EXECUTION COPY
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MASTER LOAN AND SECURITY AGREEMENT
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Dated as of January 22, 2001
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AMERICAN BUSINESS CREDIT, INC.,
HOMEAMERICAN CREDIT, INC., d/b/a UPLAND MORTGAGE, and
AMERICAN BUSINESS MORTGAGE SERVICES, INC.,
f/k/a NEW JERSEY MORTGAGE AND INVESTMENT CORP.,
as Borrowers,
AMERICAN BUSINESS FINANCIAL SERVICES, INC.,
as Guarantor,
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
as Lender
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TABLE OF CONTENTS
Page
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Section 1. Definitions and Accounting Matters..............................................................1
1.01 Certain Defined Terms.........................................................................1
1.02 Accounting Terms and Determinations..........................................................11
Section 2. Loans, Note and Prepayments....................................................................11
2.01 Loans........................................................................................11
2.02 Notes........................................................................................12
2.03 Procedure for Borrowing......................................................................12
2.04 Limitation on Types of Loans; Illegality.....................................................13
2.05 Repayment of Loans; Interest.................................................................13
2.06 Mandatory Prepayments or Pledge..............................................................14
2.07 Extension of Termination Date................................................................14
Section 3. Payments; Computations; Etc....................................................................14
3.01 Payments.....................................................................................14
3.02 Computations.................................................................................15
3.03 Requirements of Law..........................................................................15
3.04 Commitment Fee...............................................................................16
Section 4. Collateral Security............................................................................16
4.01 Collateral; Security Interest................................................................16
4.02 Further Documentation........................................................................17
4.03 Changes in Locations, Name, etc..............................................................17
4.04 Lender's Appointment as Attorney-in-Fact.....................................................17
4.05 Performance by Lender of Borrowers' Obligations..............................................19
4.06 Proceeds.....................................................................................19
4.07 Remedies.....................................................................................19
4.08 Limitation on Duties Regarding Preservation of Collateral....................................20
4.09 Powers Coupled with an Interest..............................................................20
4.10 Release of Security Interest.................................................................20
Section 5. Conditions Precedent...........................................................................20
5.01 Initial Loan.................................................................................20
5.02 Initial and Subsequent Loans.................................................................22
Section 6. Representations and Warranties.................................................................23
6.01 Existence....................................................................................23
6.02 Financial Condition..........................................................................23
6.03 Litigation...................................................................................24
6.04 No Breach....................................................................................24
6.05 Action.......................................................................................24
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6.06 Approvals....................................................................................24
6.07 Margin Regulations...........................................................................25
6.08 Taxes........................................................................................25
6.09 Investment Company Act.......................................................................25
6.10 Collateral; Collateral Security..............................................................25
6.11 Chief Executive Office/Jurisdiction of Organization..........................................26
6.12 Location of Books and Records................................................................26
6.13 True and Complete Disclosure.................................................................26
6.14 Tangible Net Worth...........................................................................26
6.15 ERISA........................................................................................26
6.16 Subsidiaries.................................................................................26
Section 7. Covenants of the Loan Parties..................................................................27
7.01 Financial Statements.........................................................................27
7.02 Litigation...................................................................................29
7.03 Existence, etc...............................................................................29
7.04 Prohibition of Fundamental Changes...........................................................30
7.05 Borrowing Base Deficiency....................................................................30
7.06 Notices......................................................................................30
7.07 Reports......................................................................................30
7.08 Underwriting Guidelines......................................................................31
7.09 Transactions with Affiliates.................................................................31
7.10 Limitation on Liens..........................................................................31
7.11 Limitation on Distributions..................................................................31
7.12 Maintenance of Tangible Net Worth............................................................31
7.13 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth.............................32
7.14 Maintenance of Profitability.................................................................32
7.15 Servicer; Servicing Tape.....................................................................32
7.16 Maintenance of Liquidity.....................................................................32
7.17 Required Filings.............................................................................32
7.18 No Adverse Selection.........................................................................32
7.19 Remittance of Collections and Prepayments....................................................32
7.20 Agency Approvals.............................................................................32
7.21 Interest Rate Protection Agreements..........................................................32
Section 8. Events of Default..............................................................................33
Section 9. Remedies Upon Default..........................................................................35
Section 10. No Duty of Lender..............................................................................35
