less from the date of acquisition backed by standby letters of credit issued by
any commercial bank satisfying the requirements of clause (b) of this
definition, or (g) shares of money market, mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition.
CLOSED-END SECOND LIEN MORTGAGE LOAN: A second lien mortgage loan for a fixed
amount drawn at closing and underwritten in accordance with Borrower's
underwriting guidelines for second lien mortgages, as same have been approved by
Lender.
CLOSING AGENT: The Person designated by Borrower and approved by Lender in
accordance with SECTION 3.7 to receive Advances from Lender, for the account of
Borrower, for the purpose of funding a Mortgage Loan.
CLOSING PROTECTION LETTER: A document issued by a title insurance company to
Borrower and/or Lender and relied upon by Lender to provide closing protection
for one or more mortgage loan closings and to insure Borrower and/or Lender,
without limitation, against embezzlement by the Closing Agent and loss or damage
resulting from the failure of the Closing Agent to comply with all applicable
closing instructions.
COLLATERAL: Collateral shall mean and include all now existing and hereafter
arising right, title and interest of Borrower in, under and to the following:
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(a) all Mortgage Loans, now owned and hereafter acquired, including all
Mortgage Notes and Mortgages evidencing such Mortgage Loans and the
related Collateral Documents, for which an Advance has been made by
Lender hereunder and not repaid in full and all Mortgage Loans,
including all Mortgage Notes and Mortgages evidencing such Mortgage
Loans and the related Collateral Documents, which, from time to time,
are delivered, or caused to be delivered, to Lender (including delivery
to a custodian or other third party on behalf of Lender) as additional
security for the payment of the Note and for the performance of all of
Borrower's obligations hereunder;
(b) all Mortgage-Backed Securities, now owned or hereafter acquired by
Borrower, that are supported by any Mortgage Loan constituting
Collateral hereunder, all right to the payment of monies in non-cash
distributions on account thereof and all new, substituted and
additional securities at any time issued with respect thereto;
(c) all rights of Borrower under all Purchase Commitments, now existing and
hereafter arising, covering any part of the Collateral, all rights to
deliver such Mortgage Loans and Mortgage-Backed Securities to permanent
investors and other purchasers pursuant thereto and all proceeds
resulting from the disposition of such Collateral thereto;
(d) all now existing and hereafter established accounts maintained with
broker-dealers by Borrower for the purpose of carrying out transactions
under Purchase Commitments relating to any part of the Collateral;
(e) all now existing and hereafter arising rights of Borrower to service,
administer and/or collect on the Mortgage Loans included as Collateral
hereunder and any and all rights to the payment of monies on account
thereof;
(f) all now existing and hereafter arising accounts, contract rights and
general intangibles constituting or relating to any of the Collateral;
(g) all mortgage insurance and all commitments issued by Insurers to insure
or guaranty any Mortgage Loans included as Collateral, including,
without limitation, the right to receive all insurance proceeds and
condemnation awards that may be payable in respect of the premises
encumbered by any Mortgage; and all other documents or instruments
delivered to Lender in respect of the Mortgage Loans included as
Collateral;
(h) All documents, files, surveys, certificates, correspondence,
appraisals, computer programs, tapes, discs, cards, accounting records
and other information and data of Borrower relating to Mortgage Loans
included as Collateral;
(i) All rights, but not any obligations or liabilities, of Borrower with
respect to the Investors;
(j) All property of Borrower, in any form or capacity now or at any time
hereafter in the possession or control of Lender, including, without
limitation, all deposit accounts and any funds at any time held
therein, into which Proceeds of the foregoing Collateral are at any
time deposited;
(k) All products and Proceeds of the foregoing Collateral; and
(l) Any funds of Borrower at any time deposited or held in the Over/Under
Account.
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COLLATERAL DATA RECORD: A document completed by Borrower and submitted to
Lender, a form of which is included in the Handbook,.
