FIRST BANK NATIONAL ASSOCIATION
WAREHOUSING CREDIT FACILITY
FOR
EXPRESS AMERICA MORTGAGE CORPORATION
DATED AS OF JANUARY 25, 1996
WAREHOUSING CREDIT AGREEMENT
THIS AGREEMENT, dated as of January 25, 1996, by and between
EXPRESS AMERICA MORTGAGE CORPORATION (the "Company"), a Delaware corporation,
and FIRST BANK NATIONAL ASSOCIATION (the "Bank"), a national banking
association.
The parties hereto agree as follows:
Section 1. DEFINITIONS AND ACCOUNTING TERMS.
1.01 Definitions. As used herein, the following terms shall have
the following respective meanings (such meanings to be equally applicable to
both the singular and plural form of the terms defined):
"Advance": a cash advance to or for the account of the Company
under the Commitment.
"Aggregate Outstandings": as of a date of determination thereof,
the unpaid principal balance of the Note as of such date.
"Affiliate": when used with reference to any Person, (a) each
Person that, directly or indirectly, controls, is controlled by or is under
common control with, the Person referred to, (b) each Person which beneficially
owns or holds, directly or indirectly, ten percent or more of any class of
voting stock of the Person referred to (or if the Person referred to is not a
corporation, ten percent or more of the equity interest), (c) each Person, ten
percent of more of the voting stock (or if such Person is not a corporation, ten
percent or more of the equity interest) of which is beneficially owned or held,
directly or indirectly, by the Person referred to, and (d) each of such Person's
officers, directors, joint venturers and general partners. The term control
(including the terms "controlled by" and "under common control with") means the
possession, directly, of the power to direct or cause the direction of the
management and policies of the Person in question.
"Agreement": this Credit Agreement, as amended, supplemented,
restated or otherwise modified and in effect from time to time in writing by the
Company and the Bank.
"Applicable Margin": with respect to:
(a) Reference Rate Borrowings, 1% per annum; and
(b) Floating Eurodollar Rate Borrowings, 2.5% per annum.
"Average Daily Note Balance": with respect to any Interest Period,
the average daily unpaid principal balance of the Note during such Interest
Period.
"Average Daily Qualifying Balances": with respect to an Interest
Period, the average daily amount of Qualifying Balances on deposit with the Bank
during such Interest Period.
"Average Daily Reserve Factor": with respect to any Interest
Period, the average daily amount of the Reserve Factor in effect during such
Interest Period.
"Balances Deficiency": as such term is defined in Section
2.03(a)(i).
"Borrowing": a Fixed Rate Borrowing, a Floating Eurodollar Rate
Borrowing or a Reference Rate Borrowing.
"Borrowing Base": as of a date of determination, an amount equal
to 100% of the Collateral Value of the Collateral as determined by the Bank from
its records.
"Borrowing Base Certificate": the certificate in the form of
Exhibit 1.01-A hereto.
"Borrowing Date": the Business Day on which the Bank makes a
Borrowing.
"Business Day": a day on which the Bank is open for the
transaction of business in its main office in Minneapolis, Minnesota.
"Capitalized Lease Obligations": all lease obligations which have
been or are required to be, in accordance with GAAP, capitalized on the balance
sheet of the lessee.
"Closing Agent": as such term is defined in the Pledge and
Security Agreement.
"Code": the Internal Revenue Code of 1986, together with all
amendments from time to time thereto.
"Collateral": as such term is defined in the Pledge and Security
Agreement.
"Collateral Account": account number 1731-0096-9620 maintained
with the Bank, which shall be under the sole dominion and control of the Bank
and with respect to which the Company shall have no withdrawal or order rights.
"Collateral Documents": the Pledge and Security Agreement and all
agreements, instruments, documents and other papers creating, evidencing or
representing the Collateral and/or Security Interests therein.
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"Collateral Value": with respect to Collateral, as determined in
accordance with the formula contained in Exhibit 1.01-B hereto.
"Commitment": as such term is defined in Section 2.01.
"Commitment Amount": at the time of any determination, the lesser
of (a) $2,500,000 and (b) the amount to which the amount of the Commitment shall
have been reduced pursuant to Section 4.05(b).
"Commitment Termination Date": the earliest of (a) December 31,
1996, (b) the date on which the Commitment terminates or the Commitment Amount
is reduced to zero pursuant to Section 4.05 hereof, and (c) the date on which
the Commitment terminates or is terminated pursuant to Section 12.02.
"Compliance Certificate": a certificate in the form of Exhibit
1.01-C hereto.
"Confirmation of Borrowing/Paydown/Conversion": a Confirmation of
Borrowing/Paydown/Conversion in the form of Exhibit 1.01-D hereto.
"Deficiency Fee": as such term is defined in Section 2.03.
"Effective Date": the date on or after the Signing Date on which
all of the conditions set forth in Section 11 shall have been met or waived in
writing by the Bank.
"Effective Period": the period from the Effective Date to the
Commitment Termination Date.
"ERISA": the Employee Retirement Income Security Act of 1974,
together with all amendments from time to time thereto.
"Eurodollar Reserve Percentage": as of any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System, with deposits comparable in amount to those held by the Bank, in
respect of "Eurocurrency Liabilities" as such term is defined in Regulation D.
The rate of interest applicable to any outstanding Floating Eurodollar Rate
Borrowings shall be adjusted automatically on and as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Event of Default": as such term is defined in Section 12.01.
"FHA": the Federal Housing Administration and any successor
thereto.
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"FHLMC": the Federal Home Loan Mortgage Corporation and any
successor thereto.
"Firm Take-Out Commitment": a current, written commitment issued
to the Company by an Investor to purchase within a specified period of time
Mortgage Loans under which commitment the Company is obligated to sell said
Mortgage Loans.
"Fixed Rate": as such term is defined in Section 2.03(a)(i).
"Fixed Rate Borrowing": a portion of the outstanding principal
balance of the Note that bears interest as provided in Section 2.03(a)(i).
"Floating Eurodollar Rate Borrowing": a portion of the outstanding
principal balance of the Note with respect to which the interest rate is
determined by reference to the Floating Reserve-Adjusted Eurodollar Rate.
"Floating Reserve-Adjusted Eurodollar Rate": on any date of
determination, the rate (rounded upward, if necessary, to the next higher one
hundredth of one percent) determined by dividing the Floating Eurodollar Rate
for such date by 1.00 minus the Eurodollar Reserve Percentage. For purposes
hereof, "Floating Eurodollar Rate" shall mean, for any day, a rate per annum
equal to the 1-month Eurodollar rate (LIBOR) for United States dollars displayed
on the Telerate Systems, Inc. screen, page 3750 (or other applicable page).
"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 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, which are applicable to the circumstances as of the date of
determination.
"GNMA": the Government National Mortgage Association and any
successor thereto.
"Guarantee": any obligation, contingent or otherwise, of any
Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or otherwise, (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor, (b)
to purchase property, securities, or
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services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness, (c) to maintain working capital, equity capital,
or other financial statement condition of the primary obligor so as to enable
the primary obligor to pay such Indebtedness or otherwise to protect the owner
thereof against loss in respect thereof, or (d) entered into for the purpose of
assuring in any manner the owner of such Indebtedness of the payment of such
Indebtedness or to protect such owner against loss in respect thereof; provided,
that the term "Guarantee" shall not include endorsements for collection or
deposit, in each case in the ordinary course of business.
"Guarantor": Express America Holdings Corporation, a Delaware
corporation.
"Guaranty": the Guaranty of even date herewith from the Guarantor
in favor of the Bank, as the same may be amended, supplemented, restated or
otherwise modified from time to time in writing by the Guarantor and the Bank.
"HUD": the Department of Housing and Urban Development or any
successor thereto.
"Immediately Available Funds": funds with good value on the day
and in the city in which payment is received.
"Indebtedness": with respect to any Person at any time, without
duplication, all obligations of such Person which, in accordance with GAAP,
consistently applied, should be classified as liabilities on a balance sheet of
such Person, but in any event shall include, without limitation: (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all obligations of such Person upon which interest charges are customarily paid
or accrued, (d) all obligations of such Person under conditional sale or other
title retention agreements relating to property purchased by such Person, (e)
all obligations of such Person issued or assumed as the deferred purchase price
of property or services, (f) all obligations of others secured by any Lien on
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of such
Person, (h) all obligations of any partnership or joint venture as to which such
Person is or may become personally liable, (i) all Guarantees by such Person of
Indebtedness of others, and (j) all liabilities or Indebtedness of others
assumed by such Person or in respect of which such Person is secondarily or
contingently liable (other than by endorsement of instruments in the course of
collection) whether by reason of any agreement to acquire such Indebtedness or
to supply or advance sums or otherwise.
"Interest Payment Date": the first Business Day of each month.
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"Interest Period": the period beginning on (and including) the
first day of each calendar month and ending on (and including) the last day of
such calendar month.
"Investment": as applied to any Person, any direct or indirect
purchase or other acquisition by that Person of, or a beneficial interest in,
stock, bonds, notes or other securities of any other Person, or any direct or
indirect loan, advance (other than advances to employees for moving and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by that Person to any other Person, including
all Indebtedness and accounts receivable from that other Person which are not
current assets or did not arise from sales to that other Person in the ordinary
course of business. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment.
"Investor": FNMA, FHLMC, a bank, trust company, savings and loan
association, pension fund, governmental authority, insurance company or other
responsible and substantial institutional investor, dealer or securities broker
(other than FNMA or FHLMC) listed by the Company and approved by the Bank.
"Leverage Ratio": at the time of any determination thereof, the
ratio of (a) the Company's Total Liabilities to (b) the Company's Net Worth.
"Lien": any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument, in, of, or on
any of the assets or properties, now owned or hereafter acquired, of the
Company, whether arising by agreement or operation of law.
"Material Adverse Effect": shall mean, with respect to any
circumstance, condition or event, that such circumstance, condition or event (a)
has, or may be reasonably expected to have, an adverse effect upon the validity
or enforceability of this Agreement or any other Transaction Document, (b)
adversely affects the present or reasonably foreseeable prospective financial
condition or operations of the Company or any Subsidiary in any material respect
or (c) materially impairs, or may be reasonably expected to materially impair,
the ability of the Company to pay its obligations under this Agreement, the Note
or any other Transaction Document.
"Mortgage": a mortgage or deed of trust on real property which has
been improved by a completed single family (i.e., one to four family units)
which secures a Mortgage Loan.
"Mortgage Loan": any loan or advance evidenced by a Mortgage Note
and secured by a Mortgage and which has a term not exceeding 30 years.
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"Mortgage Note": a promissory note evidencing a Mortgage Loan and
which is secured by a Mortgage.
"Mortgage-backed Security": a security (including, without
limitation, a participation certificate) that is an interest in a pool of
Mortgage Notes or is secured by such an interest and is guaranteed by GNMA or is
issued or guaranteed by FNMA or FHLMC.
"NationsBanc": NationsBanc Mortgage Corporation, its successors
and assigns.
"NationsBanc Agreement": the Asset Purchase Agreement dated as of
August 27, 1994 between the Company and NationsBanc, as the same may have been
and may hereafter be amended, supplemented, restated or otherwise modified and
in effect from time to time.
"NationsBanc Documents": the NationsBanc Agreement, NationsBanc
Note and all other agreements, instruments, certificates and other documents
executed and delivered pursuant to or in connection therewith, as the same may
have been and may hereafter be amended supplemented, restated or otherwise
modified and in effect from time to time.
"NationsBanc Note": the Non-Negotiable Promissory Note dated
September 30, 1994 in the original principal amount of $4,205,097 made by
NationsBanc and payable to the Company.
"Net Worth": as of a date of determination, the sum of the capital
stock, paid in surplus and earned surplus (or deficit) of the Company (excluding
stock of the Company held by the Company).
"Note": as such term is defined in Section 2.02.
"Obligations": as such term is defined in Section 8.
"Person": any natural person, corporation, partnership, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
"Plan": each employee benefit plan (whether now in existence or
hereafter instituted), as such term is defined in Section 3 of ERISA, maintained
for the benefit of employees, officers or directors of the Company.
"Pledge and Security Agreement": the Pledge and Security Agreement
of even date herewith between the Company and the Bank, as the same may be
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amended, supplemented, restated or otherwise modified from time to time in
writing by the Company and the Bank.
"Qualifying Balances": at the time of any determination,
interest-free collected deposit balances (in addition to those which the Bank
determines to be necessary to support FDIC insurance assessments and other
banking services provided to the Company and in addition to those deposited
pursuant to Section 5(b)) deposited by the Company with the Bank.
"Reference Rate": at the time of any determination thereof, the
rate per annum which is most recently publicly announced by the Bank as its
"reference rate," which may be a rate at, above or below which the Bank lends to
other Persons.
"Reference Rate Borrowing": a portion of the outstanding principal
balance of the Note that bears interest at a rate based upon the Reference Rate.
"Regulatory Change": any change after the Effective Date in United
States federal, state or foreign laws or regulations or the adoption or making
after such date of any interpretations, directives or requests applying to a
class of banks including the Bank under any United States federal, state or
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Required Balances Amount": as such term is defined in Section
2.03(a)(i).
"Reserve Factor": as of a date of determination, a number equal to
one (1) minus the percentage (expressed as a decimal rather than a percentage)
stipulated by Federal Reserve Board Regulation D (12 CFR Section 204), as such
regulation may be amended from time to time, or by any regulation promulgated to
replace said Regulation D, as the highest marginal percentage of net demand
deposits required to be maintained on reserve by the Bank on the date of
determination.
"Security Interest": each Lien, security interest, pledge,
hypothecation and other encumbrance now and hereafter granted by the Company in
favor of the Bank in the Collateral.
"Servicing Portfolio": at the time of any determination, the
aggregate unpaid principal balance of all Mortgage Notes (including Mortgage
Notes subject to Mortgage-backed Securities) as to which the Company owns the
contractual right to service for the owner of such Mortgage Notes, excluding,
however, those Mortgage Notes serviced by the Company but for which the Company
does not own the servicing rights.
"Signing Date": the day on which counterparts of this Agreement,
signed by the Company and the Bank, shall have been delivered to the Bank.
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"Standby Take-Out Commitment": a current, written commitment
issued to the Company by an Investor to purchase within a specified time period
Mortgage Loans under which commitment the Company has the right, but is not
obligated, to sell said Mortgage Loans.
"Subordinated Indebtedness": Indebtedness of the Company which is
subordinated to Indebtedness of the Company to the Bank in a manner and to an
extent which the Bank has approved in writing prior to the creation of such
Indebtedness.
"Subsidiary": any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar functions are at the
time owned directly or indirectly by the Company.
"Take-Out Commitment": a Firm Take-Out Commitment or a Standby
Take-Out Commitment, as the case may be.
"Transaction Documents": this Agreement, the Collateral Documents,
the Guaranty and the Note.
"Total Liabilities": at the time of any determination, the total
liabilities of the Company as determined in accordance with GAAP.
"Unmatured Event of Default": any event which with the lapse of
time or with notice to the Company and lapse of time would constitute an Event
of Default.
"VA": The Veterans Administration and any successor thereto.
1.02 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP on
a basis consistent with the audited financial statements referred to in Section
9.03.
1.03 Other Definitional Provisions. In this Agreement, words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments shall be deemed
to include all subsequent amendments thereto or changes therein entered into in
accordance with their respective terms; and references to Persons include their
permitted successors and assigns.
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Section 2. THE CREDIT.
2.01 Commitment. Upon the terms and subject to the conditions
hereinafter set forth, during the Effective Period the Bank, from time to time
at the request of the Company, will lend (and upon prepayment, relend) to the
Company amounts requested by the Company up to but not exceeding at any time
outstanding the Commitment Amount (the "Commitment"); provided, that the Bank
shall not be obligated to make any Advance in an amount which would cause
Aggregate Outstandings to exceed either the Commitment Amount or the Borrowing
Base.
2.02 Note Evidencing Advances. Advances shall be evidenced by the
promissory note of the Company (the "Note") substantially in the form of Exhibit
2.02 hereto. The Note shall mature on the Commitment Termination Date. The
aggregate amount of the Advances made under the Note less repayments of
principal thereof shall be the principal amount owing and unpaid on the Note.
The principal amount of each Advance and all principal payments and prepayments
thereof may be noted by the Bank on the schedule attached to the Note and shall
be entered by the Bank on its ledgers and computer records. The entries made by
the Bank on its ledgers and computer records and any notations made by the Bank
on the schedule annexed to the Note shall be presumed to be accurate until the
contrary is established.
2.03 Interest on the Note; Balances Deficiency Fees; Borrowing
Designations.
(a) Interest Rates; Balances Deficiency Fees. The Company will pay
the Bank interest on the unpaid principal balance of each Advance from time to
time outstanding as follows:
(i) With respect to Fixed Rate Borrowings, at the per annum
rate of 2.50% (the "Fixed Rate"); provided, however, that to
induce the Bank to offer the Fixed Rate, the Company agrees to
maintain on deposit with the Bank for each Interest Period for
which the Fixed Rate is in effect Average Daily Qualifying
Balances in an amount (for any such Interest Period, the "Required
Balances Amount") equal to the Average Daily Note Balance for such
Interest Period divided by the Average Daily Reserve Factor for
such Interest Period. The Bank will determine for each Interest
Period the amount of Average Daily Qualifying Balances on deposit
with the Bank for such Interest Period and the amount, if any, by
which said Average Daily Qualifying Balances exceeds (any such
excess being referred to as a " Balances Surplus") or is less than
(any such deficiency being referred to as a "Balances Deficiency")
the Required Balances Amount for such Interest Period. Any
Balances Surplus or Balances Deficiency for any Interest Period
will be carried forward and applied to increase or reduce, as the
case may be, Balances Surpluses or Balances Deficiencies
determined for subsequent Interest Periods beginning in the same
calendar year. If, as of
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the last day of the last Interest Period beginning in a calendar
year, a net Balances Surplus exists, such net Balances Surplus
shall be disregarded and shall not be carried forward to
succeeding Interest Periods. If, however, a net Balances
Deficiency exists as of the last day of said last Interest Period,
the Company shall pay to the Bank upon demand a fee ("Deficiency
Fee") in accordance with the following formula:
DF = BD x ADRR) x 31/360
where: "DF" is the Deficiency Fee;
"BD" is said net Balances Deficiency; and
"ADRR" is the average daily Reference Rate determined for
the last Interest Period in such calendar year.
(ii) with respect to Reference Rate Borrowings, the
Reference Rate plus the Applicable Margin, as adjusted
automatically on and as of the effective date of any change in the
Reference Rate; and
(iii) with respect to Floating Eurodollar Rate Borrowings,
the Floating Reserve-Adjusted Eurodollar Rate plus the Applicable
Margin, as adjusted automatically on and as of the date of any
change in the Floating Reserve-Adjusted Eurodollar Rate;
provided, however, that upon the occurrence and during the continuance of
an Event of Default, the outstanding principal balance of the Note shall
bear interest at a rate or rates equal to the rate or rates that would
otherwise be applicable under clauses (i), (ii) and/or (iii) of this
Section 2.03(a), as the case may be, plus, in each case, 2% per annum.
(b) Payment of Interest and Balances Deficiency Fees.
Interest accrued on the Note through the last day of each calendar month
shall be payable on the first Business Day of the next succeeding
calendar month and on the Commitment Termination Date. Any Balances
Deficiency Fee payable hereunder shall be payable monthly after the end
of each calendar month within two Business Days after receipt by the
Company from the Bank of a statement therefor containing the calculations
made to determine such Balances Deficiency Fee, which statement shall be
conclusive absent manifest error.
(c) Borrowing Designations by Company. As provided in
Section 2.01(b) and 2.02(b), respectively, the Company shall designate,
with respect to each Advance to be funded by the Bank, the portion or
portions thereof to be made initially as a Fixed Rate Borrowing, as a
Reference Rate Borrowing
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and/or as a Floating Eurodollar Rate Borrowing. The Company shall have
the further right to designate from time to time that all or any portion
of any outstanding Borrowing be converted into Borrowing of the same or
another type (i.e., Floating Eurodollar Rate Borrowings, Fixed Rate
Borrowings or Reference Rate Borrowings, as the case may be). Borrowing
designations by the Company under this Section 2.03(c) shall be subject
to the following additional conditions:
(i) Each such Borrowing designation shall be made by the
Company to the Bank by telephone by not later than 12:00 noon
(Minneapolis time) on the day on which the Borrowing is to become
effective, and the Company shall promptly confirm such designation
by delivering to the Bank a duly executed and completed
Confirmation of Borrowing/Paydown/Conversion.
(ii) Any portion of the outstanding principal balance of
the Note for which no other type of Borrowing has been designated
and is in effect shall be a Reference Rate Borrowing.