Section 11. Miscellaneous..................................................................................35
11.01 Waiver.......................................................................................35
11.02 Notices......................................................................................36
11.03 Indemnification and Expenses.................................................................36
11.04 Amendments...................................................................................37
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11.05 Successors and Assigns.......................................................................37
11.06 Survival.....................................................................................37
11.07 Captions.....................................................................................37
11.08 Counterparts.................................................................................37
11.09 Loan Agreement Constitutes Security Agreement; Governing Law.................................37
11.10 Submission To Jurisdiction; Waivers..........................................................38
11.11 WAIVER OF JURY TRIAL.........................................................................38
11.12 Acknowledgments..............................................................................38
11.13 Hypothecation or Pledge of Loans.............................................................39
11.14 Servicing....................................................................................39
11.15 Periodic Due Diligence Review................................................................40
11.16 Set-Off......................................................................................40
11.17 Intent.......................................................................................41
11.18 Unsecuritized Mortgage Loans.................................................................41
11.19 Confidentiality..............................................................................41
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SCHEDULES
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SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
SCHEDULE 3 Subsidiaries
EXHIBITS
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EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Request for Borrowing
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT F Underwriting Guidelines
EXHIBIT G Form of Servicer Notice
EXHIBIT H Form of Guarantee
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MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of January 22,
2001, between AMERICAN BUSINESS CREDIT, INC. ("ABC"), a Pennsylvania
corporation, HOMEAMERICAN CREDIT, INC., d/b/a UPLAND MORTGAGE ("UPLAND"), a
Pennsylvania corporation, and AMERICAN BUSINESS MORTGAGE SERVICES, INC., f/k/a
NEW JERSEY MORTGAGE AND INVESTMENT CORP. ("ABMS"), a New Jersey corporation
(each a "Borrower"; collectively the "Borrowers"), AMERICAN BUSINESS FINANCIAL
SERVICES, INC., a Delaware corporation (the "Guarantor") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ MORTGAGE CAPITAL INC., a New York corporation (the "Lender").
RECITALS
The Borrowers have requested that the Lender from time to time
make revolving credit loans to them to finance certain residential mortgage
loans owned by the Borrowers, and the Lender is prepared to make such loans upon
the terms and conditions hereof. Accordingly, the parties hereto agree as
follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1.01
or in other provisions of this Loan Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"ABC" shall have the meaning provided in the heading hereof.
"ABMS" shall have the meaning provided in the heading hereof.
"Affiliate" shall mean with respect to any Person, any
"affiliate" of such Person, as such term is defined in the Bankruptcy Code.
"Applicable Collateral Percentage" shall mean with respect to
each Eligible Mortgage Loan, the applicable collateral percentage set forth in
the chart below opposite the applicable product type:
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Product Type Applicable Collateral Percentage
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First Lien Loan that is a Performing Loan 97%
and has been included in the Borrowing
Base for 270 days or less
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Second Lien Loan 97%
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Class A Defaulted Loan 85%
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Class B Defaulted Loan 85%
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"Applicable Margin" shall mean the sum of the weighted
average of the applicable rates per annum set forth below for each type of
Eligible Mortgage Loan for each day that Loans shall be secured by such Eligible
Mortgage Loans, determined by multiplying (a) for each product type set forth in
the table below, a fraction equal to the Collateral Value of all Eligible
Mortgage Loans of such product type divided by the Collateral Value of all
Eligible Mortgage Loans, times (b) for each type set forth in the following
table below, the percentage set forth below opposite such type:
with respect to Subprime Mortgage Loans:
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Product Type Applicable Margin
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First Lien Loan that is a Performing Loan and has been .95%
included in the Borrowing Base for 120 days or less
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First Lien Loan that is a Performing Loan and has been 1.15%
included in the Borrowing Base for longer than 120
days but less than 270 days
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Second Lien Loan .95%
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Class A Defaulted Loan .95%
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Class B Defaulted Loan .95%
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"Bankruptcy Code" shall mean the United States Bankruptcy
Code of 1978, as amended from time to time.
"Borrowers" shall have the meaning provided in the heading
hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of
all Eligible Mortgage Loans.
"Borrowing Base Deficiency" shall have the meaning provided in
Section 2.06 hereof.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day on which the New York Stock Exchange, the Federal Reserve
Bank of New York or the Custodian is authorized or obligated by law or executive
order to be closed.
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"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this Loan
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Capital Stock" shall mean any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all similar ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Cash Equivalents" shall mean (a) securities with maturities
of 90 days or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b) certificates
of deposit and eurodollar time deposits with maturities of 90 days or less from
the date of acquisition and overnight bank deposits of any commercial bank
having capital and surplus in excess of $250,000,000, (c) repurchase obligations
of any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than seven days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d)
commercial paper of a domestic issuer rated at least A-1 or the equivalent
thereof by S&P or P-1 or the equivalent thereof by Moody's and in either case
maturing within 90 days after the day of acquisition, (e) securities with
maturities of 90 days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by Moody's, (f)
securities with maturities of 90 days or less from the date of acquisition
backed by standby letters of credit issued by any commercial bank satisfying the
requirements of clause (b) of this definition, or (g) shares of money market,
mutual or similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition.
"Class" shall mean, as to any Defaulted loan, its status as a
Class A Defaulted Loan or a Class B Defaulted Loan.