COLLATERAL DOCUMENTS: With respect to each Pledged Mortgage Loan:
(a) the original Mortgage Note evidencing the Mortgage Loan, endorsed by
Borrower in blank, with a complete chain from the originator to
Borrower;
(b) an original assignment in blank, executed by Borrower, for the Mortgage
securing the Mortgage Note, in recordable form but unrecorded, with a
complete chain of intervening assignments from the originator to
Borrower;
(c) a certified or true copy of the Mortgage securing the Mortgage Note
bearing evidence of the recordation of such Mortgage with the
appropriate governmental authority, or if such recording information is
unavailable because the document has not yet come back from the
recording office, then a copy of evidence that such original Mortgage
was sent out for recording by a Closing Agent; and
(d) an original or copy of the title insurance policy insuring the first
lien or second lien position of the Mortgage, as applicable, in at
least the original principal amount of the related Mortgage Note and
containing only those exceptions permitted by the Purchase Commitment
or an unconditional commitment to issue such a title insurance policy.
COLLATERAL VALUE: With respect to each Pledged Mortgage Loan for any date of
determination, an amount equal to the following, as applicable, as same may be
reduced in accordance with SECTION 4.3:
(a) if the Mortgage Loan has Standard Status, the product of the Mortgage
Loan Value and:
(i) if the Mortgage Loan is a CONVENTIONAL CONFORMING MORTGAGE
LOAN, the Tranche A Advance Rate;
(ii) if the Mortgage Loan is a GOVERNMENT MORTGAGE LOAN, the
Tranche B Advance Rate;
(iii) if the Mortgage Loan is a JUMBO MORTGAGE LOAN, the Tranche C
Advance Rate;
(iv) if the Mortgage Loan is a SUPER JUMBO MORTGAGE LOAN, the
Tranche D Advance Rate;
(v) if the Mortgage Loan is an EXPANDED CRITERIA MORTGAGE LOAN,
the Tranche E Advance Rate;
(vi) if the Mortgage Loan is a SUBPRIME MORTGAGE LOAN, the Tranche
F Advance Rate;
(vii) if the Mortgage Loan is a CLOSED-END SECOND LIEN MORTGAGE
LOAN, the Tranche G Advance Rate;
(viii) if the Mortgage Loan is a HELOC MORTGAGE LOAN, the Tranche H
Advance Rate; or
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(ix) if the Mortgage Loan is a NONPERFORMING/SUBPERFORMING MORTGAGE
LOAN, the Tranche I Advance Rate.
(b) if the Mortgage Loan is a Noncompliant Mortgage Loan, the product of
the Mortgage Loan Value and the Tranche J Advance Rate; or
(c) if the Mortgage Loan is a Defective Mortgage Loan, zero.
For purposes of the foregoing, "MORTGAGE LOAN VALUE" shall mean the lesser of
(i) the outstanding principal balance of the Mortgage Loan; (ii) the committed
purchase price of the Mortgage Loan, as evidenced by the related Purchase
Commitment; and (iii) the fair market value of the Mortgage Loan, as determined
by Lender in its sole but reasonable discretion.
COMMITMENT FEE: The non-refundable, annual commitment fee, as set forth in the
Commitment Letter.
COMMITMENT LETTER: The document executed by Lender and Borrower, referencing
this Agreement and setting forth the specifics of terms and provisions hereof
with respect to the Advances.
COMMITMENT REQUIREMENTS: Those terms and conditions, as set forth in the
Commitment Letter, applicable to a specific type of Mortgage Loan.
CONTINGENT OBLIGATIONS: Any obligation of Borrower arising from an existing
condition or situation that involves uncertainty as to outcome and that will be
resolved by the occurrence or nonoccurrence of some future event, including,
without limitation, any obligation guaranteeing or intended to guarantee any
Debt, leases, dividends or other obligations of any other Person in any manner,
whether directly or indirectly; provided; however, that endorsements of
instruments for deposit or collection in the ordinary course of business shall
not be included. With respect to guarantees, the amount of the Contingent
Obligation shall be equal to the stated or determinable amount of the primary
obligation in respect of the guarantee or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof, as determined by
Lender.