(iii) Each Fixed Rate Borrowing designated by the Company
shall be effective only with respect to a specified Interest
Period (or the remaining portion of such Interest Period, if such
designation is to become effective after the first day of such
Interest Period).
(iv) The Bank shall be not be required to make any Fixed
Rate Borrowing, or to convert any Borrowing to a Fixed Rate
Borrowing, if, after giving effect thereto, the Average Daily
Qualifying Balances maintained by the Company at the Bank would
be, in the reasonable opinion of the Bank, substantially less than
the aggregate amount of Fixed Rate Borrowings owed to the Bank.
(v) The amount of any Borrowing which may be made as or
converted to a Floating Eurodollar Rate Borrowing by the Bank
shall not be less than such minimum amount, if any, as the Bank
may establish from time to time in its sole discretion.
Section 3. METHOD OF BORROWING; CERTAIN REPRESENTATIONS.
3.01 Method of Borrowing. The Company shall give the Bank
telephonic notice of each request for an Advance not later than 12:00 noon
(Minneapolis time) on the Borrowing Date on which such Advance is to be made.
Such telephonic notice shall be irrevocable and shall specify the amount of the
requested Advance, the Borrowing Date therefor, which shall be a Business Day,
and the name and address of, and payment instructions for, the Closing Agent to
which payment of such Advance should be made for the account of the Company. The
Company shall
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promptly send to the Bank a Confirmation of Borrowing/Paydown/Conversion
confirming any such telephonic notice requesting an Advance. Provided that all
applicable conditions set forth in Sections 2 and 11 and this Section 3 have
been met, the Bank shall fund such Advance by making payment to such Closing
Agent, for the account of the Company, in accordance with the notice received by
the Bank from the Company.
3.02 Certain Representations. Each such request for an Advance
shall be deemed to be the representation of the Company and of the officer
making the request that (a) no Event of Default has occurred and no Unmatured
Event of Default has occurred or will exist upon the making of the requested
Advance, and (b) the representations and warranties contained in Section 9 are
true and correct with the same force and effect as if made on the date of such
request.
Section 4. PAYMENT OF PRINCIPAL AND INTEREST; TERMINATION OF
COMMITMENT AND REDUCTION OF COMMITMENT AMOUNT.
4.01 Mandatory Payments. Interest on the Note shall be payable on
each Interest Payment Date, upon prepayment in full of the Note and on the
Commitment Termination Date. Principal of the Note shall be due and payable in
full on the Commitment Termination Date.
4.02 Mandatory Prepayments. If, at any time, the Aggregate
Outstandings shall exceed the Borrowing Base, the Company, upon receipt of a
telephonic demand from the Bank will, within one Business Day after receipt of
such telephonic demand, prepay the principal of the Note in an amount sufficient
so that after such prepayment such condition shall not continue to exist.
4.03 Optional Prepayments. The Company shall have the right to
prepay the Note in whole or in part at any time and from time to time without
premium or penalty.
4.04 Confirmation. The Company shall promptly send the Bank a
Confirmation of Borrowing/Paydown/Conversion confirming any payment or
prepayment of the Note.
4.05 Termination of the Commitment and Reduction of the Commitment
Amount.
(a) Termination. The Company shall have the right at any time
prior to any termination of the Commitment pursuant to Section 12.02 to
terminate the Commitment by giving the Bank at least 30 days' notice in
writing which notice shall be deemed to have been given when received by
the Bank.
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(b) Reduction. The Company shall have the right at any time
upon at least 30 days' prior written notice to the Bank to reduce the
Commitment Amount, which notice shall be deemed to have been given when
received by such other party; provided, that the amount of each such
reduction shall be in a minimum amount of $100,000 or an integral
multiple of $100,000 in excess thereof and that no such reduction shall
reduce the Commitment Amount to less than the Aggregate Outstandings.
(c) Effect. Once the Commitment has been terminated or the
Commitment Amount reduced, neither may be reinstated.
4.06 Time of Payments. All payments and prepayments by the Company
of principal of and interest on the Note, and all fees, expenses and other
obligations under this Agreement payable to the Bank shall be made in
Immediately Available Funds not later than 2:00 p.m. (Minneapolis time) on the
dates called for under this Agreement at the main office of the Bank in
Minneapolis, Minnesota. Funds received on any such date but after such hour
shall be deemed, solely for the purpose of calculating interest and not for the
purpose of determining the existence of an Event of Default or Unmatured Event
of Default, to have been received by the Bank on the next Business Day. The
Company hereby authorizes the Bank to, and the Bank will, charge the Collateral
Account in an amount equal to any payment of interest when due and payable to
the Bank under the Note, and the Company agrees to maintain on deposit in the
Collateral Account collateral funds in amounts sufficient to make such payments
as and when due. In addition, the Company hereby authorizes the Bank, to the
extent any such payment is not made on the date called for under this Agreement
or the Note, as the case may be, to charge the Collateral Account in an amount
equal to any such payment or prepayment of principal, interest, non-use fee,
account maintenance and other obligations then due and payable to the Bank under
this Agreement and the Note, as the case may be. If any payment of principal of
or interest on the Note or any fee payable hereunder becomes due and payable on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall in such case be
included in the computation of any interest on such principal payment.
4.07 Computations. Interest on the Note and any fees hereunder
shall be computed utilizing the actual number of days elapsed in a year of 360
days.
Section 5. FACILITY FEES.
The Company will pay to the Bank a facility fee at the rate of
one-fourth of one percent (0.25%) per annum on the average daily Commitment
Amount (whether used or unused), payable monthly in arrears on the first
Business Day of each month.
-14-
Section 6. PROTECTION OF BANK'S RATE OF RETURN, ETC.
6.01 Increased Capital Requirements. In the event that, as a
result of any Regulatory Change, compliance by the Bank with any applicable law
or governmental rule, requirement, regulation, guideline or order (whether or
not having the force of law) regarding capital adequacy has the effect of
reducing the rate of return on the Bank's capital or on the capital of the
Bank's parent corporation as a consequence of the Commitment or amount
outstanding under the Note to a level below that which the Bank or its parent
would have achieved but for such compliance (taking into consideration the
Bank's policies and the policies of the Bank's parent corporation with respect
to capital adequacy), then from time to time the Company shall pay to the Bank
or its parent such additional amount or amounts as will compensate the Bank or
its parent for such reduction. A certificate as to the amount of any such
reduction (including calculations in reasonable detail showing how the Bank
computed such reduction and a statement that the Bank has not allocated to the
Commitment or the amount outstanding under the Note a proportionately greater
amount of such reduction than is attributable to each of its other commitments
to lend or to each of its other outstanding credit extensions that are affected
similarly by such compliance by the Bank or its parent, whether or not the Bank
allocates any portion of such reduction to such other commitments or credit
extensions) shall be furnished promptly by the Bank to the Company, which
certificate shall be conclusive absent manifest error.
6.02 Provisions Relating to Floating Eurodollar Rate Borrowings
and Fixed Rate Borrowings.
(a) Interest Rate Not Ascertainable, Etc. If, on the date for
determining the Floating Reserve-Adjusted Eurodollar Rate in respect of
any Floating Eurodollar Rate Borrowing, the Bank determines (which
determination shall be conclusive and binding, absent manifest error)
that:
(i) in the case of a Floating Eurodollar Rate Borrowing,
deposits in dollars (in the applicable amount) are not being made
available to the Bank in the interbank Eurodollar market, or
(ii) in the case of a Floating Eurodollar Rate Borrowing,
the Floating Reserve-Adjusted Eurodollar Rate will not adequately
and fairly reflect the cost to the Bank of funding or maintaining
such Floating Eurodollar Rate Borrowing, or
(iii) in the case of a Fixed Rate Borrowing, the Fixed Rate
will not adequately and fairly compensate the Bank for the cost of
funding or maintaining such Fixed Rate Borrowing,
-15-
then the Bank shall forthwith give notice to the Company of such
determination, whereupon the obligation of the Bank to make or continue,
or to convert any Borrowings to, Fixed Rate Borrowings or Floating
Eurodollar Rate Borrowings, as the case may be, shall be suspended until
the Bank notifies the Company, that the circumstances giving rise to such
suspension no longer exist. Outstanding Fixed Rate Borrowings or Floating
Eurodollar Rate Borrowings affected by any such condition shall thereupon
automatically be converted to Reference Rate Borrowings.
(b) Increased Cost. If, after the date hereof, any Regulatory
Change or compliance with any request or directive (whether or not having
the force of law) of any governmental authority, central bank or
comparable agency:
(i) shall subject the Bank to any tax, duty or other
charge with respect to Fixed Rate Borrowings or Floating
Eurodollar Rate Borrowings or its obligation to make Fixed Rate
Borrowings or Floating Eurodollar Rate Borrowings, or shall change
the basis of taxation of payment to the Bank of the principal of
or interest on Fixed Rate Borrowings or Floating Eurodollar Rate
Borrowings or any other amounts due under this Agreement in
respect of Fixed Rate Borrowings or Floating Eurodollar Rate
Borrowings or its obligation to make Fixed Rate Borrowings or
Floating Eurodollar Rate Borrowings (except for changes in the
rate of tax on the overall net income of the Bank imposed by the
laws of the United States or any jurisdiction in which the Bank's
principal office is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit, capital requirement or similar
requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System,
but excluding any such requirement to the extent included in
calculating the Fixed Rate, the Floating Reserve-Adjusted
Eurodollar Rate or the Average Daily Qualifying Balances, as the
case may be) against assets of, deposits with or for the account
of, or credit extended by, the Bank or shall impose on the Bank or
on the United States market for certificates of deposit any other
condition affecting, Fixed Rate Borrowings or Floating Eurodollar
Rate Borrowings or its obligation to make Fixed Rate Borrowings or
Floating Eurodollar Rate Borrowings;
and the result of any of the foregoing is to increase the cost to the
Bank of making or maintaining any Fixed Rate Borrowing or Floating
Eurodollar Rate Borrowing, or to reduce the amount of any sum received or
receivable by the Bank under this Agreement or under the Note, then,
within 10 days after written demand by the Bank, delivered to the
Company, the Company shall pay to the Bank such additional amount or
-16-
amounts as will compensate the Bank for such increased cost or reduction.
A certificate of the Bank claiming compensation under this Section
6.02(b), setting forth the additional amount or amounts to be paid to it
hereunder and stating in reasonable detail the basis for the charge and
the method of computation, shall be conclusive in the absence of manifest
error. In determining such amount, the Bank may use any reasonable
averaging and attribution methods. Failure on the part of the Bank to
demand compensation for any increased costs or reduction in amounts
received or receivable with respect to any period shall not constitute a
waiver of the Bank's rights to demand compensation for any increased
costs or reduction in amounts received or receivable in any subsequent
period.
(c) Illegality. If, after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by the
Bank with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall make
it unlawful or impossible for the Bank to make, maintain or fund Fixed
Rate Borrowings or Floating Eurodollar Rate Borrowings, the Bank shall
notify the Company, whereupon the obligation of the Bank to make Fixed
Rate Borrowings or Floating Eurodollar Rate Borrowings, as the case may
be, shall be suspended until the Bank notifies the Company that the
circumstances giving rise to such suspension no longer exist. If the Bank
determines that it may not lawfully continue to maintain any Fixed Rate
Borrowings or Floating Eurodollar Rate Borrowings, all of the affected
Borrowings shall be automatically converted to Reference Rate Borrowings
as of the date of the Bank's notice.
Section 7. SETOFF. The Company hereby irrevocably authorizes the
Bank to set off the liability of the Company on the Note and under this
Agreement and the other Transaction Documents against all deposits and credits
of the Company with, and any and all claims of the Company against, the Bank at
any time outstanding, excluding deposits of the Company with the Bank which the
Company holds in escrow, as custodian or in trust for the benefit of third
parties or in which a third party has a security interest.
Section 8. COLLATERAL SECURITY. To secure the payment of the Note
and all other liabilities of the Company under this Agreement and the other
Transaction Documents (collectively, the "Obligations") the Company from time to
time shall grant to the Bank a Security Interest in the NationsBanc Note and
such of its Mortgage Loans as the Company shall select. All Collateral shall be
subject to, and be governed by, the terms and conditions of the Pledge and
Security Agreement.
If no Event of Default or Unmatured Event of Default has occurred
and is continuing, the Bank, at the request of the Company, shall release its
Security Interest in any Mortgage Loan included in the Collateral; provided,
that after giving effect to any such requested release, the Borrowing Base
(including that attributable
-17-
to any Collateral given in substitution of the Mortgage Loan requested to be
released) shall not be less than the Aggregate Outstandings.
Section 9. REPRESENTATIONS AND WARRANTIES. To induce the Bank to
extend the Commitment and to make Advances thereunder, the Company represents,
covenants and warrants to the Bank that:
9.01 Formation, Powers and Good Standing.
(a) Formation and Powers. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Arizona and has all requisite corporate power and authority to
own and operate its properties, to carry on its business as now conducted
and proposed to be conducted, to enter into this Agreement, the Pledge
and Security Agreement and the other Transaction Documents, to issue the
Note and to carry out the transactions contemplated hereby and thereby.
(b) Good Standing. The Company is in good standing wherever
necessary to carry on its business and operations and in all
jurisdictions in which the failure to be in good standing would
permanently preclude the Company from enforcing its rights with respect
to any material asset or expose the Company to any material liability.
(c) Subsidiaries, Joint Ventures and Partnerships. Except
as set forth in Exhibit 9.01(c) hereto, the Company has no Subsidiaries
and is a member of no joint ventures or partnerships.
9.02 Authorization of Borrowing, etc.
(a) Authorization of Borrowing. The execution, delivery and
performance by the Company of each Transaction Document and the issuance,
delivery and payment of the Note by the Company have been duly authorized
by all necessary corporate action by the Company, as reflected in the
official records of the Company.
(b) No Conflict. The execution, delivery and performance by
the Company of each Transaction Document and the issuance, delivery and
payment of the Note by the Company do not and will not (i) violate any
provision of law applicable to the Company, the Articles of Incorporation
or Bylaws of the Company or any order, judgment or decree of any court or
other agency of government binding on the Company, (ii) conflict with,
result in a breach of or constitute (with due notice or lapse of time or
both) a default under any contractual obligation of the Company, (iii)
result in or require the creation or imposition of any Lien, charge or
encumbrance of any nature whatsoever upon any of its properties or assets
except the Security Interest, or (iv) require
-18-
any approval of shareholders or any approval or consent of any Person
under any contractual obligation of the Company other than approvals or
consents which have been obtained and disclosed in writing to the Bank.
(c) Governmental Consents. The execution, delivery and
performance by the Company of each Transaction Document and the issuance,
delivery and payment of the Note by the Company do not and will not
require any registration with, consent or approval of, or notice to, or
other action to, with or by, any Federal, state or other governmental
authority or regulatory body or other Person except those that have been
obtained and disclosed in writing to the Bank. Any registration with,
consent or approval of or other action by any Federal, state or other
governmental authority or regulatory body or other Person which has been
obtained and has been disclosed in writing to the Bank shall remain in
effect and shall not be modified by or with the consent of the Company
except as may be approved in writing by the Bank.
(d) Binding Obligation. Each of the Transaction Documents
will be the legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally.
9.03 Financial Condition. The Company heretofore delivered to the
Bank the audited consolidated financial statements of the Company and its
Subsidiaries as at September 30, 1994 and its unaudited consolidated financial
statements as at September 30, 1995. Said financial statements were prepared in
accordance with GAAP and fairly present the consolidated financial condition of
the Company and its Subsidiaries as at the date and for the period therein
indicated. As of the Signing Date, the Company and its Subsidiaries have no
contingent obligations, contingent liabilities, liabilities for taxes or other
outstanding financial obligations which are material in the aggregate and which
are not reflected in said financial statements or in the notes thereto.
9.04 Changes, etc. Since September 30, 1995, there has been no
change in the business, operations, properties, assets or condition (financial
or otherwise) of the Company and its Subsidiaries which has a Material Adverse
Effect.
9.05 Title to Properties; Liens. The Company has good, sufficient
and legal title to all the properties and assets reflected in the financial
statements as at September 30, 1995, referred to in Section 9.03 (including all
Collateral pledged pursuant to the Pledge and Security Agreement), and all
assets held by the Company on the date hereof but acquired subsequent to the
date of such financial statements, except for assets disposed of in the ordinary
course of business. All such properties and assets are free and clear of Liens,
except as permitted hereunder. The pledge and
-19-
assignment of the Collateral pursuant to the Pledge and Security Agreement
creates a valid security interest in the Collateral and the Lien on the
Collateral created by the Pledge and Security Agreement will be a first priority
Lien thereon, superior to any other Liens. Except for the due filing of a
financing statement (and except for the delivery to the Bank of any Collateral
as to which possession is the only method of perfecting a security interest in
such Collateral), no further action need be taken in order to establish and
perfect the Bank's first priority security interest in all the Collateral.
9.06 Litigation; Adverse Facts. There is no action, suit,
proceeding or arbitration (whether or not purportedly on behalf of the Company)
at law or in equity or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of the Company, threatened
against or affecting the Company or its properties except as set forth in
Exhibit 9.06 hereto, and none of the matters listed on such schedule would, if
decided in a manner adverse to the Company, have a Material Adverse Effect, and
there is no basis known to the Company for any action, suit or proceeding which
would have a Material Adverse Effect. The Company is not (i) in violation of any
applicable law which violation has a Material Adverse Effect or (ii) subject to
or in default with respect to any final judgment, writ, injunction, decree, rule
or regulation of any court or Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which has a Material Adverse Effect. There is no action, suit,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company which questions the validity or the
enforceability of any Transaction Document.
9.07 Payment of Taxes. All tax returns and reports of the Company
required to be filed by it have been timely filed, and all taxes, assessments,
fees and other governmental charges upon the Company and upon its properties,
assets, income and franchises which are due and payable have been paid when due
and payable, except to the extent permitted by Section 10.03 hereof. The Company
knows of no proposed tax assessment against it that would have a Material
Adverse Effect.
9.08 Other Agreements; Performance.
(a) Agreements. The Company is not a party to or subject to
any contractual obligation or charter or other internal restriction that
has a Material Adverse Effect.
(b) Performance. The Company is not in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any contractual obligation of the
Company, and no condition exists which, with the giving of notice or the
lapse of time or both, would constitute such a default, except where the
consequences, direct or indirect, of
-20-
such default or defaults, if any, would not have a Material Adverse
Effect. To the best knowledge of the Company, the other parties to any
contractual obligation of the Company are not in default thereunder,
except where the consequences, direct or indirect, of such default or
defaults, if any, would not have a Material Adverse Effect.
9.09 Governmental Regulation. The Company is not, and at the
Signing Date will not be, subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940 or to any Federal or state statute or regulation
limiting its ability to incur Indebtedness for money borrowed.
9.10 Securities Activities. The Company is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System). No part of the proceeds of any Advance will be used to purchase any
margin stock.
9.11 Indebtedness. Except to the extent permitted by Section
10.07, the Company does not and will not have any Indebtedness outstanding. At
and as of the Signing Date, none of such Indebtedness is in default.
9.12 Disclosure. No representation or warranty of the Company
contained in this Agreement, the other Transaction Documents or any other
document, certificate or written statement furnished to the Bank by or on behalf
of the Company for use in connection with the transactions contemplated hereby
or thereby contains any materially untrue statement of fact. There is no fact
known to the Company (other than matters of a general economic nature) which has
a Material Adverse Effect, which has not been disclosed herein or in such other
documents, certificates and statements furnished to the Bank for use in
connection with the transactions contemplated hereby.
9.13 [THIS SECTION IS INTENTIONALLY LEFT BLANK]
9.14 ERISA. Each Plan complies with all material applicable
requirements of ERISA and of the Code and with all material applicable rulings
and regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No reportable event (as defined in Section 4043(b),
subdivision (5), (6) or (9) of ERISA) (a "Reportable Event") has occurred with
respect to any Plan. The Company has not engaged in any prohibited transaction
(as defined in Section 406 of ERISA or Section 4975 of the Code) which (i) has
not been corrected within the correction period applicable to it under Section
502(i) of ERISA or Section 4975(b) of the Code or (ii) for which an exemption is
not applicable or has not been obtained under Section 408 of ERISA or Section
4975 of the Code. The Company has satisfied all of the funding standards
applicable to such Plans, and there exists no event or
-21-
condition which would permit the institution of proceedings to terminate any
Plan under Section 4042 of ERISA. The current value of such Plans' benefits
guaranteed under Title IV of ERISA does not exceed the current value of the
Plans' assets allocable to such benefits.