"Class A Defaulted Loan" shall mean an Eligible Mortgage Loan
for which the related Mortgagor is 30 to 59 days delinquent in scheduled
payments of principal and interest as at the end of the preceding calendar
month.
"Class B Defaulted Loan" shall mean an Eligible Mortgage Loan
for which the related Mortgagor is 60 to 89 days delinquent in scheduled
payments of principal and interest as at the end of the preceding calendar
month.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall have the meaning provided in Section
4.01(b) hereof.
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"Collateral Value" shall mean, as of any date of
determination, with respect to each Eligible Mortgage Loan the lesser of (a) the
Applicable Collateral Percentage of the Market Value of such Mortgage Loan, or
(b) 97% of the outstanding principal balance of such Mortgage Loan; provided,
that:
(i) the following additional limitations shall apply:
(1) the aggregate Collateral Value of all First Lien
Loans which are Performing Loans and have been included in the
Borrowing Base for more than 120 days but less than 270 days
included in the Borrowing Base at any time shall not exceed
25% of the Borrowing Base at such time;
(2) the aggregate Collateral Value of all Second Lien
loans included in the Borrowing Base at any time shall not
exceed 15% of the Borrowing Base at such time;
(3) the aggregate Collateral Value of all Class A
Defaulted Loans included in the Borrowing Base at any time
shall not exceed 3% of the Borrowing Base at such time;
(4) the aggregate Collateral Value of all Class B
Defaulted Loans included in the Borrowing Base at any time
shall not exceed 1% of the Borrowing Base at such time;
(5) the aggregate Collateral Value of all Eligible
Mortgage Loans which are C or D credit quality included in the
Borrowing Base at any time shall not exceed 20% of the
Borrowing Base at such time;
(6) the aggregate Collateral Value of all Eligible
Mortgage Loans which consist of Mortgaged Property which
relate to high-rise condominium projects included in the
Borrowing Base at any time shall not exceed 5% of the
Borrowing Base at such time; and
(ii) Collateral Value shall be deemed to be zero with respect
to each Mortgage Loan:
(1) in respect of which there is a breach of a
representation and warranty set forth on Schedule 1 (assuming
each representation and warranty is made as of the date
Collateral Value is determined),
(2) in respect of which there is a delinquency in the
payment of principal and/or interest which continues for a
period in excess of 89 days (without regard to any applicable
grace periods),
(3) which remains pledged to the Lender hereunder
later than 270 days after the date on which it is first
included in the Collateral,
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(4) which has been released from the possession of
the Custodian under the Custodial Agreement for a period in
excess of 16 calendar days,
(5) in respect of which the Lender has determined
that rating agencies would give insufficient credit to such
Mortgage Loan in connection with a securitization transaction
or that such Mortgage Loan would be deemed unacceptable by a
surety insurer relating to a securitization transaction; or
(6) which exceed the limitations on Collateral Value
set forth in (i) above.
"Collections" shall mean, collectively, all collections and
proceeds on or in respect of the Mortgage Loans, excluding collections required
to be paid to the Servicer or a mortgagor on the Mortgage Loans.
"Custodial Agreement" shall mean the Custodial Agreement,
dated as of the date hereof, among the Borrowers, the Custodian and the Lender,
substantially in the form of Exhibit B hereto, as the same shall be modified and
supplemented and in effect from time to time.
"Custodian" shall mean The Chase Manhattan Bank, as custodian
under the Custodial Agreement, and its successors and permitted assigns
thereunder.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Defaulted Loan" shall mean a Class A Defaulted Loan or a
Class B Defaulted Loan.
"Dollars" and "$" shall mean lawful money of the United States
of America.
"Due Diligence Review" shall mean the performance by the
Lender of any or all of the reviews permitted under Section 11.15 hereof with
respect to any or all of the Mortgage Loans, as desired by the Lender from time
to time.
"Effective Date" shall mean the date upon which the conditions
precedent set forth in Section 5.01 shall have been satisfied.
"Eligible Mortgage Loans" shall mean a Subprime Mortgage Loan
secured by a first mortgage lien or second mortgage lien on a one-to-four family
residential property, as to which representations and warranties in Section 6.10
and Part I of Schedule 1 hereof are correct; provided, that in no event shall
any Eligible Mortgage Loan be a security for purposes of any securities or
blue-sky laws.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
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"ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in Section
414(b) or (c) of the Code of which any Borrower is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which any Borrower is a member.
"Eurodollar Rate" shall mean, with respect to each day a Loan
is outstanding, the rate per annum equal to the rate appearing at page 5 of the
Telerate Screen as one-month LIBOR on such date (and if such date is not a
Business Day, the Eurodollar Rate in effect on the Business Day immediately
preceding such date), and if such rate shall not be so quoted, the rate per
annum at which the Lender is offered Dollar deposits at or about 10:00 A.M., New
York City time, on such date by prime banks in the interbank eurodollar market
where the eurodollar and foreign currency exchange operations in respect of its
Loans are then being conducted for delivery on such day for a period of 30 days
and in an amount comparable to the amount of the Loans to be outstanding on such
day.