CONVENTIONAL CONFORMING MORTGAGE LOAN: A first lien mortgage loan that fully
conforms to all underwriting standards, loan amount limitations and other
requirements of that standard Agency mortgage loan purchase program accepting
only the highest quality mortgage loans underwritten without dependence on
expanded criteria provisions, or that is approved by Desktop Underwriter or Loan
Prospector.
COUNTRYWIDE CLD: The Correspondent Lending Division of Countrywide Home Loans,
Inc.
CREDIT APPLICATION: The credit application or "Lender Application Profile,"
including all supporting documentation, submitted by Borrower to Lender with
respect to this Agreement.
CURRENT ASSETS: Those assets set forth in the consolidated balance sheet of
Borrower, prepared in accordance with GAAP, as current assets, defined as those
assets that are now cash or will by their terms or disposition be converted to
cash within one (1) year of the date of the determination.
CURRENT LIABILITIES: Those liabilities set forth in the consolidated balance
sheet of Borrower, prepared in accordance with GAAP, as current liabilities,
defined as those liabilities due upon demand or within one (1) year of the date
of determination.
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CUSTODIAN: Countrywide Home Loans, Inc., or such other custodian selected by
Lender in its sole discretion.
DEBT: The debt of Borrower consisting of, without duplication: (a) indebtedness
for borrowed money, including principal, interest, fees and other charges; (b)
obligations evidenced by bonds, debentures, notes or other similar instruments;
(c) obligations to pay the deferred purchase price of property or services; (d)
obligations as lessee under leases that shall have been or should be in
accordance with GAAP, recorded as capital leases; (e) obligations secured by any
lien upon property or assets owned by Borrower, even though Borrower has not
assumed or become liable for payment of such obligations; (f) obligations in
connection with any letter of credit issued for the account of Borrower; (g)
obligations under direct or indirect guarantees in respect of and obligations,
contingent or otherwise, to purchase or otherwise acquire, or otherwise assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to above; and (h) all Contingent Obligations.
DEFAULT RATE: The maximum nonusurious interest rate, if any, that at any time,
or from time to time, may be contracted for, taken, reserved, charged or
received under the laws of the United States and the State of California.
DEFECTIVE LOAN FEE: A fee equal to twenty five ($25.00) dollars payable by
Borrower for each Pledged Mortgage Loan that is or becomes a Defective Mortgage
Loan.
DEFECTIVE MORTGAGE LOAN: A Pledged Mortgage Loan:
(a) that has been pledged as Collateral for longer than the Tranche J
Maximum Dwell Time or is ineligible to be a Noncompliant Mortgage Loan
because the aggregate original Collateral Value of other Pledged
Mortgage Loans that are deemed to be Noncompliant Mortgage Loans is
equal to or greater than the Tranche J Sublimit;
(b) that is the subject of fraud by any Person involved in the origination
of such Mortgage Loan and such fraud shall not have been remedied
within three (3) Business Days after receipt of notice from Lender to
do so;
(c) where the related Mortgaged Property is the subject of material damage
or waste and such damage or waste shall not have been remedied within
five (5) Business Days after receipt of notice from Lender to do so;
(d) in connection with which any other breach of a warranty or
representation set forth in SECTION 8.2 occurs and remains uncured for
a period of ten (10) calendar days;
(e) in connection with which a default occurs under the Pledged Mortgage
Loan and remains uncured for a period of ten (10) calendar days; or
(f) where the related Mortgagor fails to make the first payment due under
the Mortgage Note on or before the applicable due date, including any
days of grace, and such default shall not have been remedied within
three (3) Business Days after receipt of notice from Lender to do so;
provided, however, that with respect to any Nonperforming/Subperforming
Mortgage Loan where specific payment conditions have been set forth in
the Commitment Letter, such Nonperforming/Subperforming Mortgage Loan
shall only be deemed a Defective Mortgage Loan for failure of the
Mortgagor to make payment if such failure constitutes a breach of the
such specific payment conditions.