9.15 No Governmental Proceedings. Except as set forth in Exhibit
F, there is no action, suit, proceeding, or arbitration (whether or not
purportedly on behalf of the Company) at law or in equity or before or by any
Federal, state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, pending or, to the
knowledge of the Company, threatened against or affecting the Company or its
properties, and there is no basis known to the Company for any action, suit, or
proceeding. The Company is not (i) in material violation of any applicable law,
or (ii) subject to or in default with respect to any final judgment, writ,
injunction, decree, rule, or regulation of any court or Federal, state,
municipal, or other governmental department, commission, board, bureau, agency,
or instrumentality, domestic or foreign.
Section 10. COVENANTS OF THE COMPANY. During the Effective Period
and thereafter until the Note and the other liabilities of the Company under
each Transaction Document have been paid in full, the Company covenants that,
unless the Bank shall otherwise consent in writing, it will perform all the
covenants set forth in this Section 10.
10.01 Financial Statements and Other Reports. The Company will
maintain a system of accounting established and administered in accordance with
sound business practices such as to permit the preparation of financial
statements in accordance with GAAP and furnish or cause to be furnished to the
Bank:
(a) as soon as available and in any event within 30 days
after the end of each calendar month, a copy of the unaudited
consolidated financial statements of the Company and its Subsidiaries as
at the end of such month, consisting of at least a consolidated balance
sheet and the related consolidated statements of income, shareholders'
equity and changes in financial position for such month and from the
beginning of the then current fiscal year of the Company to the end of
such month, setting forth in each case in comparative form the figures
for the corresponding period of the previous fiscal year, all in
reasonable detail, and certified by the chief financial officer of the
Company as being complete and correct and fairly presenting the Company's
consolidated financial condition, subject to changes resulting from
normal year-end adjustments;
(b) as soon as available and in any event within 90 days
after the end of each fiscal year, audited consolidated financial
statements of the Guarantor and the unaudited consolidated financial
statements of the Company and its Subsidiaries, in each case consisting
of at least a consolidated balance sheet as at
-22-
the end of such fiscal year and the related consolidated statements of
income, shareholders' equity and changes in financial position for such
fiscal year, setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and accompanied by
a report thereon of KPMG Peat Marwick or other firm of independent
certified public accountants selected by the Guarantor and/or Company, as
the case may be, and reasonably satisfactory to the Bank which report
shall be unqualified and shall state that such financial statements
present fairly the consolidated financial positions of the Guarantor and
of the Company and its Subsidiaries, respectively, as at the date
indicated and the results of their operations and the changes in their
consolidated financial position for the periods indicated in conformity
with GAAP applied on a basis consistent with prior fiscal years (except
as otherwise required by GAAP and stated therein) and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted auditing
standards;
(c) as soon as available and in any event within 30 days after the
end of each calendar month, each of the following:
(i) a properly completed and signed Compliance Certificate as of
the last day of such month;
(ii) a properly completed and signed Borrowing Base Certificate as
of the end of such month; and
(d) within five Business Days after their occurrence, give the
Bank notice of each of the following events:
(i) each and every action, suit, proceeding or arbitration (other
than those listed on Exhibit 9.06) which is pending or threatened
against the Company in which the aggregate uninsured amount
claimed is more than $100,000 or which would, if decided in a
manner adverse to the Company, have a Material Adverse Effect;
(ii) the occurrence of any Event of Default or Unmatured Event of
Default; and
(iii) any notice from an Investor or HUD that it intends to put
the Company on probation or that it will cease purchasing Mortgage
Notes from the Company or that it will cease permitting the
Company to service Mortgage Notes owned or guaranteed by it or
that it has revoked the Company's status as an approved mortgagee
or lender in good standing eligible to participate in any FHA
insurance or VA guaranty program;
-23-
(e) from time to time, with reasonable promptness, such other
information regarding the Collateral and Investors and the business,
affairs and financial condition of the Company and its Subsidiaries as
the Bank may reasonably request.
10.02 Corporate Existence. The Company will maintain, and will
cause each of its Subsidiaries to maintain, (a) its corporate existence in good
standing under the laws of the jurisdiction of its incorporation and (b) its
right to carry on its business and operations in each jurisdiction in which the
character of the properties owned or leased by it or the business conducted by
it makes such qualification necessary and the failure to be in good standing
would permanently preclude the Company or any of its Subsidiaries from enforcing
its rights with respect to any material assets or expose the Company or any of
its Subsidiaries to any material liability.
10.03 Compliance with Laws, Taxes, etc. The Company will comply,
and will cause each of its Subsidiaries to comply, with all applicable laws,
rules, regulations and orders (including without limitation Regulation X of the
Board of Governors of the Federal Reserve System), the failure to be in
compliance with which would have a Material Adverse Effect, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property except
to the extent contested in good faith by appropriate proceedings and for which
any reserves required by GAAP have been established.
10.04 ERISA. The Company will at all times maintain, and will
cause each of its Subsidiaries to maintain, each of its Plans in compliance with
all material applicable rulings and regulations issued under the provisions of
ERISA and the Code.
10.05 Assets and Insurance. The Company will at all times keep and
maintain, and will cause each of its Subsidiaries to keep and maintain, all of
its property and assets in good order and repair, subject to ordinary wear and
tear, and keep its assets and business fully covered by insurance with reputable
and financially sound insurance companies against such hazards and in such
amounts as is required by the terms of any law or as is customarily maintained
by Persons similarly situated.
10.06 Inspection. Upon reasonable prior notice during regular
business hours, the Company will permit any Person designated by the Bank in
writing, at the Bank's expense, to visit and inspect any of the properties,
corporate books and financial records of the Company and discuss its affairs and
finances with the principal officers of the Company and its independent public
accountants.
-24-
10.07 Indebtedness. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume,
guarantee, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
(a) Indebtedness evidenced by the Note;
(b) Subordinated Indebtedness;
(c) current liabilities incurred in the ordinary course of
business, other than for money borrowed, which are paid within thirty
(30) days after the same have become due and payable or which are being
contested in good faith, by appropriate proceedings, (provided provision
is made to the satisfaction of the Bank for the eventual payment thereof
in the event it is found that such contested current liabilities are
payable by the Company);
(d) reverse repurchase agreements;
(e) Guarantees permitted by Section 10.10;
(f) Indebtedness secured by Liens permitted by Section
10.08; and
(g) Indebtedness existing on the Signing Date, as described
in Exhibit 10.07 hereto;
provided, that no such Indebtedness described in Section 10.07(a) through (g)
causes the Leverage Ratio to exceed 4.0 to 1.0.
10.08 Liens. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist, any Lien with respect to the Servicing Portfolio, the Collateral or any
other property now owned or hereafter acquired by the Company or any of its
Subsidiaries, or any income or profits therefrom, except:
(a) the Security Interest;
(b) Liens existing on the Signing Date as described in
Exhibit 10.08 hereto;
(c) Liens in connection with deposits or pledges to secure
payment of workers' compensation, unemployment insurance, old age
pensions or other social security obligations, in the ordinary course of
business of the Company and its Subsidiaries;
-25-
(d) Liens for taxes, fees, assessments and governmental
charges not delinquent or which are being contested in good faith by
appropriate proceedings; provided, however, that the Company shall have
set aside on its books and shall maintain adequate reserves for the
payment of same in conformity with GAAP;
(e) encumbrances consisting of zoning regulations,
easements, rights of way, survey exceptions and other similar
restrictions on the use of real property and minor irregularities in
titles thereto which do not materially impair their use in the operation
of its business;
(f) Liens on Mortgage Loans delivered to a custodian for a
pool of Mortgage Loans being formed but for which a Mortgage-backed
Security has not been issued, any said Lien being for the sole benefit of
the Investor which has agreed to purchase such Mortgage-backed Security;
and
(g) Liens and security interests which secure Indebtedness
permitted by Section 10.07(d), provided such Liens and security interests
are limited to the securities which are the subject of such reverse
repurchase agreements.
10.09 Investments. The Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, make or own any Investment in
any Person, except:
(a) Investments in (i) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof, (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing within one year
from the date of acquisition thereof and, at the time of acquisition,
having the highest rating obtainable from either Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., and (iii) commercial
paper maturing no more than one year from the date of creation thereof
and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor's Corporation or Xxxxx'x Investors Service,
Inc.;
(b) Mortgage Notes and Mortgage-backed Securities;
(c) real estate acquired by foreclosure and held by the
Company for not more than one year unless the Company shall be diligently
attempting to dispose of such real estate for a price not exceeding its
fair market value;
-26-
(d) the Company's Investment in the Subsidiaries described
in Exhibit 9.01(c) hereto which is outstanding on the Signing Date; and
(e) loans from the Company to the Guarantor in an
outstanding principal amount at any time outstanding not to exceed
$2,700,000.
10.10 Guarantees. The Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create or become or be liable with
respect to any Guarantee, except:
(a) guarantees resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(b) commitments issued by the Company in the ordinary
course of business pursuant to which the Company commits to purchase
Mortgage Notes to be held in its portfolio or to be used in the formation
of Mortgage-backed Securities; and
(c) agreements to repurchase Mortgage Notes incidental to
sales thereof in the ordinary course of business.
10.11 Restriction on Fundamental Changes. The Company will not,
and will not permit any of its Subsidiaries to, engage in any business
activities or operations substantially different from or unrelated to those in
which it is engaged on the Signing Date, enter into any transaction of merger or
consolidation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its business or property, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or substantially all the
business or property of, or stock or other evidence of beneficial ownership of,
any Person, or acquire, purchase, redeem or retire any shares of its capital
stock now or hereafter outstanding for value, except:
(a) the Company may sell or otherwise dispose of Mortgage
Notes, Mortgage-backed Securities and Take-out Commitments in the
ordinary course of business;
(b) the Company may sell or otherwise dispose of obsolete
or worn out property in the ordinary course of business; and
(c) the Company may sell or otherwise dispose of property,
other than Mortgage Notes and Mortgage-backed Securities, in the ordinary
course of business, for not less than its fair market value.
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10.12 Payment of Subordinated Indebtedness. The Company will not,
and will not permit any of its Subsidiaries to: make any permissive prepayment
of principal of, or purchase, any Subordinated Indebtedness; make any payment of
principal or interest on any Subordinated Indebtedness if an Event of Default or
Unmatured Event of Default exists; amend or cancel the subordination provisions
thereof; supplement, modify or otherwise amend any instrument or agreement
related to any Subordinated Indebtedness; take or omit to take any action
whereby the subordination of such indebtedness or any part thereof to the Note
might be terminated, impaired or adversely affected; or omit to give the Bank
prompt written notice of any notice received from any holder of Subordinated
Indebtedness or of any default under any agreement or instrument relating to any
Subordinated Indebtedness by reason whereof such Indebtedness might become or be
declared to be due or payable.
10.13 Net Worth. The Company will not at any time permit Net Worth
to be less than and amount equal to $2,000,000 plus the aggregate amount of all
contributions to the capital of the Company made on or after the date of this
Agreement.
10.14 Leverage Ratio. The Company will not at any time permit the
Leverage Ratio to be greater than 4.0 to 1.0.
10.15 Maintenance of Qualifications. The Company will not commit
or suffer to be committed any act which gives any Investor for which the Company
is servicing Mortgage Notes or HUD grounds (a) to put the Company on probation,
(b) to cease purchasing Mortgage Notes from the Company, (c) to cease permitting
the Company to service Mortgage Notes owned or guaranteed by it or (d) to revoke
the status of the Company as an approved mortgagee or lender in good standing
eligible to participate in any FHA insurance or VA guaranty program or as an
approved seller-servicer for any such Investor.
10.16 NationsBanc Documents. The Company will not amend, modify or
supplement, terminate or waive any provision of any NationsBanc Document, or
fail to give the Bank prompt notice of any amendment, modification, supplement,
termination, waiver or consent to departure from the terms of any NationsBanc
Document.
10.17 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Unmatured Event of Default if
such action is taken or condition exists.
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Section 11. CONDITIONS PRECEDENT.
11.01 Initial Advance. The Bank shall not be obligated to make the
initial Advance until it shall have received the following, each dated the
Effective Date unless otherwise indicated and each of which shall be in form and
substance satisfactory to the Bank:
(a) the Note, duly executed by the Company;
(b) the Pledge and Security Agreement, duly executed by the
Company;
(c) the Guaranty, duly executed by the Guarantor;
(d) the original executed copy of the NationsBanc Note and an
agreement substantially in the form of Exhibit 11.01(d) hereto, duly
executed by the Company and NationsBanc;
(e) a copy of the resolutions of the Board of Directors of the
Company authorizing the execution, delivery and performance of each
Transaction Document to which it is a party and other matters
contemplated hereby, certified by the Secretary or an Assistant Secretary
of the Company;
(f) a copy of the resolutions of the Board of Directors of the
Guarantor authorizing the execution, delivery and performance of each
Transaction Document to which it is a party and other matters
contemplated hereby, certified by the Secretary or an Assistant Secretary
of the Guarantor;
(g) a certificate signed by the Secretary or an Assistant
Secretary of the Company as to the incumbency and signature of the person
or persons authorized to execute and deliver this Agreement and the other
Transaction Documents to which it is a party and any other instrument or
agreement hereunder and under any Transaction Document;
(h) a certificate signed by the Secretary or an Assistant
Secretary of the Guarantor as to the incumbency and signature of the
person or persons authorized to execute and deliver the Guaranty and any
other Transaction Documents to which it is a party and any other
instrument or agreement hereunder and under any Transaction Document;
(i) a completed Borrowing Base Certificate as of the last day of
the month preceding the initial request for a credit extension hereunder;
(j) copies of the insurance policies required to be maintained
under Section 10.05;
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(k) a favorable written opinion of counsel to the Company and the
Guarantor satisfactory to the Bank, addressed to the Bank, as to the
matters and to the effect set forth in Exhibit 11.01(k) hereto; and
(l) such other documents, certificates and opinions as the Bank
may reasonably require.
11.02 Each Advance. The obligation of the Bank to make each
Advance (including the initial Advance) is subject to the following conditions
precedent:
(a) The Bank shall have received from the Company the appropriate
notice contemplated by Section 3.01;
(b) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing or will exist upon the making of the requested
Advance; and
(c) The representations and warranties contained in Section 9
shall be true and correct in all material respects with the same force
and effect as if made on and as of the relevant Borrowing Date for such
Advance except that to the extent that any such representations were made
at and as of a specified date, the same shall be true at and as of such
specified date.
Section 12. EVENTS OF DEFAULT; REMEDIES.
12.01 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:
(a) The Company shall fail to make when due, whether by
acceleration of maturity or otherwise, any payment of principal of the
Note, including any prepayment due pursuant to Section 4.02; or
(b) The Company shall fail to make when due, whether on an
Interest Payment Date, by acceleration or otherwise, any payment of
interest on the Note or any fee or other amount required to be paid to
the Bank pursuant to this Agreement; or
(c) Any representation or warranty made by the Company or the
Guarantor in this Agreement or in any certificate, statement, report or
document furnished to the Bank pursuant to or in connection with this
Agreement shall be untrue or misleading in any material respect on the
date as of which the facts set forth are stated or certified; or
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(d) The Company shall fail to comply with any agreement, covenant,
condition, provision or term contained in the Pledge and Security
Agreement or in Sections 10.02(a), 10.07, 10.08, 10.09, 10.10, 10.11,
10.12, 10.13, 10.14 or 10.15 of this Agreement; or
(e) The Company shall fail to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement (other
than those hereinabove set forth in this Section 12.01) and such failure
to comply is not remedied within 30 calendar days after the earliest of
(i) the date on which the Company gives the Bank notice of such failure
pursuant to Section 10.01(e)(ii), (ii) the date on which the Company
should have given the Bank notice of such failure pursuant to Section
10.01(e)(ii), and (iii) the date on which the Bank gives the Company
written notice of such failure; or
(f) Any creditor or representative of any creditor of the Company,
the Guarantor or any Subsidiary, including without limitation the Bank,
shall become entitled to declare any Indebtedness in the amount of
$250,000 or more owing on any bond, debenture, note or other evidence of
indebtedness for borrowed money to be due and payable prior to its
expressed maturity, whether or not such Indebtedness is actually declared
to be immediately due and payable, or any such Indebtedness becomes due
and payable prior to its expressed maturity by reason of any default by
the Company, the Guarantor or such Subsidiary in the performance or
observance of any obligation or condition and such default shall not have
been effectively waived or shall not have been cured within any grace
period allowed therefor or any such Indebtedness shall have become due by
its terms and shall not have been promptly paid or extended; or
(g) The Company, the Guarantor, any Subsidiary or NationsBanc
shall become insolvent or shall fail generally to pay its debts as they
mature or shall apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee, receiver or conservator thereof or
for a substantial part of the property thereof; or, in the absence of
such application, consent or acquiescence, a custodian, trustee or
receiver shall be appointed for the Company, the Guarantor, any
Subsidiary or NationsBanc, or for a substantial part of the property
thereof, or the Company, the Guarantor, any Subsidiary or NationsBanc
shall make an assignment for the benefit of creditors; or
(h) The Company, the Guarantor, any Subsidiary or NationsBanc
shall be voluntarily or involuntarily dissolved or shall be the subject
of any bankruptcy, reorganization, debt arrangement, receivership,
conservatorship or other proceedings under any bankruptcy or insolvency
law; or any dissolution, liquidation, receivership or conservatorship
proceeding shall be instituted by or against the Company, the Guarantor,
any Subsidiary or NationsBanc and, if instituted against the Company, the
Guarantor, any Subsidiary or NationsBanc,
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shall be consented to or acquiesced in by the Company, the Guarantor, any
Subsidiary or NationsBanc, shall not have been dismissed within 60 days
or an order for relief shall have been entered against the Company, the
Guarantor, any Subsidiary or NationsBanc; or
(i) There shall be entered against the Company, the Guarantor or
any Subsidiary one or more judgments or decrees in an aggregate amount as
to the Company, the Guarantor or any Subsidiary at any one time
outstanding in excess of $100,000, excluding those judgments or decrees
that shall have been paid, vacated, discharged, stayed or bonded pending
appeal within 30 days from the entry thereof or with respect to which
(and to the extent that) the Person against which any such judgment or
decree shall have been entered is fully insured (excluding reasonable
deductibles) and with respect to which the insurer has admitted in
writing its liability for the full amount thereof; or
(j) Any execution or attachment shall be issued whereby any
substantial part of the property of the Company, the Guarantor or any
Subsidiary shall be taken or attempted to be taken and the same shall not
have been vacated or stayed within 30 days after the issuance thereof; or
(k) Any Reportable Event or any other fact or circumstance, which
the Bank determines in good faith constitutes grounds for the termination
of any Plan by the Pension Benefit Guaranty Corporation or for the
appointment by an appropriate United States District Court of a trustee
to administer any such Plan, shall have occurred and be continuing thirty
(30) days after written notice of such determination shall have been
given to the Company by the Bank, or any Plan shall be terminated within
the meaning of Title IV of ERISA, or a trustee shall be appointed by the
appropriate United States District Court to administer any such Plan, or
the Pension Benefit Guaranty Corporation shall institute proceedings to
terminate any Plan or to appoint a trustee to administer any such Plan
and, upon the occurrence of any of the foregoing, the aggregate amount of
the vested unfunded liability under all such Plans exceeds $100,000 and
such liability is not covered by insurance, or the Company shall fail to
make a required contribution to any Plan such that a statutory tax lien
may arise in favor of such Plan; or
(l) NationsBanc shall fail to make any payment on the NationsBanc
Note when due.
12.02 Remedies. If (a) any Event of Default described in Sections
12.01(g) or (h) shall occur with respect to the Company, the Commitment shall
automatically terminate and the outstanding principal of the Note, the accrued
interest thereon and all other obligations of the Company to the Bank under this
Agreement and the Note, shall automatically become immediately due and payable
or (b) any other Event of Default shall occur and be continuing, then, the Bank
may
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do all of the following: (i) declare the Commitment terminated, whereupon the
Commitment shall be terminated and (ii) declare the outstanding principal of the
Note, the accrued interest thereon and all other obligations of the Company to
the Bank under this Agreement, to be forthwith due and payable, whereupon the
Note, all accrued interest thereon and all such obligations shall immediately
become due and payable, in each case without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything in
this Agreement or in the Note to the contrary notwithstanding.
Section 13. MISCELLANEOUS.
13.01 Waiver. No failure on the part of the Bank to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
13.02 Notices. Except as otherwise specifically provided for
herein, all notices and other communications provided for herein shall be by
telex, telecopier, telegraph, cable or in writing and telexed, telecopied,
telegraphed, cabled, mailed or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to either party, at such other address as shall be designated by such
party in a notice to the other party. All notices and other communications
hereunder shall be deemed to have been duly given when transmitted by telex or
telecopier, delivered to the telegraph or cable office or personally delivered
or, in the case of a mailed notice, upon receipt thereof as conclusively
evidenced by the signed receipt therefor, in each case given or addressed as
aforesaid.