"Event of Default" shall have the meaning provided in Section
8 hereof.
"Federal Funds Rate" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the Lender from
three federal funds brokers of recognized standing selected by it.
"First Lien Loan" shall mean an Eligible Mortgage Loan for
which the related mortgage constitutes a first priority lien on the related
Mortgaged Property.
"Funding Date" shall mean the date on which a Loan is made
hereunder.
"GAAP" shall mean generally accepted accounting principles as
in effect from time to time in the United States.
"Governmental Authority" shall mean the United States
government, any state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any court or arbitrator having
jurisdiction over any Loan Party, any of their Subsidiaries or any of their
properties.
"Guarantee" shall mean, as to any Person, any obligation of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person or in any manner providing for the payment of any Indebtedness of any
other Person or otherwise protecting the holder of such Indebtedness against
loss (whether by virtue of partnership arrangements, by agreement to keep-well,
to purchase assets, goods, securities or services, or to take-or-pay or
otherwise); provided that the term "Guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business, or
(ii) obligations to make servicing advances for delinquent taxes and insurance
or other obligations in respect of a Mortgaged Property, to the extent required
by the Lender. The amount of any Guarantee of a Person shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
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respect of which such Guarantee is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined by
such Person in good faith. The terms "Guarantee" and "Guaranteed" used as verbs
shall have correlative meanings.
"Guarantor" shall have the meaning provided in the heading
hereof.
"Indebtedness" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements, sale/buy-back agreements
or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h)
all obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; (i) Indebtedness of general
partnerships of which such Person is a general partner; and (j) all obligations
of such Person to be classified under GAAP as liabilities on such Person's
financial balance sheet.
"Interest Rate Protection Agreement" shall mean, with respect
to any or all of the Mortgage Loans, any short sale of US Treasury Securities,
futures contract, mortgage related security, Eurodollar futures contract,
options related contract, interest rate swap, cap or collar agreement or similar
arrangement providing for protection against fluctuations in interest rates or
the exchange of nominal interest obligations, either generally or under specific
contingencies, entered into by the Borrowers and an Affiliate of the Lender.
"Lender" shall have the meaning provided in the heading
hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, security
interest or similar encumbrance.
"Loan" shall have the meaning provided in Section 2.01(a)
hereof.
"Loan Party" shall mean each of the Borrowers and the
Guarantor.
"Loan Agreement" shall mean this Master Loan and Security
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.
"Loan Documents" shall mean, collectively, this Loan
Agreement, the Note, the Custodial Agreement, and the Guarantee.
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"Market Value" shall mean, as of any date in respect of an
Eligible Mortgage Loan, the price at which such Eligible Mortgage Loan could
readily be sold as determined in good faith by the Lender, which price may be
determined to be zero. The Lender's determination of Market Value shall be
conclusive upon the parties absent manifest error on the part of the Lender.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition or prospects of
any Loan Party, (b) the ability of any Loan Party to perform its obligations
under any of the Loan Documents to which it is a party, (c) the validity or
enforceability of any of the Loan Documents, (d) the rights and remedies of the
Lender under any of the Loan Documents, (e) the timely payment of the principal
of or interest on the Loans or other amounts payable in connection therewith or
(f) the Collateral.
"Maximum Credit" shall mean $200,000,000.00.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
"Mortgage" shall mean the mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a first or second lien on the
fee in real property securing the Mortgage Note.
"Mortgage File" shall have the meaning assigned thereto in the
Custodial Agreement.
"Mortgage Loan" shall mean a mortgage loan which the Custodian
has been instructed to hold for the Lender pursuant to the Custodial Agreement,
and which Mortgage Loan includes, without limitation, a Mortgage Note and
related Mortgage.
"Mortgage Loan Documents" shall mean, with respect to a
Mortgage Loan, the documents comprising the Mortgage File for such Mortgage
Loan.
"Mortgage Loan Schedule" shall have the meaning assigned
thereto in the Custodial Agreement.
"Mortgage Loan Schedule and Exception Report" shall mean the
mortgage loan schedule and exception report prepared by the Custodian pursuant
to the Custodial Agreement.
"Mortgage Loan Tape" shall mean a computer-readable file
containing information with respect to each Mortgage Loan, to be delivered by
the Borrowers to the Lender pursuant to Section 2.03(a) hereof which tape fields
are identified on Annex I to the Custodial Agreement.
"Mortgage Note" shall mean the original executed promissory
note or other evidence of the indebtedness of a mortgagor/borrower with respect
to a Mortgage Loan.
"Mortgaged Property" shall mean the real property (including
all improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
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"Mortgagor" shall mean the obligor on a Mortgage Note.