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DOCUMENT DEPOSIT FEE: A fee of one dollar ($1.00) payable by Borrower for each
Collateral Document delivered to Lender after the initial delivery date of the
related Mortgage Loan File.
DRY MORTGAGE LOAN: A Mortgage Loan for which Lender or its custodian has
possession of the related Collateral Documents, in a form and condition
acceptable to Lender, prior to the funding of the Advance against which such
Mortgage Loan is pledged or a Wet Mortgage Loan for which Lender or its
Custodian has received the related Collateral Documents.
EFFECTIVE DATE: That effective date set forth in the Commitment Letter.
ELECTRONIC TRACKING AGREEMENT - WAREHOUSE LENDER: That certain Electronic
Tracking Agreement -Warehouse Lender attached hereto as EXHIBIT T.
ERISA: The Employee Retirement Income Security Act of 1974, as amended from time
to time and any successor statute.
ERISA AFFILIATE: Any person (as defined in section 3(9) of ERISA) that together
with Borrower or any of its subsidiaries would be a member of the same
"controlled group" within the meaning of Section 414(b), (m), (c) and (o) of the
Internal Review Code of 1986, as amended.
EXECUTIVE MANAGEMENT: Chairman of the board of directors, chief executive
officer, president, and chief financial officer.
EXPANDED CRITERIA MORTGAGE LOAN: A first lien mortgage loan underwritten to the
same high credit standards as a Conventional Conforming Mortgage Loan except
with respect to loan programs and parameters that may have broader
specifications of eligibility.
EVENT OF DEFAULT: Any of the conditions or events set forth in SECTION 11.1.
FHA: The Federal Housing Administration of the United States Department of
Housing and Urban Development and any successor thereto.
FHLMC: The Federal Home Loan Mortgage Corporation and any successor thereto.
FILE FEE: A fee, as set forth in the Commitment Letter, per each Mortgage Loan
that is proposed to secure an Advance, payable upon submission of the related
Collateral Data Record whether or not the Advance is actually made.
FNMA: The Federal National Mortgage Association and any successor thereto.
GAAP: Generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession
and that are applicable to the circumstances as of the date of determination.
GNMA: Government National Mortgage Association or any successor thereto.
GOVERNMENT MORTGAGE LOAN: A first lien mortgage loan, other than a
Nonperforming/Subperforming Mortgage Loan, that is (a) eligible for insurance by
FHA and is so insured or is subject to a current binding and enforceable
commitment for such
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insurance pursuant to the provisions of the National Housing Act, as amended,
and is otherwise eligible for inclusion in a GNMA mortgage-backed security pool;
or (b) eligible to be guaranteed by the VA and is so guaranteed or is subject to
a current binding and enforceable commitment for such guarantee pursuant to the
provisions of the Servicemen's Readjustment Act, as amended, and is otherwise
eligible for inclusion in a GNMA mortgage-backed security pool.
HANDBOOK: The lending guide prepared by Lender, as same may be amended from time
to time.
HAIRCUT: With respect to each Advance, an amount equal to the difference between
the amount Borrower has requested Lender to send to the Approved Payee and the
Collateral Value of the Mortgage Loan pledged against the Advance.
HELOC MORTGAGE LOAN: A home equity line of credit underwritten in accordance
with Borrower's underwriting guidelines for HELOCs, as same have been approved
by Lender.
HUD: The United States Department of Housing and Urban Development or any
successor thereto.