13.03 Expenses; Indemnification. The Company agrees to pay: (a)
the reasonable fees and expenses of Xxxxxx & Xxxxxxx, counsel to the Bank, in
connection with the preparation, execution and delivery of this Agreement, the
Note and the other Transaction Documents and the Advances hereunder, whether or
not any Advance is made hereunder, (b) the reasonable fees and expenses of
counsel for the Bank in connection with any amendment, modification or waiver of
any of the terms of this Agreement, the Note and the other Transaction Documents
and (c) all reasonable costs and expenses of the Bank (including reasonable
counsels' fees) in connection with the enforcement of this Agreement, the Note
and the other Transaction Documents. The Company hereby agrees to indemnify the
Bank and its directors, officers, agents and employees from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them arising out of or by reason of any
investigation, litigation or other proceedings related to any use made or
proposed to be made by the Company of the proceeds of
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the Advances, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceedings (but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified).
13.04 Confidentiality. Any information which the Bank receives
from the Company which is designated proprietary or confidential at the time of
receipt thereof by the Bank shall not be disclosed by the Bank to any other
Person, if such information is not otherwise in the public domain, other than
(a) to its independent accountants and legal counsel, (b) pursuant to statutory
or regulatory requirements, (c) pursuant to any mandatory court order or (d) to
any participant in or assignee of, or prospective participant in or assignee of,
any Borrowing.
13.05 Amendments, Etc. Any provision of this Agreement may be
amended or modified only by an instrument or instruments in writing signed by
the Company and the Bank. No waiver of any provision of this Agreement, the
Pledge and Security Agreement or the Note or consent to any departure by the
Company therefrom shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
13.06 Successors and Assigns; Disposition of Advances;
Transferees. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns except that the
Company may not assign its rights or obligations hereunder or under the Note
without the prior consent of the Bank. The Bank may at any time sell, assign,
transfer, grant participations in, or otherwise dispose of any portion of the
Advances (each such interest so disposed of being herein called a "Transferred
Interest") to banks or other entities ("Transferees"). Without in any way
limiting the rights of Transferees hereunder, the Company agrees that each
Transferee shall be entitled to the benefits of Section 6 to the extent of its
Transferred Interest as if it were the "Bank" holding an Advance in the amount
of such Transferred Interest. The Company agrees that each Transferee may
exercise any and all rights of banker's lien, setoff as provided in Section 7
and counterclaim available pursuant to law with respect to its Transferred
Interest as fully as if such Transferee were a direct lender to the Company.
13.07 Survival. The obligations of the Company under Sections 6
and 13.03 shall survive the repayment of the Note and the termination of the
Commitment.
13.08 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
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13.09 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW, AND NOT THE LAW OF
CONFLICTS, OF THE STATE OF MINNESOTA, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS. WHENEVER POSSIBLE, EACH PROVISION OF THIS
AGREEMENT AND THE NOTE AND ANY OTHER STATEMENT, INSTRUMENT OR TRANSACTION
CONTEMPLATED HEREBY OR THEREBY OR RELATING HERETO OR THERETO SHALL BE
INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER SUCH APPLICABLE
LAW, BUT, IF ANY PROVISION OF THIS AGREEMENT OR THE NOTE OR ANY OTHER STATEMENT,
INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR RELATING HERETO OR
THERETO SHALL BE HELD TO BE PROHIBITED OR INVALID UNDER SUCH APPLICABLE LAW,
SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT AND THE NOTE AND ANY OTHER STATEMENT,
INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR RELATING HERETO OR
THERETO.
13.10 WAIVER OF JURY TRIAL; JURISDICTION.
(a) THE COMPANY, BY ITS EXECUTION AND DELIVERY HEREOF, AND THE
BANK, BY ITS ACCEPTANCE HEREOF, HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, THE NOTE AND ANY OTHER OF THE TRANSACTION DOCUMENTS OR UNDER ANY
AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH ARISING FROM ANY CREDIT
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
(b) THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY MINNESOTA STATE OR FEDERAL COURT SITTING IN HENNEPIN COUNTY, MINNESOTA OVER
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO
SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING. THE COMPANY IRREVOCABLY CONSENTS TO THE SERVICE OF COPIES OF THE
SUMMONS AND COMPLAINT AND ANY OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING BY UNITED STATES CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, OF COPIES OF SUCH PROCESS TO THE COMPANY, ADDRESSED AS
PROVIDED IN SECTION 13.02.
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SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING, EFFECTED AS AFORESAID,
SHALL BE EFFECTIVE UPON RECEIPT BY THE COMPANY AND SHALL BE DEEMED PERSONAL
SERVICE UPON THE COMPANY AND SHALL BE LEGAL AND BINDING UPON THE COMPANY FOR ALL
PURPOSES. THE COMPANY AGREES THAT A JUDGMENT, FINAL BY APPEAL OR EXPIRATION OF
TIME TO APPEAL WITHOUT BEING TAKEN, IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SECTION 13.10 (b) SHALL
AFFECT THE RIGHT OF THE BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION OR
PROCEEDING AGAINST THE COMPANY OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
13.11 Highest Lawful Rate. Anything herein to the contrary
notwithstanding, the obligations of the Company on the Advances shall be subject
to the limitation that payments of interest shall not be required, for any
period for which interest is computed hereunder, to the extent that contracting
for or receipt thereof would be contrary to provisions of any law applicable to
the Bank limiting the highest rate of interest which may be lawfully contracted
for, charged or received by the Bank.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first above written.
EXPRESS AMERICA MORTGAGE
CORPORATION
By Signature Illegible
----------------------------------
Title Chairman and CEO
-----------------------------
Address for Notices:
Express America Mortgage Corporation
Two Renaissance Square
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxxx X. Xxxx
Telephone No. (000) 000-0000
Telecopier No. (000) 000-0000
FIRST BANK NATIONAL ASSOCIATION
By Signature Illegible
----------------------------------
Title Vice President
-----------------------------
Address for Notices:
First Bank National Association
First Bank Place
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Telephone No. (000) 000-0000
Telephone No. (000) 000-0000
S-1
EXHIBIT 1.01-A
TO CREDIT AGREEMENT
-------------------
[On Company Letterhead]
[Date]
To: First Bank National Association
First Bank Place
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Vice President
Mortgage Banking Services Division
MPFP0801
Re: Borrowing Base Certificate
Ladies and Gentlemen:
This Borrowing Base Certificate is submitted to you pursuant to Section
10.01(c)(ii) of the Warehousing Credit Agreement dated as of January 25, 1996
(as said Agreement may be amended, supplemented, restated or otherwise modified
from time to time in writing, (the "Credit Agreement") between Express America
Mortgage Corporation (the "Company") and First Bank National Association (the
"Bank"). Each capitalized term used herein has the meaning ascribed to that term
in the Credit Agreement.
The Company and the undersigned officer hereby certify to the Bank as
follows:
(1) The undersigned is authorized to submit this Borrowing Base
Certificate on behalf of the Company.
(2) As of the close of business on _____, 19__:
(a) Borrowing Base Computation. The Borrowing Base was computed as
follows:
Lessor of:
(i) Aggregate unpaid principal
balance of Eligible Pledged
Mortgage Loans per attached
Schedule 1 $___________
or
--
(ii) Aggregate Repurchase Price
for Eligible Pledged Mortgage
Loan per attached Schedule 1. $___________
(iii) less 20% adjustment (___________)
(iv) Total Collateral Value $___________
(b) Outstanding Note Balance. The aggregate principal amount
outstanding under the Note was $___________.
The foregoing certifications are made and delivered this ____
day of ___________, 199_.
EXPRESS AMERICA MORTGAGE
CORPORATION
By:_______________________
Its:___________________
SCHEDULE 1
TO BORROWING BASE CERTIFICATE
-----------------------------
Eligible Pledged Mortgage Loans
-------------------------------
(as of ___________, 199_)
Outstanding
Mortgagor Principal Repurchase
Loan Number Name Balance Price Status*
----------- ---- ------- ----- -------
* Indicate status of Mortgage Loan, e.g., "incomplete documentation,"
"no Take-Out Commitment," etc.
EXHIBIT 1.01-B
TO CREDIT AGREEMENT
-------------------
FORMULA
FOR
DETERMINING COLLATERAL VALUE
FOR BORROWING BASE
The "Collateral Value" of the Eligible Pledged Mortgage Loans
and other assets constituting collateral under the Mortgage Loan Pledge
Agreement shall be determined as follows:
1. Eligible Pledged Mortgage Loans. The Collateral Value of an
Eligible Pledged Mortgage Loan, at the time of any determination thereof, shall
be an amount equal to eighty percent (80%) of the least of:
(a) the Repurchase Price of such Eligible Pledged Mortgage
Loan,
(b) the unpaid principal balance of such Eligible Pledged
Mortgage Loan, and
(c) at the election of the Bank, the Fair Market Value ofsuch
Eligible Pledged Mortgage Loan;
provided, however, that an Eligible Pledged Mortgage Loan will be considered as
having no Collateral Value if any of the following events occur with respect
thereto:
(1) 180 days elapse from the date on which such
Eligible Pledged Mortgage Loan was pledged under the Pledge
and Security Agreement;
(2) 45 days elapse from the date such Eligible
Pledged Mortgage Loan was delivered to an Investor or a pool
custodian for examination and purchase and such Eligible
Pledged Mortgage Loan has not been returned to the Bank;
(3) 21 days elapse from the date a Collateral
document relating to such Eligible Pledged Mortgage Loan was
delivered to the Company for correction or completion and such
corrected or completed Collateral document has not been
returned to the Bank;
(4) such Eligible Pledged Mortgage Loan ceases to be
an Eligible Pledged Mortgage Loan; or
(5) the Bank notifies the Company that in the
reasonable opinion of the Bank such Eligible Pledged Mortgage
Loan is not marketable and should not be given Collateral
Value hereunder.
Notwithstanding any of the foregoing, (A) a Pledged Mortgage
Loan shall remain a part of the collateral pledged under the Pledge and Security
Agreement until it is released by the Bank pursuant to Section 10.04 thereof,
notwithstanding any determination that such Pledged Mortgage Loan is not, or has
ceased to be, an Eligible Pledged Mortgage Loan or that it does not have, or has
ceased to have, Collateral Value, and (B) an Eligible Pledged Mortgage Loan
which has been delivered to an Investor or a pool custodian for inclusion in a
pool of Mortgage Loans backing a Related Mortgage-backed Security pursuant to
Section 10.03 of the Pledge and Security Agreement shall remain a part of the
Collateral pledged under the Pledge and Security Agreement and, to the extent
provided in the first sentence of this paragraph 1, shall retain its Collateral
Value until it is released pursuant to Section 10.04 of the Pledge and Security
Agreement.
2. Other Assets. The Collateral Value of any other asset
("Other Asset") offered by the Company and accepted as Collateral by the Bank in
its sole and absolute discretion shall be such amount of Collateral Value (if
any) as the Bank may assign thereto in its sole and absolute discretion.
3. Definitions. As used in this Exhibit, the following terms
shall have the following respective meanings:
"Appraised Value": with respect to an interest in real estate,
the then current fair market value thereof as of a recent date satisfactory to
the Bank, as determined by the FHA or the VA, if applicable, or, if there is no
such determination, then as determined in accordance with accepted methods of
appraising by a qualified appraiser who is a member of the American Institute of
Real Estate Appraisers or other group of professional appraisers.
"Conventional Mortgage Loan": a Mortgage Loan secured by a
First Mortgage on improved real estate which (a) is in an amount not in excess
of eighty percent (80%) of the Appraised Value of such real estate unless the
amount of the Mortgage Loan in excess of eighty percent (80%) of such Appraised
Value is insured against credit losses by an insurer approved by FHLMC or FNMA
and (b) but for the matters that gave rise to the repurchase thereof, satisfies
FHLMC's, FNMA's or other Investor's underwriting standards.
"Eligible Pledged Mortgage Loan": a Pledged Mortgage Loan: (a)
the entire interest in which is owned by the Company, (b) which has been
repurchased by the Company from an Investor or out of a pool of Mortgage Loans
backing a Mortgage-backed Security pursuant to the Company's obligation as
servicer to do so, (c) which is an FHA Mortgage Loan, a VA Mortgage Loan or a
Conventional Mortgage Loan covering a completed residential property, and (d)
the Repurchase Date is less than 180 days prior to the date on which such
Pledged Mortgage Loan becomes part of the collateral under the Pledge and
Security Agreement.
-1-
"Fair Market Value": at any date with respect to any Eligible
Pledged Mortgage Loan, the FNMA market price for thirty (30) day mandatory
future delivery of such Eligible Pledged Mortgage Loan quoted by Telerate or, if
not so quoted, the average bid price quoted in writing to the Bank as of the
computation date by two nationally recognized dealers selected by the Bank who
at the time are making a market in similar Mortgage Loans multiplied, in any
case, by the outstanding principal balance thereof.
"FHA Mortgage Loan": a Mortgage Loan secured by a First
Mortgage which is insured, or is eligible to be insured by, and is covered by a
binding commitment of, the FHA pursuant to the provisions of the National
Housing Act, as amended.
"First Mortgage": a Mortgage which is subject to no prior or
superior mortgage, deed of trust or other security deed in the land and
interests in real property covered by such Mortgage.
"Pledged Mortgage Loan": as defined in the Pledge and Security
Agreement.
"Related Mortgage-backed Security": as defined in the Pledge
and Security Agreement.
"Repurchase Date": with respect to a Mortgage Loan, the date
of the repurchase of such Mortgage Loan by the Company from an Investor or out
of a pool of Mortgage Loans backing a Mortgage-backed Security pursuant to the
Company's obligation as servicer to do so.
"Repurchase Price": with respect to a Mortgage Loan which is
repurchased by the Company from an Investor or out of a pool of Mortgage Loans
backing a Mortgage-backed Security pursuant to the Company's obligation as
servicer to do so, the actual out-of-pocket cost to the Company incurred in
connection with the repurchase of such Mortgage Loan.
"VA Mortgage Loan": a Mortgage Loan secured by a First
Mortgage which is guaranteed, or is eligible to be guaranteed by, and is covered
by a binding commitment to guarantee of, the VA pursuant to the provisions of
the Servicemen's Readjustment Act of 1944, as amended.
-2-
EXHIBIT 1.01-C
TO CREDIT AGREEMENT
[On Company Letterhead]
To: First Bank National Association
First Bank Place
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Vice President
Mortgage Banking Services Division
MPFP0801
Re: Compliance Certificate
Ladies and Gentlemen:
This Compliance Certificate is submitted to you pursuant to
Section 10.01(c)(i) of the Warehousing Credit Agreement dated as of January 25,
1996 (as said Agreement may be amended, supplemented or restated from time to
time, the "Credit Agreement") between Express America Mortgage Company (the
"Company") and First Bank National Association (the "Bank"). Each capitalized
term used herein has the meaning ascribed to that term in the Credit Agreement.
The Company and the undersigned officer hereby certify to the
Bank as follows:
(1) The undersigned is the duly elected chief
financial officer of the Company and is authorized to submit this
Compliance Certificate on behalf of the Company.
(2) The undersigned has reviewed the terms of the
Credit Agreement and has made, or has caused to be made under the
undersigned's supervision, a detailed review of the transactions and
conditions of the Company and the Subsidiaries during the accounting
period(s) covered by Attachment 1 hereto.
(3) The examinations described in paragraph (2) did
not disclose, and the undersigned and the Company have no knowledge,
whether arising out of such examinations or otherwise, of the existence
of any condition or event which constitutes an Event of Default or
Unmatured Event of Default during or at the end of the accounting
period(s) covered by Attachment 1 hereto or as of the date of this
Compliance Certificate, except as described below and/or in a separate
attachment to this Compliance Certificate [describing the exceptions in
detail, the nature of the condition or event, the period during which
it has existed and the action which Company
has taken, is taking, or proposes to take with respect to each such
condition or event]:___________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
(4) The computations set forth in Attachment 1 hereto are true
and correct as of the date and for the accounting period(s) specified
therein.
The foregoing certifications, together with the computations
set forth in Attachment No. 1 hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this __ day of
___________, 19__.
EXPRESS AMERICA MORTGAGE
CORPORATION
By___________________________
Its Chief Financial Officer
- 2 -
Attachment No. 1
to Compliance Certificate
-------------------------
(Terms defined in the Credit Agreement are used herein as
defined therein and Section references used herein refer to the Sections of the
Credit Agreement.)
The following computations are as of ___________, 19__:
A. Minimum Net Worth
Requirement of Section 10.13:
1. Net Worth (sum of consolidated
capital stock, paid in surplus and
earned surplus (or deficit)) $__________
2. Minimum Net Worth as prescribed
by Section 10.13 ($2,000,000 + 100%
of capital contributions) $__________
B. Leverage Ratio Requirement of
Section 10.14:
1. Total Liabilities of Company $__________
2. Net Worth (item I.A.1) $__________
3. Leverage Ratio (Ratio of I.B.1 to I.B.2) ____ to 1.0
4. Maximum ratio prescribed by
Section 10.14 4.0 to 1.0
- 2 -
EXHIBIT 1.01-D
TO CREDIT AGREEMENT
-------------------
FORM OF
CONFIRMATION OF BORROWING/PAYDOWN/CONVERSION
--------------------------------------------
[On Company Letterhead]
[Date]
First Bank National Association
First Bank Place - MPFP0801
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Mortgage Banking Services Division
RE: Confirmation of Borrowing/Paydown/Conversion
Ladies and Gentlemen:
Reference is made to the Warehousing Credit Agreement dated as of
January 25, 1996 (as said Agreement may be amended, supplemented, restated of
otherwise modified from time to time in writing, the "Credit Agreement"),
between Express America Mortgage Corporation (the "Company") and First Bank
National Association (the "Bank"). Each capitalized term used herein shall have
the meaning ascribed to such term in the Credit Agreement.
The Company and the undersigned hereby confirm and certify to the Bank
as follows:
1. The undersigned is authorized to submit this Confirmation of
Borrowing/Paydown/ Conversion on behalf of the Company.
2. On ______, 19__, the Company (a) requested the Bank to make an
Advance in the principal amount of $______, (b) made principal payments in the
aggregate amount of $_______, or (c) converted outstanding Borrowings to
outstanding Borrowings of another type,* as follows:
----------------------
* For purposes of this Certificate, Borrowings being converted shall be
described as principal payments, and the new Borrowings into which such
Borrowings are being converted shall be described as new Borrowings.
Floating
Reference Eurodollar
Rate Rate Fixed Rate
Advance/Borrowing
---------- ---------- ----------
Payment
---------- ---------- ----------
Net Amount Outstanding
========== ========== ==========
Interest Rate % % %
---------- ---------- ----------
3. In connection with any requested Advance, please disburse $________
as follows [include wire instructions]:
4. In connection with any requested Advance: (a) no Event of Default or
Unmatured Event of Default has occurred or will exist upon the completion of
such Advance; (b) the representations and warranties contained in Section 9 of
said Credit Agreement and in Section 5 of the Pledge and Security Agreement are
true and correct in all material respects with the same force and effect as if
made on and as of the date hereof; and (c) after giving effect to the Advance
requested herein the Aggregate Outstandings will not exceed the Borrowing Base.
Very Truly yours,
EXPRESS AMERICA MORTGAGE
CORPORATION
By:___________________________
Its:________________________
EXHIBIT 2.02
TO CREDIT AGREEMENT
-------------------
PROMISSORY NOTE
---------------
$2,500,000 January 25, 0000
Xxxxxxxxxxx, Xxxxxxxxx
FOR VALUE RECEIVED, EXPRESS AMERICA MORTGAGE CORPORATION, an Arizona
corporation (the "Company"), hereby promises to pay to the order of FIRST BANK
NATIONAL ASSOCIATION (the "Bank"), at the main office of the Bank at First Bank
Place, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, or at such
other office as may be designated in writing by the Bank, in lawful money of the
United States of America in Immediately Available Funds (as such term and each
other capitalized term used herein are defined in the Credit Agreement
hereinafter referred to), the principal sum of Two Million Five Hundred Thousand
and 00/100ths Dollars ($2,500,000.00) or the aggregate unpaid principal amount
of all Advances made by the Bank hereunder pursuant to a Warehousing Credit
Agreement dated as of January 25, 1996 between the Company and the Bank (as the
same may be amended, modified or restated from time to time, the "Credit
Agreement"), whichever is less, and to pay interest from the date hereof on the
unpaid principal balance thereof at the times and at the rate or rates per annum
provided for in the Credit Agreement. Principal of this note is payable at the
times and in the amounts provided for in the Credit Agreement.