"MS & Co." shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, a
registered broker-dealer.
"MS Indebtedness" shall mean any indebtedness of a Borrower
hereunder and under any other arrangement between a Borrower on the one hand and
the Lender or an Affiliate of the Lender on the other hand.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been or are
required to be made by the Borrowers or any ERISA Affiliate and that is covered
by Title IV of ERISA.
"Net Income" shall mean, for any period, the net income of the
Guarantor for such period as determined in accordance with GAAP.
"1934 Act" shall mean the Securities and Exchange Act of 1934,
as amended.
"Note" shall have the meaning provided in Section 2.02(a)
hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Performing Loan" shall mean an Eligible Mortgage Loan for
which the related Mortgagor is current or fewer than 30 days delinquent in
scheduled payments of principal and interest as of the end of the preceding
calendar month.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, limited liability company,
trust, unincorporated association or government (or any agency, instrumentality
or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan
established or maintained by the Borrowers or any ERISA Affiliate and covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any principal of
any Loan or any other amount under this Loan Agreement, the Note or any other
Loan Document that is not paid when due to the Lender (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 3% per annum
plus the Prime Rate.
"Prime Rate" shall mean the prime rate announced to be in
effect from time to time, as published as the average rate in The Wall Street
Journal, or, if such rate is not so published, the rate announced in another
reasonable replacement for The Wall Street Journal.
"Property" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
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"Regulations T, U and X" shall mean Regulations T, U and X of
the Board of Governors of the Federal Reserve System (or any successor), as the
same may be modified and supplemented and in effect from time to time.
"Responsible Officer" shall mean, as to any Person, the chief
executive officer, president, executive vice president or senior vice president
or, with respect to financial matters, the chief financial officer, treasurer or
controller of such Person.
"Requirement of Law" shall mean as to any Person, the
certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"S&P" shall mean Standard and Poor's Ratings Services.
"Second Lien Loan" shall mean an Eligible Mortgage Loan for
which the related Mortgage constitutes a second priority lien on the related
Mortgaged Property.
"Secured Obligations" shall have the meaning provided in
Section 4.01(c) hereof.
"Servicer" shall have the meaning provided in Section 11.14(c)
hereof.
"Servicer Notice" shall have the meaning provided in Section
11.14(c) hereof.
"Servicing Agreement" shall have the meaning provided in
Section 11.14(c) hereof.
"Servicing Records" shall have the meaning provided in Section
11.14(b) hereof.
"Subprime Mortgage Loan" shall mean an A through D credit
quality Mortgage Loan underwritten in compliance with the Underwriting
Guidelines for "subprime mortgage loans."
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"System" shall mean all hardware or software, or any system
consisting of one or more thereof, including, without limitation, any and all
enhancements, upgrades, customizations, modifications and the like utilized by
any Person for the benefit of such Person to perform its obligations and to
administer and track, store, process, provide, and where appropriate, insert,
true and accurate dates and calculations for dates and spans with respect to the
Mortgage Loans.
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"Tangible Net Worth" shall mean, as of a particular date,
(a) all amounts which would be included under capital on a
balance sheet of the Guarantor and the Borrowers at such date, determined in
accordance with GAAP, less
(b) (i) amounts owing to the Guarantor and the Borrowers from
Affiliates and (ii) intangible assets (for purpose of clarification only,
intangible assets (as used in this definition) shall not include interest-only
or residual strips or servicing rights).
"Termination Date" shall mean twelve (12) months from the
Effective Date or such earlier date on which this Loan Agreement shall terminate
in accordance with the provisions hereof or by operation of law.
"Test Period" shall have the meaning provided in Section 7.12
hereof.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of the Loan Parties during such period less (i) the amount of any
nonspecific balance sheet reserves maintained in accordance with GAAP; and (ii)
debt arising out of transactions structured to qualify for sale treatment under
GAAP.
"Underwriting Guidelines" shall mean the underwriting
guidelines attached as Exhibit F hereto, as amended from time to time in
accordance herewith.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect on the date hereof in the State of New York; provided that if
by reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection.
"UPLAND" shall have the meaning provided in the heading
hereof.
1.02 Accounting Terms and Determinations. Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Lender hereunder shall be prepared, in accordance with GAAP.
Section 2. Loans, Note and Prepayments.
2.01 Loans.
(a) The Lender agrees to make, on the terms and subject to the
conditions of this Loan Agreement, loans (individually, a "Loan" and,
collectively, the "Loans") to the Borrowers in Dollars, from and including the
Effective Date to and including the Termination Date in an aggregate principal
amount at any one time outstanding up to but not exceeding the lesser of (i) the
Maximum Credit or (ii) the Borrowing Base as in effect from time to time.