INSOLVENCY EVENT: The occurrence of any of the following events:
(a) such Person shall become insolvent or generally fail to pay, or admit
in writing its inability to pay, its debts as they become due, or shall
voluntarily commence any proceeding or file any petition under any
bankruptcy, insolvency or similar law or seeking dissolution,
liquidation or reorganization or the appointment of a receiver,
trustee, custodian, conservator or liquidator for itself or a
substantial portion of its property, assets or business or to effect a
plan or other arrangement with its creditors, or shall file any answer
admitting the jurisdiction of the court and the material allegations of
an involuntary petition filed against it in any bankruptcy, insolvency
or similar proceeding, or shall be adjudicated bankrupt, or shall make
a general assignment for the benefit of creditors, or such Person, or a
substantial part of its property, assets or business, shall be subject
to, consent to or acquiesce in the appointment of a receiver, trustee,
custodian, conservator or liquidator for itself or a substantial
property, assets or business;
(b) corporate action shall be taken by such Person for the purpose of
effectuating any of the foregoing;
(c) an order for relief shall be entered in a case under the Bankruptcy
Code in which such Person is a debtor; or
(d) involuntary proceedings or an involuntary petition shall be commenced
or filed against such Person under any bankruptcy, insolvency or
similar law or seeking the dissolution, liquidation or reorganization
of such Person or the appointment of a receiver, trustee, custodian,
conservator or liquidator for such Person or of a substantial part of
the property, assets or business of such Person, or any writ, order,
judgment, warrant of attachment, execution or similar process shall be
issued or levied against a substantial part of the property, assets or
business of such Person, and such proceeding or petition shall not be
dismissed, or such execution or similar process shall not be released,
vacated or fully bonded, within sixty (60) days after commencement,
filing or levy, as the case may be.
INSURER: A private mortgage insurer, which is acceptable to Lender in its sole
discretion.
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INTERCREDITOR AGREEMENT: An agreement substantially in the form of EXHIBIT M
hereto.
INVESTOR: FNMA, FHLMC, GNMA or a financially responsible private institution,
which is deemed acceptable by Lender in its sole discretion, purchasing Mortgage
Loans from Borrower pursuant to a Purchase Commitment.
IRREVOCABLE CLOSING INSTRUCTIONS: Closing instructions, including wire
instructions, in the form of EXHIBIT G issued in connection with funds disbursed
for the funding of a Wet Mortgage Loan.
JUMBO MORTGAGE LOAN: A first lien mortgage loan underwritten to the same high
standards as a Conventional Conforming Mortgage Loan except with respect to the
original principal balance, which is greater than that permitted by the Agencies
but less than one million ($1,000,000) dollars.
MARGIN: With respect to each Advance, the annual rate of interest set forth in
the Commitment Letter, that shall be added to the Applicable Rate to determine
the annual rate of interest for such Advance.
MATURITY DATE: The date on which an Advance shall be paid in full, as set forth
in the confirmation delivered to Borrower in accordance with SECTION 3.2.
MAXIMUM DWELL TIME: With respect to Tranches A through I, the maximum number of
days a Pledged Mortgage Loan can be pledged as Collateral against an Advance
before such Pledged Mortgage Loan may be deemed to be a Noncompliant Mortgage
Loan and with respect to Tranche J, the maximum number of days that a Pledged
Mortgage Loan can be deemed to be a Noncompliant Mortgage Loan, all as set forth
in the Commitment Letter.
MAXIMUM LOAN AMOUNT: The maximum permitted original principal balance of a
Pledged Mortgage Loan, as set forth in the Commitment Letter.
MORTGAGE: A first-lien or second-lien mortgage, deed of trust, security deed or
similar instrument on improved real property.
MORTGAGE-BACKED SECURITIES: Any security, including, without limitation, a
participation certificate, that is (a) guaranteed by GNMA that represents an
interest in a pool of mortgages, deeds of trusts or other instruments creating a
lien on real property; (b) issued by FNMA or FHLMC that represents interests in
such a pool; or (c) privately placed and represents undivided interests in or
otherwise supported by such a pool.
MORTGAGED PROPERTY: The real property securing repayment of the debt evidenced
by a Mortgage Note.
MORTGAGE LOAN: A Conventional Conforming Mortgage Loan, Government Mortgage
Loan, Jumbo Mortgage Loan, Super Jumbo Mortgage Loan, Expanded Criteria Mortgage
Loan, Subprime Mortgage Loan, Closed-End Second Lien Mortgage Loan, HELOC
Mortgage Loan or NONPERFORMING/SUBPERFORMING Mortgage Loan, which Mortgage Loan
may be either a Dry Mortgage Loan or a Wet Mortgage Loan.