This note is the Note referred to in the Credit Agreement and is
subject to mandatory and voluntary prepayment and its maturity is subject to
acceleration, in each case upon the terms provided in the Credit Agreement. This
note is secured by certain collateral referred to in the Credit Agreement. The
Company hereby waives diligence, presentment, demand, protest, and notice
(except such notice as may be required under the Transaction Documents) of any
kind whatsoever. The nonexercise by the Bank of any of its rights hereunder or
under the Transaction Documents shall not constitute a waiver thereof in any
subsequent instance. This note is entitled to the benefit of the Pledge and
Security Agreement and the other Transaction Documents.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF MINNESOTA, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. In the event of
default hereunder, the Company agrees to pay all costs and expenses of
collection, including reasonable attorneys' fees.
EXPRESS AMERICA MORTGAGE CORPORATION
By__________________________________
Its__________________________
EXHIBIT 9.01 C
EXPRESS AMERICA MORTGAGE CORPORATION SUBSIDIARIES, JOINT VENTURES
AND PARTNERSHIPS
WESAV INVESTMENT CORPORATE, a Delaware corporation
WESAV INVESTMENTS INC.-2, a Minnesota corporation
EXHIBIT 9.06
EXPRESS AMERICA HOLDINGS CORPORATION
AND
EXPRESS AMERICA MORTGAGE CORPORATION
LITIGATION
1. Express America Holdings Corporation ("Company") acquired Express America
Mortgage Corporation ("EAMC") from the Resolution Trust Corporation
("RTC") on May 16, 1991, following a competitive bidding process. The RTC
owned EAMC (which was then named Wesav Mortgage Corporation) as a result
of the receivership of Western Savings and Loan Association Phoenix,
Arizona. The RTC filed a complaint in the United States District Court,
District of Arizona on December 8, 1995, against the Company, Xxxxxxxx
Xxxxxx Refsnes, Inc., Xxxxx Xxxxxx, Xxxxxx Xxxxx & Co., Incorporated and
five individuals and their spouses including the current CEO and CFO of
the Company and two former officers of the Company. The complaint alleges
various irregularities in the bidding process and the closing of the
acquisition. The RTC as asked for at least $20 million in actual damages
and at least $60 million in punitive damages. The Company has investigated
this matter and believes its officers acted properly, and that it has
strong meritorious defenses and it will vigorously defend itself. The
Company also is aware that the United States Attorney, District of Arizona
is investigating this matter.
2. XxXxxxxxx Summary - This case was initially filed by Xxxx and Xxxxxxxxx
XxXxxxxxx against Mercury Capital Services, a broker, and Express America
Mortgage Corporation in June of 1994. It was filed as a proposed class
action. The class was defined as all borrowers whose loans were originated
by Mercury as the broker, through any lender or wholesaler, for the one
year period prior to June 9, 1994.
Mercury was an inactive defendant, (and in fact has recently filed a
bankruptcy proceeding.) Express America opposed class certification on the
grounds that there existed insufficient numerosity with regard to
transaction in which it was involved with Mercury, and it would be
inappropriate for the Court to order class treatment with respect to
transactions involving other lenders if those Lender were not parties.
Thereafter, the Plaintiffs moved to add all of the other lenders
("Additional Lenders"). That motion was opposed, but on July 12, 1995, the
Court entered an order granting Class certification and permitting the
addition of all of the Additional Lenders, approximately sixteen (16) new
defendants. The substantive issues in the case involved allegation of
violations of RESPA. In a nutshell, the Plaintiff alleges certain
disclosure violations, which are relatively minor, and as to which there
is a strong argument that no private right of action exists. The heart of
the Plaintiffs' case is that the "yield spread differentials" or
"service release premiums" charged to the Plaintiffs and all other class
members are per se violations of RESPA, thereby entitling each borrower to
the recovery of three (3) times the yield spread differential or services
release premium charged, plus attorney's fees. Express America had only
five (5) transactions with Mercury in which a yield spread differential or
service release premium was charged. Several of the Additional Lenders
have filed Motions to Dismiss and/or Summary Judgment. These motions for
the most part relate to a questions of the applicable statute of
limitations, and the date within which it begins to run for them. Those
issues are not directly related to defenses which will be available to
Express America (since it was an original Defendant), but, if successful,
they could once against reduce the class.
There have recently been some settlement negotiations in this case.
Plaintiffs counsel have proposed a settlement whereby each settling
Defendant pay three (3) times the amount of the yield spread for each
relevant transaction plus a proportion of attorneys fees. That proposal
has been modified downward to be two (2) times the yield spread plus fees
(and the current discussions may have moved it down further to a 1.5
multiple). However, Plaintiffs' counsel have indicated a willingness to
proceed in this fashion only if most, if not all, of the Lenders
(including the key larger one like Colonial) are willing to settle. We are
not aware of what final position the Lenders with the larger amount of
transactions have taken to this proposal.
3. Grant Summary - The Plaintiff, Xxxxxxxxxx Xxxxx, is a recent home buyer,
whose loan was brokered through co-defendant, Innovative Mortgage Company,
Inc. and was funded by Express America Mortgage Corp. The Company was
substantially amended in April of 1995 and again in May of 1995. The
amended complaint now assets nine (9) separate causes of action, as
follows: violations of RESPA; restitution for money had and received;
violations of RICO; violations of Truth-In-Lending; fraud in the
indictment; international interference with contract; including breach of
fiduciary duty; request for declaratory relief relating to the outstanding
loan; and, common law fraud.
The action was filed as a punitive class action, but no action has yet
been taken by the Plaintiff or the Court to certify and class. The
proposed class (or classes) as articulated in the Complaint would be very
broad, encompassing in proposed Class A all borrowers in Express America
loans made in the United States (and no time frame is asserted) without
regard to any involvement of co-Defendant Innovative; and, in Class B, all
borrowers in loans made in Alabama originated by Innovative.
All of the nine counts revolve around one central theme asserted by the
Plaintiff, namely that the "yield spread differentials" or "service
release premium" is per se unlawful, both under RESPA and various other
statutes, as well as under various common law theories.
The Grant case is the third of three similar cases filed by the same
Plaintiffs' attorneys. The other two cases are Xxxxxx v. North American
Mortgage Company, Civil Action No. 94-T-1400-N and Xxxxxx x. Quality
Mortgage USE, Inc., Civil Action No. 94-T-1370-N. All three cases are
pending before the same judge, the Xxxxxxxxx Xxxxx Xxxxxxxx, United States
District Judge for the Middle District of Alabama. The other two cases
were filed before the Grant case. In both of those cases the Defendants
have filed motions which could be determinative on some, if not all, of
the issues raised by the Plaintiffs in those cases, (and, by implication,
the grant case).
For that reason, on October 11, 1995, Judge Xxxxxxxx entered an order
staying any further action in the Grant case until he resolves the pending
motions in the Xxxxxx and Xxxxxx cases. As of this time, we are not aware
of any resolution of those pending motions. There have been no settlement
negotiations in the Grant case. Indeed, it would seem that no meaningful
settlement discussions are possible until the pending motions if Xxxxxx
and Xxxxxx are resolved, and until the Court addresses the issue of class
certification. For it would be virtually impossible to look at any
settlement possibilities until such time as we know the scope of any
certified class.
Discovery is this case has uncovered significant problems for the
Plaintiff's side with the individual names Plaintiff. For example, the
Complaint alleges that Xx. Xxxxx'x loan was for home repair purposes, not
for home buying purposes. Factually, that is incorrect, and legally it is
significant because it totally undercuts the Truth-In-Lending rescission
claim. For reasons such as this Plaintiff's counsel have indicated that
they may seek to substitute or add a new named Plaintiff, but that has not
occurred.
EAMC is also involved in various other legal proceedings which arouse in
the course of its discontinued mortgage operations. Management is of the
opinion that such proceedings are not material in nature and will not have
a material adverse effect on EAMC.
EXHIBIT 9.15
EXPRESS AMERICA MORTGAGE CORPORATION
GOVERNMENTAL PROCEEDINGS
None; see Exhibit 9.06
EXHIBIT 10.07
EXPRESS AMERICA MORTGAGE CORPORATION
INDEBTEDNESS
The following are Express America Mortgage Corporation liabilities as
of September 30, 1995. Such liabilities have not changes materially as of
January 25, 1996.
Liabilities:
Accounts payable $ 247,460
Accounts payable controlled disbursement 447,751
Accrued vacation 97,925
Loss allowance 4,346,478
Other payables and accruals 1,272,438
---------
Current Liabilities $ 6,412,051
The loss allowance covers expected losses arising out of obligations of
the mortgage company incurred while it was conducting its mortgage banking
business. The loss allowance generally covers expected losses that will arise
out of the repurchase of loans originated by Express America.
EXHIBIT 10.08
EXPRESS AMERICA MORTGAGE CORPORATION
LIENS
There are no Liens other than those Liens permitted under Section 10.08.
EXHIBIT 11.01(d)
AGREEMENT RELATING TO COLLATERAL ASSIGNMENT
-------------------------------------------
THIS AGREEMENT RELATING TO COLLATERAL ASSIGNMENT ("Consent") made and
entered into as of the 25th day of January, 1996, by and between EXPRESS AMERICA
MORTGAGE CORPORATION (the "Company"), NATIONSBANC MORTGAGE CORPORATION
("NationsBanc") and FIRST BANK NATIONAL ASSOCIATION (the "Lender").
WITNESSETH
----------
WHEREAS, NationsBanc has heretofore made and executed in favor of the
Company a Non-Negotiable Promissory Note dated September 30, 1994 in the
original principal amount of $4,205,097.00 (the "Note");
WHEREAS, the Company and the Lender are parties to a Warehousing Credit
Agreement dated as of January 25, 1996, pursuant to which the Lender has agreed
to make certain loans to the Company (such Warehousing Credit Agreement, as
amended, supplemented, restated or otherwise modified and in effect from time to
time, and any other agreement between the Lender and the Company entered into in
connection therewith, are hereinafter referred to as the "Credit Agreement"), to
finance, among other things, the repurchase by the Company of certain mortgage
loans pursuant to loan servicing contracts purchased by NationsBanc pursuant to
an Asset Purchase Agreement dated as of August 27, 1994 between the Company and
NationsBanc (the "Contract");
WHEREAS, to secure the "Obligations" (as defined in the Credit
Agreement), the Company has granted to the Lender a lien and security interest
in, and assigned to the Lender as collateral, among other assets, the Note and
all rights of the Company to receive payments under the Note;
WHEREAS, the Lender is not willing to make loans under the Credit
Agreement until the Company and NationsBanc execute and deliver this Consent;
and
WHEREAS, the loans to be made by the Lender to the Company will be of
benefit to NationsBanc;
NOW, THEREFORE, in consideration of the foregoing, the sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. NationsBanc consents to the grant by the Company to the Lender of a
security interest in, and the collateral assignment by the Company to the Lender
of, the Company's right, title and interest in and to the Note and all rights of
the Company to receive payments under the Note.
2. The Lender acknowledges and agrees that said security interest and
collateral assignment granted by the Company to the Lender are subject to all
defenses which NationsBanc may have, including, but not limited to, all rights
of offset as set forth in the Note and/or in the Contract, and shall not in any
way affect or impair the rights of NationsBanc under the Note or the Contract.
3. The Lender and the Company hereby direct NationsBanc to make all
future payments under the Note to the Lender, for the account of the Company.
Such payments shall be made by wire transfer to the Lender at First Bank
National Association, First Bank Place, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxx 00000-0000 for credit to the Company's collateral account no.
1731-0096-9620. The Lender will deposit all such payments in the Collateral
Account (as defined in the Credit Agreement).
4. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first above written.
EXPRESS AMERICA MORTGAGE
CORPORATION
By ___________________________
Its______________________
NATIONSBANC MORTGAGE CORPORATION
By ___________________________
Its______________________
FIRST BANK NATIONAL ASSOCIATION
By ___________________________
Its______________________
- 2 -
EXHIBIT 11.01(k)
Xxxxx & Xxxx [LETTERHEAD]
January ___, 1996
Warehousing Credit Agreement (the "Agreement"),
-----------------------------------------------
dated as of January 25, 1995,
-----------------------------
by and between Express America Mortgage Corporation,
----------------------------------------------------
an Arizona corporation (the "Company")
--------------------------------------
and First Bank National Association
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel to the Company and Express America Holding
Corporation, a Delaware corporation ("EAHC"), in connection with the
transactions contemplated by the Agreement. This opinion is delivered to you
pursuant to Section 11.01(k) of the Agreement. Terms defined in the Agreement
are used herein as defined herein.
In rendering the opinions expressed below, we have examined the
originals or conformed copies of such corporate records, agreements and
instruments of the Company and EAHC, certificates of public officials and of
officers of the Company and EAHC and such other document sand records, as such
matters of law, as we have deemed appropriate as a basis for the opinions
hereinafter expressed. In our examination, we have assumed the authenticity of
all documents submitted to us as originals, the conformity with the originals of
all document submitted to us as certified or photostatic copies thereof and the
authenticity of the originals of such latter documents. In addition, we have
assumed the genuineness of all signatures, the due authorization, execution and
delivery of all documents referred to herein by parties thereto other than the
Company and EAHC and the due authority of all persons executing such documents
except persons executing such documents on behalf of the Company and EAHC.
Based upon the foregoing, we are of the opinion that:
1. Each of EAHC and the Company (collectively, the
"Transactions Parties" and, individually, a "Transaction Party") has been duly
incorporated, is a validly existing corporation and in good standing under the
laws of its respective jurisdiction of incorporation and has the requisite
corporate power to own its respective properties and to conduct its respective
businesses as currently conducted by it. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each
XXXXX & XXXX P.A.
First Bank
National Association January __, 1996
-2-
jurisdiction in which the character of the business conducted by it or the
location of the properties owned or leased by its makes such qualification
necessary, except in jurisdictions in which the failure to be in good standing
will not preclude it from enforcing its rights with respect to any material
assets or expose it to any material assets or expose it to any material
liability.
2. The execution, delivery and performance by each Transaction
Party of each Transaction Document to which it is a party, and the consummation
of the transactions contemplated thereby, are within the corporate powers of
such Transaction Party, have been duly authorized by all necessary corporate
action and do not, and the consummation of the transactions contemplated thereby
and compliance by each Transaction Party with the applicable provisions thereof
will not, conflict with, constitute a default under or violate (a) any of the
terms, conditions or provisions of its articles or certificate of incorporation
or bylaws, (b) any of the terms, conditions or provisions of any document,
agreement or other instrument which is known to us to which it is a party or by
which it is bound, or (c) any judgment, writ, injunction, decree, order or
ruling of any court or governmental authority binding on it and known to us.
3. Each Transaction Document to which a Transaction Party is a
party has been duly executed and delivered by such Transaction Party and is the
legal, valid and binding obligation of such Transaction Party enforceable
against such Transaction Party in accordance with its terms, subject to
limitations as to enforceability which might result from general equitable
principles or bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws affecting creditors' rights generally.
4. No consent, approval, waiver, license or authorization or
other action by or filing with any governmental authority is required in
connection with the execution, delivery and performance by any Transaction Party
of any Transaction Document to which it is a party except for those which have
already been obtained and are in full force and effect.
5. The Pledge and Security Agreement creates a valid security
interest in the "Collateral" (as defined therein).
6. Upon delivery to the Bank of a Mortgage Note in accordance
with Section 4.01 of the Pledge and Security Agreement, the Bank will have a
perfected security interest in such Mortgage Note and in the related Mortgage
and Mortgage Loan, which perfected security interest will continue so long as
such Mortgage Note continues to be held by or for the Bank as contemplated by
the Pledge and Security Agreement.
XXXXX & XXXX P.A.
First Bank
National Association January __, 1996
-3-
7. The security interests granted under the Pledge and
Security Agreement to the Bank in the Collateral Account and the balances,
credits and deposits contained in the Collateral Account will be perfected when
the Collateral Account is established by the Bank and there are balances,
credits or deposits in the Collateral Account.
8. The financing statement to be filed under the Pledge and
Security Agreement in the form attached to this opinion as Exhibit A is in
proper form for filing in the office of the Secretary of State of the State of
Arizona. Assuming that said financing statement has been duly filed with said
office and that the Company has rights in the collateral described therein, the
security interested granted under the Pledge and Security Agreement to the Bank
has been perfected as to the Collateral which is other than Eligible Pledged
Mortgage Loans, the Collateral Account or balances, credits or deposits
contained in the Collateral Account, to the extent that the Bank's security
interest is the Collateral may be perfected by filing such financing statement
under the Uniform Commercial Code.
9. To the best of our knowledge, there is no litigation,
proceeding or governmental investigation pending or threatened against any
Transaction Party or its properties except as disclosed in Schedule 9.06 to the
Credit Agreement.
10. The Company 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.
11. The Company is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power act, the Interstate
Commerce Act, or the Investment Company Act of 1940, or to any Federal or state
statute limiting its ability to incur indebtedness for borrowed money.
12. The making of any Advances and the application of the
proceeds thereof by the Company as provided in the Agreement will not violate
Regulations G, U or X of the Board of Governors of the Federal Reserve System.
In basing the opinions and other matter express herein on "to our
knowledge" or "known to us," "to our knowledge" and "known to us" are intended
to signify that, in the course of our representation of the Company and EAHC in
matters with respect to which we have been engaged by the Company and EAHC as
special counsel, no information has come to our attention which would give us
actual knowledge or actual notice that any such opinions of other matters are
not accurate or complete or that any of
XXXXX & XXXX P.A.
First Bank
National Association January __, 1996
-4-
the documents, certificates, reports and information on which we have relied are
not accurate and complete.
Our opinions are limited to the laws of Arizona, the General
Corporation Law of Delaware and applicable Federal law, and we express no
opinion concerning the laws or any other jurisdictions. For purposes of our
opinions herein we have assumed, with your consent, that the laws of Minnesota
which govern the Transaction Documents are identical in all respects to the laws
of Arizona.
The opinions express in this letter are based upon the law in effect on
the date hereof, and we assume no obligation to revise or supplement this
opinion should such law be changed by legislative action, judicial decision or
otherwise.
These opinions are furnished to you solely for your use in connection
with the transactions described herein; they are not to be used or relied upon
for any other purpose or by any other person without our prior consent, except
you may provide copies of this letter to your attorneys and auditors, and to
governmental authorities in connection with their bank regulatory activities,
and to any participant, assignee or potential participant or assignee of your
rights under the Agreement.
Very truly yours,
/s/ Xxxxx & Xxxx, P.A.
Xxxxx & Xxxx, P.A.
First Bank National Association
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
PROMISSORY NOTE
---------------
$2,500,000 January 25, 0000
Xxxxxxxxxxx, Xxxxxxxxx
FOR VALUE RECEIVED, EXPRESS AMERICA MORTGAGE CORPORATION, an Arizona
corporation (the "Company"), hereby promises to pay to the order of FIRST BANK
NATIONAL ASSOCIATION (the "Bank"), at the main office of the Bank at First Bank
Place, 000 Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000, or at such
other office as may be designated in writing by the Bank, in lawful money of the
United States of America in Immediately Available Funds (as such term and each
other capitalized term used herein are defined in the Credit Agreement
hereinafter referred to), the principal sum of Two Million Five Hundred Thousand
and 00/100ths Dollars ($2,500,000.00) or the aggregate unpaid principal amount
of all Advances made by the Bank hereunder pursuant to a Warehousing Credit
Agreement dated as of January 25, 1996 between the Company and the Bank (as the
same may be amended, modified or restated from time to time, the "Credit
Agreement"), whichever is less, and to pay interest from the date hereof on the
unpaid principal balance thereof at the times and at the rate or rates per annum
provided for in the Credit Agreement. Principal of this note is payable at the
times and in the amounts provided for in the Credit Agreement.
This note is the Note referred to in the Credit Agreement and is
subject to mandatory and voluntary prepayment and its maturity is subject to
acceleration, in each case upon the terms provided in the Credit Agreement. This
note is secured by certain collateral referred to in the Credit Agreement. The
Company hereby waives diligence, presentment, demand, protest, and notice
(except such notice as may be required under the Transaction Documents) of any
kind whatsoever. The nonexercise by the Bank of any of its rights hereunder or
under the Transaction Documents shall not constitute a waiver thereof in any
subsequent instance. This note is entitled to the benefit of the Pledge and
Security Agreement and the other Transaction Documents.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF MINNESOTA, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS. In the event of
default hereunder, the Company agrees to pay all costs and expenses of
collection, including reasonable attorneys' fees.