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(b) Subject to the terms and conditions of this Loan
Agreement, during such period the Borrowers may borrow, repay and reborrow
hereunder; provided, that, notwithstanding the foregoing, the Lender shall have
no obligation to make Loans to the Borrowers in excess of the Maximum Credit
and, in the event the obligation of the Lender to make Loans to the Borrowers is
terminated as permitted hereunder, the Lender shall have no further obligation
to make additional Loans hereunder.
2.02 Notes.
(a) The Loans made by the Lender shall be evidenced by a
single promissory note of the Borrowers substantially in the form of Exhibit A
hereto (the "Note"), dated the date hereof, payable to the Lender in a principal
amount equal to the amount of the Maximum Credit as originally in effect and
otherwise duly completed. The Lender shall have the right to have its Note
subdivided, by exchange for promissory notes of lesser denominations or
otherwise.
(b) The date, amount and interest rate of each Loan made by
the Lender to the Borrowers, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of the Note, endorsed by the Lender on the schedule attached to the Note or any
continuation thereof; provided, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrowers to
make a payment when due of any amount owing hereunder or under the Note in
respect of the Loans.
2.03 Procedure for Borrowing.
(a) The Borrowers may request a borrowing hereunder, on any
Business Day during the period from and including the Effective Date to and
including the Termination Date, by delivering to the Lender, with a copy to the
Custodian, a written request for borrowing, substantially in the form of Exhibit
D attached hereto, which request must be received by the Lender prior to 11:00
a.m., New York City time, one (l) Business Day prior to the requested Funding
Date. Such request for borrowing shall (i) attach a schedule identifying the
Eligible Mortgage Loans that the Borrowers propose to pledge to the Lender and
to be included in the Borrowing Base in connection with such borrowing, (ii)
specify the requested Funding Date, (iii) be accompanied by a Mortgage Loan Tape
containing information with respect to the Eligible Mortgage Loans that the
Borrowers propose to pledge to the Lender and to be included in the Borrowing
Base in connection with such borrowing, and (iv) attach an officer's certificate
signed by a Responsible Officer of the Borrowers as required by Section 5.02(b)
hereof.
(b) Upon the Borrowers' request for a borrowing pursuant to
Section 2.03(a), the Lender shall, upon satisfaction of all conditions precedent
set forth in Section 5.01 and 5.02 hereof and provided that no Default shall
have occurred and be continuing, make a Loan to the Borrowers on the requested
Funding Date, in the amount so requested.
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(c) The Borrowers shall release to the Custodian no later than
12:00 p.m., New York City time, two (2) Business Days prior to the requested
Funding Date, the Mortgage File pertaining to each Eligible Mortgage Loan to be
pledged to the Lender and included in the Borrowing Base on such requested
Funding Date, in accordance with the terms and conditions of the Custodial
Agreement.
(d) Pursuant to the Custodial Agreement, the Custodian shall
deliver to the Lender and the Borrowers, no later than 11:00 a.m. on a Funding
Date, a Trust Receipt (as defined in the Custodial Agreement) in respect of all
Mortgage Loans pledged to the Lender on such Funding Date, and a Mortgage Loan
Schedule and Exception Report.
(e) Subject to Section 5 hereof, such borrowing will then be
made available to the Borrowers by the Lender transferring, via wire transfer,
to the following account of the Borrowers: Account Number: 00103386976, for the
account of the Borrower, Chase Bank of Texas, N.A., ABA No. ▇▇▇-▇▇▇-▇▇▇, Attn:
ABFS Sweep, in the aggregate amount of such borrowing in funds immediately
available to the Borrowers.
2.04 Limitation on Types of Loans; Illegality. Anything herein
to the contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate:
(a) the Lender determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Rate" in Section 1.01 hereof are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Loans as provided herein; or
(b) the Lender determines, which determination shall be
conclusive, that the relevant rate of interest referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for Loans is to be determined is not likely adequately to cover the
cost to the Lender of making or maintaining Loans; or
(c) it becomes unlawful for the Lender to honor its obligation
to make or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrowers prompt notice thereof and, so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Loans, and the Borrowers shall, either prepay all such Loans as
may be outstanding or pay interest on such Loans at a rate per annum equal to
the Federal Funds Rate plus 0.50% plus the Applicable Margin.
2.05 Repayment of Loans; Interest.
(a) The Borrowers hereby promise to repay in full on the
Termination Date the then aggregate outstanding principal amount of the Loans.
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(b) The Borrowers hereby promise to pay to the Lender interest
on the unpaid principal amount of each Loan for the period from and including
the date of such Loan to but excluding the date such Loan shall be paid in full,
at a rate per annum equal to the Eurodollar Rate plus the Applicable Margin.