MORTGAGE LOAN FILE: With respect to each Mortgage Loan, that file that contains
the Collateral Documents and is delivered to Lender or its Custodian.
MORTGAGE NOTE: A promissory note secured by a Mortgage and evidencing a Mortgage
Loan.
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MORTGAGOR: The obligor of a Mortgage Loan.
NONCOMPLIANT MORTGAGE LOAN: As of any date of determination, a Pledged Mortgage
Loan that has been:
(a) pledged as Collateral for more than the Maximum Dwell Time permitted,
given the type of Collateral, but less than the Maximum Dwell Time for
Tranche J;
(b) rejected by the Investor set forth in the related Purchase Commitment;
or
(c) determined to be ineligible for sale as a Mortgage Loan of the type
originally stipulated.
NONCOMPLIANT MORTGAGE LOAN FEE: A one-time fee, as set forth in the Commitment
Letter, payable by Borrower for each Pledged Mortgage Loan that is deemed to be
a Noncompliant Mortgage Loan.
NONPERFORMING/SUBPERFORMING MORTGAGE LOAN: A first or second lien mortgage loan
that when originated qualified as a Conventional Conforming Mortgage Loan,
Government Mortgage Loan, Expanded Criteria Mortgage Loan, Subprime Mortgage
Loan, Closed-End Second Lien Mortgage Loan or HELOC Mortgage Loan; provided,
however, that at the time of Advance (or subsequently if the mortgage loan
originally served as Collateral for another type of Advance and Lender, in its
sole discretion, has agreed to re-designate the mortgage loan as a
Nonperforming/Subperforming Mortgage Loan) has a history of late payments during
the past twelve months (the exact number permitted late payment to be determined
by Lender in its sole discretion) or is currently past due more than thirty (30)
days.
NOTE: The promissory note delivered by Borrower to Lender, substantially in the
form of EXHIBIT B hereto, and all renewals, extensions, increases, modifications
and rearrangements thereof.
OVER/UNDER ACCOUNT: That account maintained by Lender, as described in SECTION
3.5.
PERSON: Includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
PERSONAL IDENTIFICATION NUMBER OR PIN: An electronic identification number,
unique to Borrower, consisting of any combination of symbols, codes, letters or
numerals.
PLAN: Any multiemployer plan or single-employer plan as defined in section 4001
of ERISA, that is maintained and contributed to by (or to which there is an
obligation to contribute of), or at any time during the five (5) calendar years
preceding the date of this Agreement was maintained or contributed to by (or to
which there is an obligation to contribute of), Borrower or by a subsidiary of
Borrower or an ERISA Affiliate.
PLEDGED MORTGAGE LOAN: A Mortgage Loan that has been pledged as Collateral for
an Advance hereunder and not released to an Investor or Borrower pursuant to
SECTION 6.5.
POTENTIAL DEFAULT: The occurrence of any event or existence of any condition
that, but for the giving of notice, the lapse of time, or both, would constitute
an Event of Default.
POWER OF ATTORNEY: That certain power of attorney attached hereto as EXHIBIT N.
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PRINCIPAL AGREEMENTS: This Agreement, the Commitment Letter, the Note, the
Guarantee(s) and all other documents and instruments evidencing or securing the
Advances, as same may from time to time be supplemented, modified or amended.
PROCEEDS: Whatever is receivable or received when Collateral or proceeds is
sold, collected, exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary, and includes, without limitation, all rights to
payment, including return premiums, with respect to any insurance relating
thereto.
PURCHASE ADVICE: In connection with each wire transfer to be made to Lender by
Borrower or an Investor, a written or electronic notification setting forth (a)
the loan number assigned by Lender or last name of the Mortgagor for each
Mortgage Loan that secures an Advance in connection with which a payment is
being made; (b) the amount of the wire transfer to be applied to the Advance
secured by each such Mortgage Loan; and (c) the total amount of the wire.