EXPRESS AMERICA MORTGAGE CORPORATION
By /s/ Xxxxx Xxxxxxxx
Its Senior Vice President
PLEDGE AND SECURITY AGREEMENT
THIS AGREEMENT, dated as of January 25, 1996 by and between
EXPRESS AMERICA MORTGAGE CORPORATION (the "Pledgor"), an Arizona corporation,
and FIRST BANK NATIONAL ASSOCIATION (the "Bank"), a national banking
association.
WITNESSETH, That:
WHEREAS, the Pledgor and the Bank have entered into a
Warehousing Credit Agreement of even date herewith (as the same may be amended,
supplemented, restated or otherwise modified from time to time in writing by the
Pledgor and the Bank, the "Credit Agreement"), pursuant to which the Bank has
agreed to make certain credit facilities available to the Pledgor on the
condition, among others, that Pledgor execute and deliver this Agreement to the
Bank; and
WHEREAS, the Pledgor finds it advantageous, desirable and in
its best interests to comply with the condition that it execute and deliver this
Agreement;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and in order to induce the Bank to become a
party to, and to extend credit under, the Credit Agreement, the parties hereto
agree as follows:
Section 1. DEFINITIONS
Each capitalized term used herein which is not otherwise
defined herein (including, without limitation, the term "Obligations") shall
have the meaning ascribed to such term in the Credit Agreement, including
Exhibit 1.01-B thereto. In addition, the following terms shall have the
following respective meanings:
"Bailee Letter": a letter substantially in the form of
Attachment 1 hereto.
"Collateral": as such term is defined in Section 2 hereof
"Collections": as such term is defined in Section 2 hereof.
"FHLMC Security": a Mortgage-backed Security issued or
guaranteed by FHLMC.
"FIRREA Qualifying Appraisal": with respect to any Pledged
Mortgage Loan, an appraisal of the real estate securing such Pledged Mortgage
Loan which meets the requirements of the applicable appraisal regulations under
Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of
1989, including, without limitation, the appraisal regulations applicable to
mortgage warehousing loans.
"FNMA Security": a Mortgage-backed Security issued or
guaranteed by FNMA.
"GNMA Pool Custodian": as such term is defined in Section
10.03 hereof.
"GNMA Pool Custodian Letter": a letter substantially in the
form of Attachment 2 hereto.
"GNMA Security": a Mortgage-backed Security guaranteed by
GNMA.
"Obligor": a person or other entity who now or hereafter is or
becomes liable to the Pledgor with respect to any of the Collateral.
"Pledged Mortgage Loans": Mortgage Loans deemed to have been
delivered to the Bank as provided in Section 4.01 hereof.
"Pledgor": as such term is defined in the first paragraph of
this Agreement.
"Pool Mortgage": as such term is defined in Section 10.03
hereof.
"PTC": as such term is defined in Section 10.03 hereof.
"PTC Account": as such term is defined in Section 10.03
hereof.
"PTC Participant": as such term is defined in Section 10.03
hereof.
"Related Mortgage-backed Security": a Mortgage-backed Security
that represents an interest in, or is secured by, any Mortgage Loans that were
Pledged Mortgage Loans at the time of formation of the related pool.
"Settlement Amount": as such term is defined in Section 10.03
hereof.
"Settlement Date": as such term is defined in Section 10.03
hereof.
"Transmittal Letter": a transmittal letter substantially in
the form of Attachment 3 hereto.
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"Trust Receipt": a trust receipt substantially in the form of
Attachment 4 hereto.
Section 2. PLEDGE
As collateral security for the due and punctual payment of the
Obligations, the Pledgor does hereby pledge, hypothecate, assign, transfer and
convey to the Bank and its successors and assigns, and grants to the Bank and
its successors and assigns, a security interest in and to the following
described property (the "Collateral"):
(a) all right, title and interest of the Pledgor in and to the
Pledged Mortgage Loans and Related Mortgage-backed Securities and all
promissory notes, participation agreements, participation certificates,
or other instruments or agreements which evidence the Pledged Mortgage
Loans and Related Mortgage-backed Securities;
(b) all right, title and interest of the Pledgor in and to all
Mortgage Notes and other notes, real estate mortgages, deeds of trust,
security agreements, chattel mortgages, assignments of rent and other
security instruments whether now or hereafter owned, acquired or held
by the Pledgor which secure (or constitute collateral for any note,
instrument or agreement securing) any of the Pledged Mortgage Loans;
(c) all right, title and interest of the Pledgor in and to all
financing statements perfecting the security interest of any of the
Pledged Mortgage Loans or property securing any Pledged Mortgage Loan;
(d) all right, title and interest of the Pledgor in and to all
guaranties, insurance policies and other instruments by which the
persons or entities executing the same guarantee or insure, among other
things, the payment or performance of the Pledged Mortgage Loans;
(e) all right, title and interest of the Pledgor in and to all
title insurance policies, title insurance binders, commitments or
reports insuring or relating to any Pledged Mortgage Loan or property
securing any Pledged Mortgage Loan;
(f) all right, title and interest of the Pledgor in and to all
surveys, bonds, hazard and liability insurance policies, participation
agreements and any other agreement, instrument or document pertaining
to, affecting, obtained by the Pledgor in connection with, or arising
out of, the Pledged Mortgage Loans;
-3-
(g) all right, title and interest of the Pledgor in and to all
agreements to purchase any Pledged Mortgage Loans or Related
Mortgage-backed Securities, or agreements to purchase Mortgage Loans or
Mortgage-backed Securities under which any Pledged Mortgage Loans or
Related Mortgage-backed Securities are eligible for sale (hereinafter
collectively called "Take-Out Commitments");
(h) all right, title and interest of the Pledgor in and to all
collections on, and proceeds of or from, any and all of the foregoing
(hereinafter collectively called "Collections");
(i) all right, title and interest of the Pledgor in and to any
other asset of the Pledgor which has been or hereafter at any time is
delivered to the Bank hereunder;
(j) all files, surveys, certificates, correspondence,
appraisals, computer programs, tapes, discs, cards, accounting records,
and other records, information, and data of the Pledgor relating to the
Pledged Mortgage Loans (including all information, data, programs,
tapes, discs and cards necessary to administer and service such Pledged
Mortgage Loans and Related Mortgage-backed Securities);
(k) all right, title and interest of the Pledgor in and to all
balances, credits and deposits contained in the Collateral Account and
in the PTC Account, to the extent that such balances, credits and
deposits constitute proceeds of Advances or proceeds of Collateral
described in this Agreement;
(l) all private mortgage insurance, FHA insurance and VA
guaranties relating to any Pledged Mortgage Loans or Related
Mortgage-backed Securities and the proceeds of any such insurance and
guaranties;
(m) all right, title and interest of the Pledgor in and to the
NationsBanc Note, the NationsBanc Agreement and the NationsBanc
Documents; and
(n) any and all balances, credits, deposits, accounts or
moneys of, or in the name of, the Pledgor representing or evidencing
the foregoing or any proceeds thereof, and any and all proceeds of any
of the foregoing.
Section 3. REPORTS CONCERNING EXISTING COLLATERAL AND HEREAFTER
ACQUIRED COLLATERAL
From time to time hereafter as reasonably requested by the
Bank, the Pledgor will promptly give a written report to the Bank describing and
listing each document, instrument or other paper which evidences, secures,
guarantees, insures or pertains to any item of the Collateral whether now or
hereafter owned, acquired
-4-
or held by the Pledgor that the Pledgor has not theretofore delivered to the
Bank. Such written report shall contain sufficient information to enable the
Bank to identify each such document, instrument or other paper. The Pledgor (a)
upon the request of the Bank, shall promptly provide additional information
concerning, or a more complete description of, each such document, instrument or
other paper and (b) at the request of the Bank, shall promptly deliver the same
to the Bank.
Section 4. DELIVERY OF COLLATERAL DOCUMENTS
4.01 Delivery of Mortgage Loans. A Mortgage Loan shall be
deemed to have been delivered under this Pledge and Security Agreement when the
following described instruments and documents shall have been delivered to the
Bank in accordance with the provisions of this Section 4.01:
(a) the original Mortgage Note evidencing such Mortgage Loan,
duly endorsed in blank as follows:
"Pay to the order of,
-------------------------------
without recourse
EXPRESS AMERICA MORTGAGE CORPORATION
By
-----------------------------
Title "
--------------------------
(b) an original or a copy of the Mortgage securing such
Mortgage Loan, containing all recording information;
(c) a duly executed appropriate assignment of said Mortgage in
favor of the Bank and in recordable form;
(d) if there are any intermediate assignments of said
Mortgage, an original or a copy of each such assignment, containing all
recording information;
(e) if any of the foregoing documents was executed on behalf
of a party thereto by another Person under a power of attorney, the
original or a copy of the executed copy of such power of attorney,
containing all recording information; and
(f) a Transmittal Letter listing all documents being delivered
to the Bank.
-5-
The instruments and documents to be delivered under this Section 4.01 shall be
delivered no later than 10:00 a.m. (Minneapolis time) on the Business Day
preceding the Business Day on which the Advance is to be made for the purpose of
financing the repurchase of such Mortgage Loan.
4.02 Delivery of Additional Mortgage Loan Documents Upon
Request. Within seven calendar days after receiving a written request from the
Bank to deliver the same with respect to any Pledged Mortgage Loan, the Pledgor
shall deliver to the Bank the following:
(a) Original guaranties, mortgage insurance certificates,
assignments of rents and other instruments and documents relating to
security for and payment of such Pledged Mortgage Loan, together with
duly executed assignments thereof;
(b) A mortgagee's title insurance policy (or commitment
therefor) in the form of an American Land Title Association standard
policy (revised coverage, most recent form) from a substantial and
reputable title insurance company acceptable to FNMA and FHLMC in favor
of the Pledgor insuring the lien of the mortgage securing such Pledged
Mortgage Loan (subject only to such liens and encumbrances as are
generally acceptable to reputable lending institutions, mortgage
investors and securities dealers) or, if such a mortgagee's title
policy (or commitment therefor) is generally not available in the state
in which the real property subject to such mortgage is located, an
opinion of an attorney reasonably acceptable to the Bank to the effect
that the Mortgage securing such Pledged Mortgage Loan is a valid first
lien free and clear of all other liens, encumbrances and restrictions
except such as are generally acceptable to reputable lending
institutions, mortgage investors and securities dealers;
(c) Evidence satisfactory to the Bank that the premises
covered by the Mortgage securing such Pledged Mortgage Loan is insured
against fire and perils of extended coverage for an amount at least
equal to the lesser of the full insurable value of such premises and
the Collateral Value of such Pledged Mortgage Loan;
(d) With respect to each Pledged Mortgage Loan and each
Related Mortgage-backed Security, copies of any applicable Take-Out
Commitment and all documents and instruments called for thereunder;
(e) With respect to each Pledged Mortgage Loan secured by a
Mortgage which is insured by the FHA or guaranteed by the VA, a
certificate signed by an officer of the Pledgor that, as of the date of
delivery thereof, the Pledgor has possession of the applicable FHA
insurance certificate or VA guarantee covering such Pledged Mortgage
Loan;
-6-
(f) Originals, or photocopies, as the Bank may request, of
surveys (or plat maps, if surveys are not available) and all other
instruments, documents and other papers pertaining to each such Pledged
Mortgage Loan which are in the possession or control of the Pledgor or
which the Pledgor has the right to possess or control;
(g) The original of each Mortgage referred to Section 4.01(b)
hereof, together with satisfactory evidence of its recordation, or, if
the original recorded Mortgage has not been returned to the Pledgor by
the applicable recording officer, a copy of the original recorded
Mortgage certified as a true and exact copy thereof by the applicable
recording officer;
(h) Evidence satisfactory to the Bank that the Pledgor has
obtained and maintains in its files, as agent for the Bank, a FIRREA
Qualifying Appraisal with respect to such Pledged Mortgage Loan, which
evidence may include, but is not limited to, a copy of such FIRREA
Qualifying Appraisal certified by the Pledgor to be a true and exact
copy of the original thereof as maintained in the Pledgor's files; and
(i) copies of all truth-in-lending disclosures showing
compliance with Regulation Z of the Board of Governors of the Federal
Reserve System and copies of all disclosures under the Real Estate
Settlement Procedures Act;
provided, however, that if the original recorded Mortgage or a certified copy
thereof is requested by the Bank pursuant to clause (g) above and neither of
such items can be obtained from the applicable recording office within such
seven-day period, then such original recorded Mortgage or a certified copy
thereof shall furnished to the Bank by the Pledgor as promptly as possible.
4.03 Form of Assignments. All assignments executed and
delivered by the Pledgor pursuant to this Section 4 shall be in form and
substance acceptable to and approved by the Bank.
4.04 Effect of Transmittal Letters. Any Transmittal Letter
delivered to the Bank hereunder, together with the documents accompanying any
such Transmittal Letter, shall conclusively be presumed to have been delivered
to the Bank on behalf of the Pledgor notwithstanding that any such Transmittal
Letter shall not be signed or submitted by a person who has been authorized in
writing to do so by the Pledgor through its Board of Directors or otherwise.
4.05 Endorsement and Delivery of Checks, Etc. The Pledgor will
from time to time whenever an Event of Default exists, upon the request of the
Bank, endorse and deliver to the Bank any draft, check, note or other writing
which evidences a right to the payment of money which constitutes Collateral.
-7-
4.06 Defects in Collateral Documentation; Loss of Collateral
Value. A Pledged Mortgage Loan which has been delivered to the Bank under this
Pledge and Security Agreement in accordance with Section 4.01 hereof shall be
and remain Collateral which is subject to the lien and security interest granted
to the Bank under Section 2 hereof until such Pledged Mortgage Loan is sold to
an Investor in accordance with Sections 10.02 and 10.03 hereof (in which case
the proceeds thereof, including, without limitation, any Related Mortgage-backed
Security, shall constitute Collateral) or released pursuant to Section 10.04
hereof or until this Pledge and Security Agreement terminates in accordance with
Section 19 hereof, notwithstanding (a) any defect in any document delivered to
the Bank pursuant to Section 4.01 hereof, (b) the failure of such Pledged
Mortgage Loan to be or to remain a Pledged Approved Mortgage Loan, (c) the
failure of such Pledged Mortgage Loan to have or to retain Collateral Value, (d)
the failure of the Pledgor to make timely delivery of any document required to
be delivered to the Bank under Section 4.02 hereof, or (e) any other fact,
circumstance, condition or event whatsoever. For purposes of the preceding
sentence, the financing or refinancing of the repurchase of a Pledged Mortgage
Loan from the proceeds of Advances and/or the assignment of Collateral Value to
such Pledged Mortgage Loan by the Bank shall be deemed to be conclusive evidence
of the delivery of such Pledged Mortgage Loan under Section 4.01 hereof,
notwithstanding any subsequent determination by the Bank that the documentation
delivered for such Pledged Mortgage Loan was incomplete or defective in any
respect or that such Pledged Mortgage Loan should not have been assigned
Collateral Value.
4.07. Delivery of NationsBanc Note. The Pledgor shall deliver
the original executed copy of the NationsBanc Note to the Bank in accordance
with the Credit Agreement.
Section 5. REPRESENTATIONS AND WARRANTIES
The Pledgor hereby represents and warrants that: (a) all of
the representations and warranties set forth in the Credit Agreement are true
and correct; (b) the Pledgor is or will be the legal and equitable owner of the
Collateral and its interests therein are or will be free and clear of all liens,
security interests, charges and encumbrances of every kind and nature (other
than as created hereunder or under Take-Out Commitments or under assignments to
purchasers under Take-Out Commitments); (c) no financing statement or
other evidence of lien covering any of the Collateral is or will be on file in
any public office other than financing statements filed in connection with the
Credit Agreement and related security documents; (d) the Pledgor has good right,
power and lawful authority to pledge, assign and deliver the Collateral in the
manner hereby done or contemplated; (e) no consent or approval of any
governmental body, regulatory authority, person, trust, or entity is or will be
(i) necessary to the validity of the rights created hereunder or (ii) required
prior to the assignment, transfer and
-8-
delivery of any of the Collateral to the Bank; (f) to the Pledgor's knowledge,
no material dispute, right of setoff, counterclaim or defense exists with
respect to all or any part of the Collateral; (g) this Pledge and Security
Agreement constitutes the legal, valid and binding obligation of the Pledgor
enforceable against the Pledgor and the Collateral in accordance with its terms
(subject to limitations as to enforceability which might result from bankruptcy,
reorganization, arrangement, insolvency or other similar laws affecting
creditors' rights generally); (h) the Pledgor has or will have fully complied
with, and all collateral documents delivered with respect to such Pledged
Mortgage Loan comply or will comply with, all applicable federal, state and
local laws, regulations and rules, including, but not limited to, (i) usury
laws, (ii) the Real Estate Settlement Procedures Act of 1974, (iii) the Equal
Credit Opportunity Act, (iv) the Federal Truth in Lending Act, (v) Regulation Z
of the Board of Governors of the Federal Reserve System and (vi) all other
consumer protection and truth-in-lending laws which may apply, and in each case
with the regulations promulgated in connection therewith, as the same may be
amended from time to time; and the Pledgor shall maintain sufficient documentary
evidence in its files with respect to such Pledged Mortgage Loans to
substantiate such compliance; (i) the Pledgor has obtained or will obtain prior
to the delivery of any Mortgage Loan to the Bank in accordance with Section 4.01
hereof, and will maintain in its files as agent for the Bank, a FIRREA
Qualifying Appraisal with respect to such Mortgage Loan; (j) immediately upon
(i) the execution and delivery of the Credit Agreement, the Note and the other
Loan Documents, (ii) the acquisition by the Pledgor of rights in a Pledged
Mortgage Loan and (iii) the delivery of the Mortgage Note evidencing such
Pledged Mortgage Loan to the Bank as contemplated by Section 4.01 hereof, the
Bank shall have a valid and perfected first priority security interest in such
Pledged Mortgage Loan; (k) immediately upon (i) the execution and delivery of
the Credit Agreement, the Note and the other Loan Documents, (ii) the
acquisition by the Pledgor of rights in such Collateral and (iii) the filing
with the Secretary of State of Arizona of a financing statement showing the
Pledgor as debtor and the Bank as secured party and describing the Collateral,
the Bank shall have a valid and perfected first priority security interest in
the Collateral which is other than as described in clause (j) of this Section 5,
to the extent that a security interest in such other Collateral can be perfected
by filing a financing statement; (l) each Pledged Mortgage Loan has been fully
advanced and is a first lien on the premises described therein; (m) each Pledged
Mortgage Loan and each Pledged Approved Mortgage Loan complies with all
requirements of this Agreement and the Credit Agreement applicable thereto; (n)
except as described in the Borrowing Base Certificates provided by the Pledgor
to the Bank pursuant to Section 10.01 of the Credit Agreement, or as otherwise
disclosed to the Bank, there is no monetary default existing under any Pledged
Mortgage Loan that has continued for more than 60 days and to the knowledge of
the Pledgor, there is no other default existing under any Pledged Mortgage Loan;
and (o) all Pledged Mortgage Loans secured by properties located in special
flood hazard areas designated by the Secretary of Housing and Urban Development
are and shall continue to be covered by flood insurance under the National Flood
Insurance Program.
-9-
Section 6. POSSESSION OF COLLATERAL; STANDARD OF CARE
The Bank shall exercise reasonable care in the custody and
preservation of the Collateral and shall keep the Collateral separate from
similar collateral furnished by third parties. The Bank shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral in its possession if it takes such action for that purpose as the
Pledgor requests in writing, but failure of the Bank to comply with any such
request shall not itself be deemed a failure to exercise reasonable care, and no
failure of the Bank to preserve or protect any rights with respect to such
Collateral not so requested by Pledgor shall be deemed a failure to exercise
reasonable care in the custody or preservation of such Collateral.
Section 7. COLLECTIONS ON COLLATERAL BY THE PLEDGOR; ACCOUNTING
Until the Bank gives notice to the Pledgor pursuant to the
penultimate sentence of this Section 7 or exercises the Bank's rights under
Sections 8 or 13, the Pledgor shall be entitled to receive all Collections and
use the same in the normal course of business. Upon notice from the Bank to the
Pledgor given after the occurrence and during the continuation of an Event of
Default or an Unmatured Event of Default, the Pledgor shall furnish to the Bank
not later than the tenth Business Day after the end of each month a report on
all Collections received during the preceding month and provide the same
accounting therefor as the Pledgor customarily furnishes the Investors therein,
including with respect to Collections on each Pledged Mortgage Loan: (a) the
name of the borrower, (b) Pledgor's loan number for the Pledged Mortgage Loan,
(c) current principal balance of the Pledged Mortgage Loan, (d) current escrow
balance with respect to the Pledged Mortgage Loan, (e) number and amount of past
due payments on the Pledged Mortgage Loan and (f) the amount of the Collections
received during such month with respect to the Pledged Mortgage Loan, itemized
to show (i) principal portion, (ii) interest portion and (iii) portion thereof
representing amounts paid in escrow for real estate taxes and insurance.