Notwithstanding the foregoing, the Borrowers hereby promise to pay to the Lender
interest at the applicable Post-Default Rate on any principal of any Loan and on
any other amount payable by the Borrowers hereunder or under the Note that shall
not be paid in full when due (whether at stated maturity, by acceleration or by
mandatory prepayment or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable monthly on the first Business Day of each
month and for the last month of the Loan Agreement on the first Business Day of
such last month and on the Termination Date; provided, that, the Lender may, in
its sole discretion, require accrued interest to be paid simultaneously with any
prepayment of principal made by the Borrowers on account of any of the Loans
outstanding. Interest payable at the Post-Default Rate shall accrue daily and
shall be payable upon such accrual.
(c) It is understood and agreed that, unless and until a
Default shall have occurred and be continuing, the Borrowers shall be entitled
to the proceeds of the Mortgage Loans pledged to the Lender hereunder.
2.06 Mandatory Prepayments or Pledge.
If at any time the aggregate outstanding principal amount of
Loans exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined
by the Lender and notified to the Borrowers on any Business Day, the Borrowers
shall no later than one (1) Business Day after receipt of such notice, either
prepay the Loans in part or in whole or pledge additional Eligible Mortgage
Loans (which Collateral shall be in all respects acceptable to the Lender) to
the Lender, such that after giving effect to such prepayment or pledge the
aggregate outstanding principal amount of the Loans does not exceed the
Borrowing Base.
2.07 Extension of Termination Date.
At the request of the Borrowers made at least thirty (30)
days, but in no event earlier than ninety (90) days, prior to the then current
Termination Date, the Lender may in its sole discretion extend the Termination
Date for a period to be determined by Lender in its sole discretion by giving
written notice of such extension to the Borrowers no later than twenty (20)
days, but in no event earlier than thirty (30) days, prior to the then current
Termination Date. Any failure by the Lender to deliver such notice of extension
shall be deemed to be the Lender's determination not to extend the then current
Termination Date.
Section 3. Payments; Computations; Etc.
3.01 Payments.
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrowers
under this Loan Agreement and the Note, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender at
the following account maintained by the Lender: Account No. ▇▇▇▇▇▇▇▇, for the
account of MSMCI, Citibank, N.A., ABA No. ▇▇▇▇▇▇▇▇▇, Attn: Whole Loan
Operations, not later than 3:30 p.m., New York City time, on the date on which
such payment shall become due (and each such payment made after such time on
such due date shall be deemed to have been made on the next succeeding Business
Day). Each Borrower acknowledges that it has no rights of withdrawal from the
foregoing account.
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(b) Except to the extent otherwise expressly provided herein,
if the due date of any payment under this Loan Agreement or the Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
3.02 Computations. Interest on the Loans shall be computed on
the basis of a 360-day year for the actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
3.03 Requirements of Law.
(a) If any Requirement of Law (other than with respect to any
amendment made to the Lender's certificate of incorporation and by-laws or other
organizational or governing documents) or any change in the interpretation or
application thereof or compliance by the Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i) shall subject the Lender to any tax of any kind whatsoever
with respect to this Loan Agreement, the Note or any Loan made by it
(excluding net income taxes) or change the basis of taxation of
payments to the Lender in respect thereof;
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory Loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, Loans or other extensions of credit by, or any other
acquisition of funds by, any office of the Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder;
(iii) shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount which the Lender deems to be material, of making, continuing or
maintaining any Loan or to reduce any amount due or owing hereunder in respect
thereof, then, in any such case, the Borrowers shall promptly pay the Lender
such additional amount or amounts as will compensate the Lender for such
increased cost or reduced amount receivable.
(b) If the Lender shall have determined that the adoption of
or any change in any Requirement of Law (other than with respect to any
amendment made to the Lender's certificate of incorporation and by-laws or other
organizational or governing documents) regarding capital adequacy or in the
interpretation or application thereof or compliance by the Lender or any
corporation controlling the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on the Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which the Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration the Lender's or such corporation's
policies with respect to capital adequacy) by an amount deemed by the Lender to
be material, then from time to time, the Borrowers shall promptly pay to the
Lender such additional amount or amounts as will compensate the Lender for such
reduction.
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(c) If the Lender becomes entitled to claim any additional
amounts pursuant to this Section, it shall promptly notify the Borrowers of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this Section submitted by the Lender to
the Borrowers shall be conclusive in the absence of manifest error.
3.04 Commitment Fee.
The Borrowers agree to pay to the Lender on or prior to the
Effective Date a commitment fee equal to 12.5 basis points (0.125%) of the
Maximum Credit, such payment to be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Lender at the account
set forth in Section 3.01(a) hereof.
Section 4. Collateral Security.
4.01 Collateral; Security Interest.
(a) Pursuant to the Custodial Agreement, the Custodian shall
hold the Mortgage Loan Documents as exclusive bailee and agent for the Lender
pursuant to terms of the Custodial Agreement and shall deliver to the Lender
Trust Receipts (as defined in the Custodial Agreement) each to the effect that
it has reviewed such Mortgage Loan Documents in the manner and to the extent
required by the Custodial Agreement and identifying any deficiencies in such
Mortgage Loan Documents as so reviewed.