PURCHASE COMMITMENT: A trade ticket or other written commitment, in form and
substance satisfactory to Lender, issued in favor of Borrower by an Investor
pursuant to which that Investor commits to purchase one or more Pledged Mortgage
Loans, along with the related correspondent or whole loan purchase agreement by
and between Borrower and the Investor, in form and substance satisfactory to
Lender, governing the terms and conditions of any such purchases.
QUALIFYING INVESTOR: A proposed purchaser of a Pledged Mortgage Loan that meets
certain investor requirements set forth by Lender, as may be amended from time
to time.
REPORTABLE EVENT: An event described in Section 4043(b) of ERISA with respect to
a Plan as to which the thirty (30) days notice requirement has not been waived
by the Pension Benefit Guaranty Corporation.
SETTLEMENT DATE: With respect to each Advance, the date on which Borrower or the
Investor, on behalf of Borrower, pays all amounts due in connection with the
purchase of the Pledged Mortgage Loan, as set forth in the related Purchase
Commitment.
SHIPPING FEE: That fee, as set forth in the Commitment Letter, payable by
Borrower to Lender for each Mortgage Loan File, or portion thereof, Lender
delivers to Borrower, an Investor or other designee.
STANDARD STATUS: As of any date of determination, the Pledged Mortgage Loan has
been pledged as Collateral for less than the Maximum Dwell Time and is not a
Noncompliant Mortgage Loan or a Defective Mortgage Loan.
SUBORDINATED DEBT: Debt of Borrower that has been subordinated as provided in
SECTION 7.1(A)(XII) or as otherwise approved by Lender.
SUBPRIME MORTGAGE LOAN: A first lien mortgage loan underwritten in accordance
with Borrower's underwriting guidelines for subprime mortgage loans, as same
have been approved by Lender.
SUPER JUMBO MORTGAGE LOAN: A first lien mortgage loan underwritten to the same
high standards as a Conventional Conforming Mortgage Loan except with respect to
the original principal balance, which is greater than one million and one
dollars ($1, 000,001) but less than one million five hundred thousand dollars
($1,500,000)
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TANGIBLE NET WORTH: With respect to any Person at any date, the excess of the
total assets over total liabilities of such Person on such date, each to be
determined in accordance with GAAP consistent with those applied in the
preparation of Borrower's financial statements less the sum of the following
(without duplication): (a) the book value of all investments in non-consolidated
subsidiaries, and (b) any other assets of Borrower and consolidated subsidiaries
that would be treated as intangibles under GAAP including, without limitation,
good will, research and development costs, trademarks, trade names, copyrights,
patents, rights to refunds and indemnification and unamortized debt discount and
expenses; provided further that, to the extent not already excluded, there shall
be excluded from Tangible Net Worth, those assets of any Person which, if such
Person were a HUD mortgagee, would be deemed by HUD to be non-acceptable in
calculating adjusted net worth in accordance with its requirements in effect as
of such date, as such requirements appear in the "Audit Guide for Use by
Independent Public Accountants in Audits of HUD-Approved Nonsupervised
Mortgagees, Loan Correspondents and Coinsuring Mortgagees" or any successor or
replacement audit guide published by HUD. Notwithstanding the foregoing,
servicing rights shall be included in the calculation of total assets.
TOTAL LIABILITIES: The total liabilities of any Person on any given date of
determination, to be determined in accordance with GAAP consistent with those
applied in the preparation of the Person's financial statements less the amount
of the "Credit Off Feature," if any, as set forth in the Commitment Letter.
TRANCHE A ADVANCE, TRANCHE B ADVANCE, TRANCHE C ADVANCE, TRANCHE D ADVANCE,
TRANCHE E ADVANCE, TRANCHE F ADVANCE, TRANCHE G ADVANCE, TRANCHE H ADVANCE AND
TRANCHE I ADVANCE: A disbursement by Lender under this Agreement that that is
secured by the corresponding type of Mortgage Loan set forth in SECTION 2.3(A).