Upon notice from the Bank to the Pledgor given after the
occurrence and during the continuation of an Event of Default or of an Unmatured
Event of Default, the Pledgor shall hold all Collections representing principal
payments and prepayments and escrows for real estate taxes and insurance in
trust for the Bank and shall promptly remit the same to the Bank. All amounts
representing the principal payments and prepayments on Pledged Mortgage Loans
which are delivered to the Bank pursuant to the preceding sentence shall be
deposited in the Collateral Account and all amounts representing real estate tax
and insurance escrows for Pledged Mortgage Loans which are delivered to the Bank
pursuant to the preceding sentence shall be deposited in an escrow account with
any bank
-10-
satisfactory to the Pledgor and the Bank, to be held for the payment of the
applicable real estate taxes and insurance premiums.
Section 8. COLLECTIONS ON COLLATERAL BY THE BANK
Upon the occurrence and during the continuation of an Event of
Default or an Unmatured Event of Default, the Bank shall be entitled, but not
obligated, at any time and from time to time, to notify and direct any or all
Obligors with respect to any of the Collateral thereafter to make all payments
on such Collateral directly to the Bank or such other person or entity
designated by the Bank, regardless of whether the Pledgor was previously making
collections thereon. All amounts paid by Obligors to the Bank pursuant to the
preceding sentence shall be deposited in (a) the Collateral Account, to the
extent such payments represent interest payments and principal payments and
prepayments on Pledged Mortgage Loans, and (b) in an escrow account with any
bank satisfactory to the Pledgor and the Bank, to the extent such payments
represent real estate tax and insurance escrows on Pledged Mortgage Loans, to be
held for the payment of the applicable real estate taxes and insurance premiums.
The Bank shall promptly account to the Pledgor for all such payments received by
the Bank. Each Obligor making such payment to the Bank or such other person or
entity designated by the Bank shall be fully protected in relying on the written
statement of the Bank that the Bank then holds the security interests herein
granted and assigned which entitled the Bank or such other person or entity
designated by the Bank to receive such payment, and the receipt of the Bank or
such other person or entity designated by the Bank for such payment shall be
full acquittance therefor to the Obligor making such payment.
Section 9. DEFAULTED LOANS; COLLECTION AND FORECLOSURE PROCEEDINGS
If the Pledgor wishes to institute collection or foreclosure
proceedings with respect to a Pledged Mortgage Loan, it shall substitute other
Collateral so that it is entitled to a release of such Pledged Mortgage Loan
pursuant to Section 10.04 hereof. If the Pledgor does not own sufficient other
Collateral to obtain a release of such Pledged Mortgage Loan, then so long as an
Event of Default or an Unmatured Event of Default has not occurred and is
continuing, the Bank, upon written request of the Pledgor, will deliver, upon
such terms and conditions as the Bank in its sole discretion may establish, to
an attorney at law, as the agent of the Bank, to the extent necessary for the
purpose of enabling said attorney to institute, in the name of the Pledgor or
the Bank, or in their names or in the names of their nominees, as the Bank may
determine, collection and/or foreclosure proceedings on any Pledged Mortgage
Loan in default the following: (a) the promissory note or other instrument
evidencing any such Pledged Mortgage Loan in default and (b) the mortgage or
deed of trust, if any, that secures such promissory note, or other Collateral
needed by said attorney in connection with such collection and/or foreclosure
proceedings in such manner and in such form as the Bank deems
-11-
necessary or desirable to preserve the Bank's security interests in such
Collateral, provided such Collateral and all proceeds of any such collection
and/or foreclosure efforts shall remain subject to this Pledge and Security
Agreement and the security interests granted herein and all such proceeds shall
be delivered to the Bank as and when and in the form received to the extent
required by the terms of the Credit Agreement. The Pledgor hereby covenants and
agrees that, without first obtaining the prior written consent of the Bank, it
will not request or accept any discount on, or any conveyance, endorsement,
transfer or assignment of any right, title or interest in and to any of the
real, personal or mixed properties sold, pledged, mortgaged, hypothecated,
assigned, transferred, set over or conveyed to the Bank as security for, any of
the promissory notes or other instruments or agreements which evidence Pledged
Mortgage Loans in lieu of foreclosure proceedings if, after giving effect to any
such proposed transaction, the Borrowing Base would be less than the aggregate
unpaid principal amount of the outstanding Supplemental Warehousing Advances. At
such time as such delivery of the Collateral is no longer required in connection
with said collection and/or foreclosure efforts, the same shall be reassigned
and redelivered to the Bank.
Section 10. SALES AND RELEASES OF COLLATERAL
10.01 Redelivery of Collateral for Correction. If no Event of
Default or Unmatured Event of Default exists, the Bank may redeliver to the
Pledgor, for correction, any instrument or document which constitutes or relates
to any of the Collateral; provided, that any such redelivery shall be made
against a Trust Receipt duly completed and executed by the Pledgor requiring,
within 21 days after the redelivery thereof to the Pledgor, the return to the
Bank of each such instrument and document. The Pledgor shall deliver to the Bank
each such instrument and document as soon as it has completed the correction
thereof and, in any event, within 21 days after its receipt thereof.
10.02 Delivery for Sale of Pledged Mortgage Loans. If no Event
of Default or Unmatured Event of Default exists, the Pledgor may direct the
Bank, and the Bank will transmit on behalf of the Pledgor, Pledged Mortgage
Loans, accompanied by a duly completed and executed Bailee Letter, to an
Investor who has issued a Take-Out Commitment. All sale proceeds transferred to
the Bank pursuant to such Bailee Letter and all Mortgage Notes and other
documents returned to the Bank pursuant to such Bailee Letter shall remain a
part of the Collateral unless and until released pursuant to Section 10.04 of
this Pledge and Security Agreement. If required by the applicable Take-Out
Commitment, Pledged Mortgage Loans may be duly assigned of record to the issuer
of such Take-Out Commitment subject to reassignment if not purchased and with
beneficial title to any such assigned Pledged Mortgage Loans being subject to
the above-stated escrow condition. All Pledged Mortgage Loans which are so
transmitted or otherwise delivered but not paid for shall constitute Collateral
and shall, subject to the limits contained herein, be included in determining
the Borrowing Base. The Pledgor further agrees that the
-12-
initial certifications and the settlements in connection with FNMA and GNMA
pools are to be performed by the Bank or its designated agent. The proceeds
received by the Bank from the sale of any Pledged Mortgage Loans pursuant to
this Section 10.03 shall be deposited by the Bank in the Collateral Account and
shall be promptly applied to the payment of principal of the Note; provided,
however, that if an Event of Default has occurred and is continuing, such
proceeds shall be applied in accordance with Section 17 hereof.
10.03 Formation of Pools. (a) The following provisions shall
apply with respect to the delivery of Pledged Mortgage Loans which are intended
for inclusion in a pool of Mortgage Loans backing securities to be issued by
GNMA (each such Mortgage Loan, a "Pool Mortgage"):
(i) The Pledgor shall enter into and conform to such
custody and related agreements required by the Bank or its designated
agent with the approval of the Bank to permit the creation, transmittal
to, maintenance and sale of GNMA Securities in both certificated and
uncertificated book-entry form with Participant Trust Company ("PTC")
in New York City, or such other successor organization or system
approved from time to time by GNMA. Such agreements shall be with such
financial organizations who have been (and continue to be during the
term of this Pledge and Security Agreement) approved by PTC as
participants in PTC and further approved by the Bank, and shall
provide, among other things, that GNMA Securities shall be created,
maintained and traded at the direction, in the name and for the benefit
of the Bank or its designated agent (any such PTC participant being
referred to herein as a "PTC Participant"). The accounts maintained at
PTC to and in which GNMA Securities shall be delivered and maintained,
any trading accounts and any accounts into which proceeds or interest
and other amounts payable in respect of any GNMA Securities which are
pledged hereunder are held are herein collectively referred to as the
"PTC Account." The PTC Account shall, for all purposes of this Pledge
and Security Agreement and any GNMA Securities and the proceeds thereof
and other amounts with respect thereto contained therein, be deemed
part of the Collateral hereunder.
(ii) The Bank shall, provided that no Event of
Default shall have occurred, execute and deliver to a party designated
as a GNMA pool document custodian (a "GNMA Pool Custodian") Form HUD
1711A ("Release of Security Interest") (or any successor form) in
respect of a Pool Mortgage upon the delivery to the Bank of: (A)
a copy of Form HUD 11705 ("Schedule of Subscribers") (or any
successor form) with "Authorization and Instructions to GNMA" duly
completed by the Pledgor, and specifying that (1) the related GNMA
Security shall be made available for pick-up at the Chemical Bank GNMA
window at PTC, (2) such GNMA Security is to be deposited with PTC in
the PTC Account and (3) the Pledgor is the subscriber
-13-
for said GNMA Security for an amount at least equal to the aggregate
outstanding principal balance of all relevant Pool Mortgages; and (B)
delivery instructions with respect to the GNMA Security acceptable to
the Bank and the PTC Participant. The Bank shall deliver the Pool
Mortgages to the GNMA Pool Custodian against a properly executed GNMA
Pool Custodian Letter simultaneously with the delivery of Form HUD
11705 to such GNMA Pool Custodian.
(iii) Upon compliance with the foregoing, the Bank or
its designated agent shall, on the settlement date of the related GNMA
trade (the "Settlement Date"), arrange to have delivered the related
GNMA Securities, in accordance with the Pledgor's delivery
instructions. Upon its receipt of the settlement amount (the
"Settlement Amount") from the PTC Participant, the Bank shall apply
such Settlement Amount in payment of the unpaid principal amount
outstanding under the Note.
(b) With respect to each Pledged Mortgage Loan which is
intended for inclusion in a FNMA or FHLMC Mortgage Loan pool to back book-entry
FNMA or FHLMC Securities, the Pledgor agrees that it will enter into and conform
to such agreements and procedures as are established by the Bank in its sole
judgment from time to time for the delivery of Pledged Mortgage Loans to a FHLMC
or FNMA pool custodian (or directly to FHLMC or FNMA, as the case may be) and
the issuance, maintenance and transfer of FHLMC or FNMA Securities under such
book-entry system or program. The Bank may enter into such agreements as may be
necessary or appropriate in the sole discretion of the Bank in order to
effectuate the issuance, maintenance and transfer of such FNMA or FHLMC
Securities under such book-entry system or program.
(c) The Bank or its designated agent will use its best efforts
to complete documents in a timely manner and otherwise to cooperate with the
Pledgor in the issuance of Mortgage-backed Securities and the formation of pools
of Mortgage Loans as contemplated by this Section 10.03, subject, however, to
the provisions of Sections 6 and 20 hereof. The Bank and its designated agent
shall be entitled to rely on the written instructions of the Pledgor and the
written instructions and published guidelines of the applicable Investor in this
regard and shall have no obligation to act in the absence of such written
instructions or published guidelines.
10.04 Release or Assignment of Particular Collateral. (a) If
no Event of Default or Unmatured Event of Default has occurred which is
continuing, the Bank shall, at the written request of the Pledgor, release its
security interest in any item of Collateral specified by the Pledgor in such
written request, provided that, after giving effect to such requested release or
assignment, as the case may be, the Borrowing Base (including therein the
Collateral Value of any Collateral given in substitution for the Collateral to
be released) shall not be less than the aggregate principal amount outstanding
under the Note. If the Pledgor requests and is
-14-
entitled to a release of a Pledged Mortgage Loan pursuant to the preceding
sentence, the Bank shall promptly redeliver to the Pledgor (i) the Mortgage Note
evidencing such Pledged Mortgage Loan endorsed without recourse upon, or
representation or warranty by, the Bank and (ii) a reassignment, without
recourse upon, or representation or warranty by, the Bank, of any part of the
Collateral that secures such Mortgage Note.
(b) Whether or not the Pledgor, by terms of this Section
10.04, is entitled to a release of the Bank's security interest in the
Collateral, the Bank shall release its security interest in any Pledged Mortgage
Loan to the extent necessary to permit the Pledgor to execute any full or
partial release of any mortgage, deed of trust, security agreement, financing
statement or other security instrument or deed which the Pledgor is
contractually obligated to release upon payment thereof or of a minimum release
price, provided, the Pledgor promptly remits such payment to the Bank for
application upon the unpaid principal amount outstanding under the Note.
(c) Upon the Bank's receipt of the proceeds from the sale of a
Pledged Mortgage Loan delivered pursuant to Section 10.02 hereof, the security
interest of the Bank in such Pledged Mortgage Loan and in the Mortgage Note and
other documents related thereto shall terminate without further action by the
Bank.
(d) Upon the Bank's receipt of the proceeds from the sale of a
Related Mortgage-backed Security representing an interest in, or which is
secured by, Pledged Mortgage Loans delivered pursuant to Section 10.03 hereof,
the security interest of the Bank in such Related Mortgage-backed Security and
in such Pledged Mortgage Loans shall terminate without further action by the
Bank.
Section 11. FURTHER ASSURANCES
The Pledgor, upon the request of the Bank, will promptly
correct any patent defect, error or omission which may be discovered in the
contents of this Pledge and Security Agreement or in the execution hereof and
will do such further acts and things, and execute, acknowledge, endorse and
deliver such further instruments, agreements, schedules and certificates,
including, but not limited to, notes, mortgages, deeds of trust, assignments,
chattel mortgages, security agreements and financing statements covering the
title to any real, personal or mixed property now owned or hereafter acquired by
the Pledgor and now or hereafter constituting Collateral, schedules and
certificates respecting all or any of the Collateral at the time subject to the
security interest hereunder, the items or amounts received by the Pledgor in
full or partial payment, or otherwise as proceeds of any of the Collateral and
supplements to and amendments of this Pledge and Security Agreement, that the
Bank may at any time and from time to time reasonably request in connection with
the administration or enforcement of this Pledge and Security Agreement or
related to the Collateral or any part thereof or in order to assure and confirm
unto
-15-
the Bank the rights, powers and remedies hereunder or to subject all of the
real, personal or mixed properties now owned or hereafter acquired by the
Pledgor and now or hereafter constituting Collateral to, or to confirm or
clearly establish that all of said properties are subject to and encumbered by,
a lien to secure the due and punctual payment of the Obligations. Any such
instrument, agreement, schedule or certificate shall be executed by a duly
authorized officer of the Pledgor and shall be in such form and detail as the
Bank may reasonably specify. Promptly upon the request of the Bank, the Pledgor
will xxxx, or permit the Bank to xxxx in a reasonable manner, the Pledgor's
books, records and accounts showing or dealing with the Collateral with a
notation clearly setting forth that the Collateral has been assigned to the
Bank, which notation shall be in form and substance satisfactory to the Bank.
The Pledgor will do all acts and things, and will execute and
file or record all instruments (including mortgages, pledges, assignments,
security agreements, financing statements, amendments to financing statements,
continuation statements, etc.) required, or reasonably requested by the Bank, to
establish, perfect, maintain and continue the perfection and priority of the
security interest of the Bank in the Collateral and will pay the costs and
expenses of: all filings and recordings, including taxes thereon; all searches
necessary, or reasonably deemed necessary by the Bank, to establish and
determine the validity and the priority of such security interest of the Bank;
and also to satisfy all other liens which in the reasonable opinion of the Bank
might prejudice, imperil or otherwise affect the Collateral or the existence or
priority of such security interest. A carbon, photographic or other reproduction
of this Pledge and Security Agreement or of a financing statement shall be
sufficient as a financing statement and may be filed in lieu of the original in
any or all jurisdictions which accept such reproductions.
The Pledgor will assist and cooperate fully with any and all
measures established by the Bank to comply with the appraisal regulations under
Title XI of the Financial Institutions Reform, Recovery and Enforcement Act of
1989 (including, without limitation, the appraisal regulations applicable to
mortgage warehousing loans), which compliance measures may include, but shall
not be limited to, spot checks, policy reviews and similar verification
activities.
Section 12. COVENANTS OF THE PLEDGOR
So long as this Pledge and Security Agreement shall remain in
effect, the Pledgor will (a) defend the right, title and interest of the Bank in
the Collateral against the claims and demands of all Persons; (b) not amend,
modify, or waive any of the terms and conditions of, or settle or compromise any
claim in respect of, any Collateral in a manner which would materially adversely
affect the interest of the Bank; (c) not sell, assign, transfer, or otherwise
dispose of, or grant any option with respect to, or pledge or otherwise
encumber, or release any of the Collateral or any interest therein except in a
manner whereby the Bank alone would be entitled to
-16-
receive the proceeds therefrom; (d) notify the Bank monthly of any monetary
default that continues for 60 days or more or any other default of which the
Pledgor has knowledge that continues beyond any applicable notice or grace
period under any Pledged Mortgage Loan which has Collateral Value; and (e)
maintain, or cause to be maintained, in its chief executive office or in the
offices of a computer service bureau approved by the Bank for the processing of
Mortgage Notes and Mortgage-backed Securities, originals, or copies if the
original has been delivered to the Bank, of its Mortgage Notes and all files,
surveys, certificates, correspondence, appraisals, computer programs, tapes,
discs, cards, accounting records and other records, information and data,
relating to the Collateral and will give the Bank written notice of the place
where such records, information and data will be maintained.
Section 13. BANK APPOINTED ATTORNEY-IN-FACT
Effective upon the occurrence and continuation of an Event of
Default or an Unmatured Event of Default, the Pledgor hereby appoints the Bank
the Pledgor's attorney-in-fact, with full power of substitution, to submit any
Pledged Mortgage Loan and related documents to a purchaser under a Take-Out
Commitment and for the purpose of carrying out the provisions of this Pledge and
Security Agreement and taking any action and executing in the name of the
Pledgor without recourse to the Pledgor any instrument, including, but not
limited to, the instruments described in Section 2 hereof, which the Bank may
deem necessary or advisable to accomplish the purpose hereof, which appointment
is irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Bank shall have the right and power to receive, endorse and
collect checks and other orders for the payment of money made payable to the
Pledgor representing any payment or reimbursement made under, or pursuant or
with respect to, the Collateral or any part thereof and to give full discharge
for the same. The Pledgor hereby authorizes the Bank, in the Bank's discretion
at any time and from time to time in connection with the exercise of its rights
and/or remedies under this Pledge and Security Agreement, including, without
limitation, its rights and/or remedies under Sections 10.02, 10.03 and 14
hereof, to (i) complete or cause to be completed any assignment of real
estate mortgage or deed of trust which heretofore was, or hereafter at any time
may be, executed and delivered by the Pledgor to the Bank so that such
assignment describes a real estate mortgage or deed of trust which is security
for any Pledged Mortgage Loan now or hereafter at any time constituting
Collateral and (ii) complete or cause to be completed any other assignment or
endorsement that was delivered in blank hereunder.
Section 14. EVENTS OF DEFAULT: REMEDIES
If one or more Events of Default shall occur, then the Bank,
in addition to any and all other rights and remedies which the Bank may then
have hereunder, under the Credit Agreement, under the Uniform Commercial Code of
the State of Minnesota or of any other pertinent jurisdiction (the "Code"), or
under any other
-17-
instrument, or which the Bank may have at law or in equity, or otherwise, may,
at its option, (a) in the name of the Pledgor, or otherwise, demand, collect,
receive and receipt for, compound, compromise, settle and give acquittance for,
and prosecute and discontinue any suits or proceedings in respect of any or all
of the Collateral; (b) take any action which the Bank may deem necessary or
desirable in order to realize on the Collateral, including, without limitation,
the power to perform any contract, endorse in the name of the Pledgor without
recourse to the Pledgor any checks, drafts, notes or other instruments or
documents received in payment of or on account of the Collateral; (c) enter upon
the premises where any of the Collateral not in the possession of the Bank is
located and take possession thereof and remove the same, with or without
judicial process; (d) reduce the claims of the Bank to judgment or foreclosure
or otherwise enforce the security interests herein granted and assigned, in
whole or in part, by any available judicial procedure; (e) after notification,
if any, provided for herein, sell, lease, or otherwise dispose of, at the office
of the Bank, on the premises of the Pledgor, or elsewhere, all or any part of
the Collateral, in its then condition or following any commercially reasonable
preparation or processing, and any such sale or other disposition may be as a
unit or in parcels, by public or private proceedings, and by way of one or more
contracts (it being agreed that the sale of any part of Collateral shall not
exhaust the power of sale granted hereby, but sales may be made from time to
time, and at any time, until all the Collateral has been sold or until all
Obligations have been fully paid and performed), and at any such sale it shall
not be necessary to exhibit any of the Collateral; (f) at the Bank's discretion,
surrender any policies of insurance on the Collateral consisting of real or
personal property owned by the Pledgor and receive the unearned premiums, and,
in connection therewith, the Pledgor hereby appoints the Bank as the agent and
attorney-in-fact for the Pledgor to collect such premiums; (g) at the Bank's
discretion, retain the Collateral in satisfaction of the Obligations whenever
the circumstances are such that the Bank is entitled to do so under the Code or
otherwise; and (h) exercise any and all other rights, remedies and privileges
which the Bank may have under this Pledge and Security Agreement, or any of the
other promissory notes, assignments, mortgages, deeds of trust, chattel
mortgages, security agreements, transfers of lien, and any other instruments,
documents, and agreements executed and delivered pursuant to the terms hereof or
pursuant to the terms of the Credit Agreement. The Pledgor acknowledges and
agrees that (x) a private sale of the Collateral pursuant to any Take-Out
Commitment shall be deemed to be a sale of the Collateral in a commercially
reasonable manner and (y) the Collateral is intended to be sold and that none of
the Collateral is a type or kind intended by the Pledgor to be held for
investment or any purpose other than for sale.