TRANCHE A ADVANCE RATE, TRANCHE B ADVANCE RATE, TRANCHE C ADVANCE RATE, TRANCHE
D ADVANCE RATE. TRANCHE E ADVANCE RATE, TRANCHE F ADVANCE RATE, TRANCHE G
ADVANCE RATE, TRANCHE H ADVANCE RATE, TRANCHE I ADVANCE RATE AND TRANCHE J
ADVANCE RATE: With respect to each type of Advance, the corresponding advance
rate set forth in the Commitment Letter.
TRANCHE A MARGIN, TRANCHE B MARGIN, TRANCHE C MARGIN, TRANCHE D MARGIN, TRANCHE
E MARGIN, TRANCHE F MARGIN, TRANCHE G MARGIN, TRANCHE H MARGIN, TRANCHE I MARGIN
AND TRANCHE J MARGIN: With respect to each type of Advance, the corresponding
annual rate of interest set forth in the Commitment Letter that shall be added
to the Applicable Rate to determine the annual rate of interest for such
Advance.
TRANCHE A SUBLIMIT, TRANCHE B SUBLIMIT, TRANCHE C SUBLIMIT, TRANCHE D SUBLIMIT,
TRANCHE E SUBLIMIT, TRANCHE F SUBLIMIT, TRANCHE G SUBLIMIT, TRANCHE H SUBLIMIT,
TRANCHE I SUBLIMIT AND TRANCHE J SUBLIMIT: With respect to each type of Advance,
the aggregate amount of credit at any time outstanding agreed to be made
available by Lender to Borrower, as set forth in the Commitment Letter.
TRANCHE SUBLIMIT: Tranche A Sublimit, Tranche B Sublimit, Tranche C Sublimit,
Tranche D Sublimit, Tranche E Sublimit, Tranche F Sublimit, Tranche G Sublimit,
Tranche H Sublimit, Tranche I Sublimit or Tranche J Sublimit.
TRUST RECEIPT: A trust receipt substantially in the form of EXHIBIT O hereto.
UNDERWRITER APPROVAL: Written evidence, in form and substance acceptable to
Lender, that a Pledged Mortgage Loan has been underwritten to the satisfaction
of the Investor issuing the applicable Purchase Commitment.
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UNUSED FACILITY FEE: A fee, as set forth in the Commitment Letter, payable by
Borrower quarterly in arrears based upon the unused portion of the Aggregate
Credit Limit; provided, however, that no fee shall be due if the average
difference between the Aggregate Credit Limit and actual outstanding principal
amount of all Advances, calculated on a daily basis, during such quarter is less
than that percent of the Aggregate Credit Limit set forth in the Commitment
Letter.
VA: The Department of Veterans Affairs and any successor thereto.
WAREHOUSE CREDIT: The aggregate amount of credit, committed and uncommitted,
available to Borrower through warehouse lines of credit, repurchase facilities
or similar mortgage finance arrangements.
WET DEFICIENCY FEE: A fee, as set forth in the Commitment Letter, payable by
Borrower for each calendar day that Borrower fails to deliver to Lender or its
Custodian the Collateral Documents relating to any Wet Mortgage Loan pledged as
Collateral following expiration of the Wet Mortgage Loans Maximum Dwell Time.
WET MORTGAGE LOAN: A mortgage loan as to which Lender makes an Advance to
Borrower by delivering funds to the applicable Closing Agent prior to receipt by
Lender or its Custodian of the related Collateral Documents; provided, however,
that Borrower has agreed to deliver to Lender such Collateral Documents in
accordance with SECTION 3.3(B).
WET MORTGAGE LOANS MAXIMUM DWELL TIME: That period of time, as set forth in the
Commitment Letter, by which Borrower must deliver to Lender or its designee the
Collateral Documents for a Wet Mortgage Loan.
WET MORTGAGE LOANS SUBLIMIT: The maximum aggregate principal amount of Advances
that may be secured by Wet Mortgage Loans at any time, as set forth in the
Commitment Letter.
WIRE TRANSFER FEE: That fee, as set forth in the Commitment Letter, payable by
Borrower for each disbursement by wire transfer made to Borrower or its Approved
Payee or received by Lender from Borrower or its Investor or otherwise related
to an Advance.
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