Section 15. WAIVERS
The Pledgor, for itself and all who may claim under the
Pledgor, as far as the Pledgor now or hereafter lawfully may, also waives all
right to have all or any portion of the Collateral marshalled upon any
foreclosure hereof and agrees that
-18-
any court having jurisdiction over this Pledge and Security Agreement may order
the sale of all or any portion of the Collateral as an entirety. Any sale of, or
the grant of options to purchase (for the option period thereof or after
exercise thereof), or any other realization upon, all or any portion of the
Collateral under clause (e) of Section 14 shall operate to divest all right,
title, interest, claim and demand, either at law or in equity, of the Pledgor in
and to the Collateral so sold, optioned or realized upon, and shall be a
perpetual bar both at law and in equity against the Pledgor and against any and
all persons claiming or attempting to claim the Collateral so sold, optioned or
realized upon or any part thereof, from, through and under the Pledgor. No delay
on the part of the Bank in exercising any power of sale, lien, option or other
right hereunder and no notice or demand which may be given to or made upon the
Pledgor with respect to any power of sale, lien, option or right hereunder shall
constitute a waiver thereof, or limit or impair the right of the Bank to take
any action or to exercise any power of sale, lien, option or any other right
under this Pledge and Security Agreement or the Credit Agreement, or otherwise,
nor shall any single or partial exercise thereof, or the exercise of any power,
lien, option or other right under this Pledge and Security Agreement or
otherwise, all without notice or demand (except as otherwise provided by the
terms of this Pledge and Security Agreement), prejudice the Bank's rights
against the Pledgor in any respect. Each and every remedy given the Bank shall,
to the extent permitted by law, be cumulative and shall be in addition to any
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute.
Section 16. NOTICES
Reasonable notification of the time and place of any public
sale of any Collateral, or reasonable notification of the time after which any
private sale or other intended disposition of any of the Collateral is to be
made shall be sent to the Pledgor and to any other person entitled under the
Code to notice; provided, that if any of the Collateral threatens to decline
speedily in value, or is of a type customarily sold on a recognized market, the
Bank may sell or otherwise dispose of the Collateral without notification,
advertisement, or other notice of any kind. It is agreed that notice sent or
given not less than fifteen (15) calendar days prior to the taking of the action
to which the notice relates is reasonable notification and notice for the
purposes of this Section 16 and that such notice is sufficient if it states only
the number of Pledged Mortgage Loans to be sold and their aggregate outstanding
principal balance, together with the time and place of sale. All notices and
other communications provided for in the Pledge and Security Agreement shall be
given to the parties at their respective addresses set forth on the signature
pages of the Credit Agreement or, as to each such party, at such other address
as shall be designated by such party in a written notice to the other parties.
All such notices and other communications shall be given by one or more of the
means specified in Section 13.02 of the Credit Agreement and, upon being so
given, shall be deemed to have been given as of the earliest time specified in
said Section 13.02 for the means so used.
-19-
Section 17. APPLICATION OF PROCEEDS
Until all Obligations owed to the Bank have been paid in full,
any and all proceeds received by the Bank from any sale or other disposition of
the Collateral, or any part thereof, upon the occurrence of an Event of Default
or the exercise of any other remedy pursuant to Section 8 hereof or by virtue of
Section 14 hereof, shall be applied by the Bank in accordance with following
order of priority:
First, to the payment of the out-of-pocket expenses of the
Bank and the reasonable fees and out-of-pocket expenses of counsel employed in
connection therewith, and to the payment of all costs and expenses incurred by
the Bank in connection with the administration and enforcement of this Pledge
and Security Agreement (including, without limitation, the sale or other
disposition of the Collateral) and to the payment of all advances made by the
Bank for the account of the Pledgor hereunder, to the extent that such costs and
expense have not been reimbursed to the Bank;
Second: to the payment in full of the Obligations; and
Third: the balance (if any) of such proceeds shall be paid to
the Pledgor, its successors or assigns, or as a court of competent jurisdiction
may direct;
provided, that if such proceeds are not sufficient to satisfy the Obligations in
full, the Pledgor shall remain liable to the Bank for any deficiency.
Section 18. INDEMNIFICATION AND COSTS AND EXPENSES
The Pledgor will (a) pay all reasonable out-of-pocket
expenses, including, without limitation, any recording or filing fees, fees of
title insurance companies in connection with records or filings, costs of
mortgage insurance policies and endorsements thereof and mortgage registration
taxes (or any similar fees or taxes), incurred by the Bank in connection with
the enforcement and administration of this Pledge and Security Agreement
(whether or not the transactions hereby contemplated shall be consummated) and
the Credit Agreement, the enforcement of the rights of the Bank in connection
with this Pledge and Security Agreement and the Credit Agreement and including,
without limitation, the reasonable fees and disbursements of counsel for the
Bank; (b) pay, and hold the Bank harmless from and against, any and all present
and future stamp and other similar taxes with respect to the foregoing matters
and save the Bank harmless from and against any and all liabilities with respect
to or resulting from any delay or omission to pay such taxes; and (c) indemnify,
pay and hold harmless the Bank from and against any and all liabilities,
obligations, losses, damages, penalties, judgments, suits, costs, expenses and
disbursements of any kind whatsoever (the "Indemnified Liabilities") which may
be imposed on, incurred by
-20-
or asserted against it in any way relating to or arising out of this Pledge and
Security Agreement or the Credit Agreement or any of the transactions
contemplated hereby or thereby, unless the same are caused by the gross
negligence or willful misconduct of the Bank. The undertakings of the Pledgor
set forth in this Section 18 shall survive the payment in full of the Note and
the termination of this Pledge and Security Agreement and the Credit Agreement.
Section 19. TERMINATION
This Pledge and Security Agreement shall terminate when all
the Obligations have been fully paid and performed and the Commitment has been
terminated, at which time the Bank shall reassign and redeliver, without
recourse upon, or representation or warranty by, the Bank and at the expense of
the Pledgor, to the Pledgor, or to such other person or persons as the Pledgor
shall designate, against receipt, such of the Collateral (if any) as shall not
have been sold or otherwise disposed of by the Bank pursuant to the terms hereof
or the Credit Agreement, and shall still be held by the Bank, together with
appropriate instruments of reassignment and release; provided, however, that
this Pledge and Security Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the Bank or any other
Person upon the insolvency, bankruptcy, or reorganization of the Pledgor or
otherwise, all as though such payment had not been made.
Section 20. NON-ASSUMPTION OF LIABILITY; NO FIDUCIARY RESPONSIBILITY
Nothing herein contained shall relieve the Pledgor from
performing any covenant, agreement or obligation on the part of the Pledgor to
be performed under or in respect of any of the Collateral or from any liability
to any party or parties having an interest therein or impose any liability on
the Bank for the acts or omissions of the Pledgor in connection with any of the
Collateral. The Bank shall not assume or become liable for, nor shall it be
deemed or construed to have assumed or become liable for, any obligation of the
Pledgor with respect to any of the Collateral, or otherwise, by reason of the
grant to the Bank of security interests in the Collateral. While the Bank shall
use reasonable care in the custody and preservation of the Collateral as
provided in Section 6 hereof, the Bank shall not have any fiduciary
responsibility to the Pledgor with respect to the holding, maintenance or
transmittal of the Collateral delivered hereunder.
Section 21. WAIVERS, ETC.
No failure on the part of the Bank to exercise and no delay in
exercising, any power or right hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any power or right preclude any other or
further
-21-
exercise thereof or the exercise of any other power or right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
Section 22. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL
THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW, BUT NOT THE LAW OF
CONFLICTS, OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS. THE PLEDGOR HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ANY MINNESOTA STATE OR FEDERAL COURT SITTING IN HENNEPIN OR XXXXXX COUNTIES,
STATE OF MINNESOTA, FOR ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS, AND THE PLEDGOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH MINNESOTA STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PLEDGOR HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF ANY SUCH ACTION OR PROCEEDING. THE PLEDGOR AND THE
BANK HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO,
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 23. COUNTERPARTS; EFFECTIVENESS
This Pledge and Security Agreement and any amendments,
waivers, consents, or supplements may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all such
counterparts together shall constitute but one and the same instrument. This
Pledge and Security Agreement shall become effective upon the written or
telephonic notification of such execution and authorization of delivery thereof
has been received by the Bank.
-22-
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
and Security Agreement to be executed as of the day and year first above
written.
EXPRESS AMERICA MORTGAGE
CORPORATION
By Signature Illegible
Its Chairman and CEO
FIRST BANK NATIONAL ASSOCIATION
By Signature Illegible
Its Illegible
-23-
Attachment 1
[On Company Letterhead]
FORM OF BAILEE LETTER
[Investor name and address]
Gentlemen:
Enclosed please find_____________ original promissory notes
representing an original principal amount of $______________ (the "Notes")
evidencing the Pledged Mortgage Loans described in more detail on the schedule
attached to this letter, along with other supporting documents which you have
agreed to purchase. Please be advised that a security interest in the Notes has
been granted to First Bank National Association (the "Bank") pursuant to a
Warehousing Credit Agreement dated as of January 25, 1996 between Express
America Corporation and the Bank.
The Notes, and all other documents relating thereto, whether now
or hereafter delivered to you, are to be held by you as agent, bailee and
custodian for the benefit of the Bank, and subject to the Bank's direction and
control. Notwithstanding the foregoing,
(i) if the Notes or any of them are accepted for purchase, the
applicable proceeds of such purchase are, within forty-five (45)
days after the date of delivery of this letter, to be wire
transferred to the Bank in immediately available funds at First
Bank National Association, First Bank Place, 000 Xxxxxx Xxxxxx
Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000 for credit to the
Company's collateral account no. 1731-0096-9620 and
(ii) Notes which are not accepted for purchase should be returned,
within forty-five (45) days after the date of delivery of this
letter by overnight courier, to:
First Bank National Association
Mortgage Banking Services Division
First Bank Place -MPFP0801
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
along with all other documents relating to such Notes, at the aforesaid address
unless otherwise directed by the Bank.
Upon the Bank's receipt of such proceeds, the security interest of the
Bank in the Notes and all other documents relating thereto shall terminate and
be cancelled without further action. The Notes and related documents have not
been assigned or transferred by the Bank to any other party.
In no event are the Notes, and all other documents relating
thereto, to be delivered to any third party, or otherwise dealt with by you,
without the prior written consent of the Bank.
You are not to honor any requests or instructions from the Company
relating to any Note (other than for correction), or any other documents
relating thereto (other than for correction or replacement thereof or to
supplement such documents), unless you have received the written or telephonic
consent of the Bank to such new or variant instructions, or until the Bank has
received the applicable proceeds of the sale of such Note.
If you have any questions, please address your inquiries to
Xxxxxxxx X. Xxxxx, Mortgage Banking Officer of the Bank, whose phone number is
(000) 000-0000 or Xxxxx X. Xxxxxxx, Vice President, whose phone number is (612)
973-0588.
By accepting the enclosed Notes, you shall be deemed to have
consented to act as agent, bailee and custodian for the Bank, to have agreed to
comply with all the instructions contained herein, and to have agreed (x) to
maintain possession of the Notes on behalf of the Bank, (y) not to deliver any
of the Notes to anyone without the prior written consent of the Bank and (z) to
deliver the Notes to, or follow the instructions regarding disposition thereof
of, the Bank, on demand. Any interest you may have in the Notes, including
without limitation any claim of setoff you may at any time have, is subject to
and subordinate to the security interest of the Bank in the Notes, and you will
not exercise any right with respect to the Notes without the prior written
consent of the Bank. We request that you so indicate by signing the
acknowledgement at the foot of the enclosed counterpart of this letter and
returning it to the Bank at the address set forth below (but your failure to do
so in no way nullifies your consent and agreements resulting from your
acceptance of the enclosed Notes, as set forth in this paragraph):
-2-
First Bank National Association
Mortgage Banking Services Division
First Bank Place -MPFP0801
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Very truly yours,
EXPRESS AMERICA MORTGAGE
CORPORATION
By ________________________________
Its ____________________________
To the Addressee of the above letter:
The undersigned hereby acknowledges and agrees to the terms of the
above letter and, notwithstanding any contrary understanding with you, instructs
you to comply with all the instructions set forth therein which instructions
cannot be varied by written instructions received by you from the Company.
FIRST BANK NATIONAL ASSOCIATION
By _______________________________
Its ___________________________
Received and Agreed to:
________________________
By______________________
Title___________________
Date____________________
Enclosures
-3-
Attachment 2
[On Company Letterhead]
FORM OF GNMA POOL CUSTODIAN LETTER
----------------------------------
[Name and address of
GNMA Pool Custodian]
Gentlemen:
Enclosed please find_____________ original promissory notes
representing an original principal amount of $_____________ (the "Notes")
evidencing the Pledged Loans described in more detail on the schedule attached
to this letter, along with other supporting documents, which are being delivered
to you as custodian for certification in connection with the formation of GNMA
Pool No. Please be advised that a security interest in the Notes has been
granted to First Bank National Association (the "Bank") pursuant to a
Warehousing Credit Agreement dated as of January 25, 1996 between Express
America Mortgage Corporation (the "Company") and the Bank.
The Notes, and all other documents relating thereto, whether
now or hereafter delivered to you, are to be held by you as agent, bailee and
custodian for the benefit of the Bank, and subject to the Bank's direction and
control. Notwithstanding the foregoing, Notes which are not accepted for the
pool should be returned, within forty-five (45) days after the date of delivery
of this letter by overnight courier, to:
First Bank National Association
Mortgage Banking Services Division
First Bank Place -MPFP0801
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
along with all other documents relating to such Notes, at the aforesaid address
unless otherwise directed by the Bank.
Upon the Bank's receipt of the proceeds from the sale of the
Mortgage-backed Security issued with respect to the Notes, the security interest
of the Bank in the Notes and all other documents relating thereto shall
terminate and be cancelled without further action. The Notes and related
documents have not been assigned or transferred by the Bank to any other party.
In no event are the Notes, and all other documents relating
thereto, to be delivered to any third party, or otherwise dealt with by you,
without the prior written consent of the Bank.
You are not to honor any requests or instructions from the Company
relating to any Note (other than for correction), or any other documents
relating thereto (other than for correction or replacement thereof or to
supplement such documents), unless you have received the written or telephonic
consent of the Bank to such new or variant instructions, or until the Bank has
received the applicable proceeds of the sale of the Mortgage-backed Security
issued with respect to such Note.
If you have any questions, please address your inquiries to
Xxxxxxxx X. Xxxxx, Mortgage Banking Officer of the Bank, whose phone number is
(000) 000-0000 or Xxxxx X. Xxxxxxx, Vice President, whose phone number is (612)
973-0588.
By accepting the enclosed Notes, you shall be deemed to have
consented to act as agent, bailee and custodian for the Bank, to have agreed to
comply with all the instructions contained herein, and to have agreed (x) to
maintain possession of the Notes on behalf of the Bank, (y) not to deliver any
of the Notes to anyone without the prior written consent of the Bank and (z) to
deliver the Notes to, or follow the instructions regarding disposition thereof
of, the Bank, on demand. Any interest you may have in the Notes, including
without limitation any claim of setoff you may at any time have, is subject to
and subordinate to the security interest of the Bank in the Notes, and you will
not exercise any right with respect to the Notes without the prior written
consent of the Bank. We request that you so indicate by signing the
acknowledgement at the foot of the enclosed counterpart of this letter and
returning it to the Bank at the address set forth below (but your failure to do
so in no way nullifies your consent and agreements resulting from your
acceptance of the enclosed Notes, as set forth in this paragraph):
First Bank National Association
Mortgage Banking Services Division
First Bank Place -MPFP0801
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Very truly yours,
EXPRESS AMERICA MORTGAGE
CORPORATION
By__________________________
Its_______________________
-2-
To the Addressee of the above letter:
The undersigned hereby acknowledges and agrees to the terms of the
above letter and, notwithstanding any contrary understanding with you, instructs
you to comply with all the instructions set forth therein which instructions
cannot be varied by written instructions received by you from the Company.
FIRST BANK NATIONAL ASSOCIATION
By ____________________________
Its ________________________
Received and Agreed to:
_________________________
By_______________________
Title____________________
Date_____________________
Enclosures
-3-
Attachment 3
TO: First Bank National Association
Mortgage Banking Services
First Bank Place - MPFP0801
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
FROM: Express America Mortgage Corporation
Loan Type: ___ FHA ___ Level Pay (100) ___ Six Months
___ 1 Year
___ VA ___ 3 Years
___ ARM's (300) ___ 5 Years
___ Conventional ___ GEM's/ECM (400)
___ GPM's (500) ___ 15 Years
____ Conforming ___ Other
___ 20 Years
____ Nonconforming ___ 25 Years
___ 30 Years
Interest Rate___________%
The present status of this mortgage is certified to be:
LOAN NUMBER: _____________________
MORTGAGE NAME: _____________________
(LAST NAME, first)
PROPERTY: _____________________
ADDRESS: _____________________
Note Principal Origination Collateral
Date Amount Amount % Value %
---------- ----------- ----------- ----- ---------- ---------
---------- ----------- ----------- ----- ---------- ---------
================================================================================
In connection with the pledging of the above mortgage which is to be held by you
as collateral, we submit the following instruments and facts:
___ 1. Original Mortgage Note Endorsed in Blank
___ 2. Certified Copy of Mortgage Deed or Deed or Trust
___ 3. Assignment of Mortgage to First Bank National Association
___ 4. Certified Copy of Intervening Assignment(s)
___ 5. Certified Copy of the Power of Attorney (if applicable)
___ 6. Takeout Commitment Information:
____ Specific $_________ from _________
Dated________ which is priced at_______%
____ Blanket: Loan conforms to ___________
Which has a weighted average price of_______%
We hereby certify that this loan is pledged to First Bank National Association
(the"Bank") in accordance with the Warehousing Credit Agreement between us and
the Bank. Capitalized terms used herein have the meanings ascribed thereto in
said Credit Agreement.
We also certify that (i) this loan is subject to a Firm Commitment or Standby
Commitment, (ii) sufficient fire and extended insurance coverage is in effect
and will be maintained on the property, (iii) we have obtained and will maintain
in our files as agent for the Bank a FIRREA Qualifying Appraisal with respect to
this loan, and (iv) all other documents pertaining to this loan will be held and
maintained by us for the Bank.
All items taken on Trust Receipt for delivery to a permanent investor will be
delivered with a Bailee Letter to such investor which requires remittance of
payment to the Bank or return of the collateral to the Bank.
DATE:__________ EXPRESS AMERICA MORTGAGE CORPORATION
By _________________________________
Title____________________________
Attachment 4
TRUST RECEIPT
-------------
Temporary Release
of Collateral
The undersigned hereby acknowledges receipt this____________day
of__________ , 199_, from First Bank National Association (hereinafter called
the "Bank") of the following described property (hereinafter called
"Collateral"):
The undersigned represents, warrants and agrees that:
1. The undersigned has requested and obtained possession of the
Collateral from the Bank for one of the purposes set forth below and for no
other purpose:
_________correction
2. The Collateral and the proceeds thereof are and will remain subject
to the security interest held by the Agent, and the undersigned will keep the
Collateral and any such proceeds segregated and identifiable and free and clear
of all liens, charges and encumbrances.
3. The Collateral will be redelivered to the Bank or its designee as
soon as the purpose for which possession was taken has been accomplished, and in
any event within twenty-one (21) days from the date of taking possession.
4. In the event of any default in the performance of any term or
condition of this Trust Receipt, the Bank may declare all or any part of the
indebtedness secured by the Collateral immediately due and payable without
notice or demand.
5. Additional limitations, if any:
EXPRESS AMERICA MORTGAGE CORPORATION
By ___________________________________
Its _______________________________