(b) All of each Borrower's right, title and interest in, to
and under each of the following items of property, whether now owned or
hereafter acquired, now existing or hereafter created and wherever located, is
hereinafter referred to as the "Collateral":
(i) all Mortgage Loans;
(ii) all Mortgage Loan Documents, including without limitation
all promissory notes, and all Servicing Records, Servicing Agreements
and any other collateral pledged or otherwise relating to such Mortgage
Loans, together with all files, documents, instruments, surveys,
certificates, correspondence, appraisals, computer programs, computer
storage media, accounting records and other books and records relating
thereto;
(iii) all mortgage guaranties and insurance (issued by
governmental agencies or otherwise) and any mortgage insurance
certificate or other document evidencing such mortgage guaranties or
insurance relating to any Mortgage Loan and all claims and payments
thereunder;
(iv) all other insurance policies and insurance proceeds
relating to any Mortgage Loan or the related Mortgaged Property;
(v) all collateral, however defined, under any other agreement
between each Borrower or any of its Affiliates on the one hand and the
Lender or any of its Affiliates on the other hand;
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(vi) all "general intangibles", "accounts" and "chattel paper"
as defined in the Uniform Commercial Code relating to or constituting
any and all of the foregoing, but excluding any Interest Rate
Protection Agreements; and
(vii) any and all replacements, substitutions, distributions
on or proceeds of any and all of the foregoing.
(c) Each Borrower hereby assigns pledges and grants a security
interest in all of its right, title and interest in, to and under the Collateral
to the Lender to secure the MS Indebtedness including without limitation the
repayment of principal of and interest on all Loans and all other amounts owing
to the Lender hereunder, under the Note and under the other Loan Documents
(collectively, the "Secured Obligations"). Each Borrower agrees to ▇▇▇▇ its
computer records and tapes to evidence the interests granted to the Lender
hereunder.
4.02 Further Documentation. At any time and from time to time,
upon the written request of the Lender, and at the sole expense of the
Borrowers, the Borrowers will promptly and duly execute and deliver, or will
promptly cause to be executed and delivered, such further instruments and
documents and take such further action as the Lender may reasonably request for
the purpose of obtaining or preserving the full benefits of this Loan Agreement
and of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code in effect in any jurisdiction with respect to the Liens created hereby.
Each Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of such Borrower to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Loan Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.
4.03 Changes in Locations, Name, etc. No Borrower shall (i)
change the location of its chief executive office/chief place of business from
that specified in Section 6 hereof or (ii) change its name, identity or
corporate structure (or the equivalent) or (iii) unless it shall have given the
Lender at least 30 days prior written notice thereof and shall have delivered to
the Lender all Uniform Commercial Code financing statements and amendments
thereto as the Lender shall request and taken all other actions deemed necessary
by the Lender to continue its perfected status in the Collateral with the same
priority.
4.04 Lender's Appointment as Attorney-in-Fact.
(a) Each Borrower hereby irrevocably constitutes and appoints
the Lender and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of such Borrower and in the name of such Borrower or in
its own name, from time to time in the Lender's discretion, for the purpose of
carrying out the terms of this Loan Agreement, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary, desirable or required to be delivered hereunder to accomplish the
purposes of this Loan Agreement. In addition, without limiting the generality of
the foregoing, each Borrower hereby gives the Lender the power and right, on
behalf of such Borrower, without assent by, but with notice to, the Borrowers,
if an Event of Default shall have occurred and be continuing, to do the
following:
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(i) in the name of such Borrower or its own name, or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due under any mortgage insurance or with respect to any other
Collateral and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by the Lender for the purpose of collecting any and all
such moneys due under any such mortgage insurance or with respect to
any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B) to
ask or demand for, collect, receive payment of and receipt for, any and
all moneys, claims and other amounts due or to become due at any time
in respect of or arising out of any Collateral; (C) to sign and endorse
any invoices, assignments, verifications, notices and other documents
in connection with any of the Collateral; (D) to commence and prosecute
any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any portion thereof
and to enforce any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against the Borrowers
with respect to any Collateral; (F) to settle, compromise or adjust any
suit, action or proceeding described in clause (E) above and, in
connection therewith, to give such discharges or releases as the Lender
may deem appropriate; and (G) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Lender were the
absolute owner thereof for all purposes, and to do, at the Lender's
option and the Borrowers' expense, at any time, and from time to time,
all acts and things which the Lender deems necessary to protect,
preserve or realize upon the Collateral and the Lender's Liens thereon
and to effect the intent of this Loan Agreement, all as fully and
effectively as the Borrowers might do.
Each Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Each Borrower also authorizes the Lender, at any time and
from time to time, to execute, in connection with any sale provided for in
Section 4.07 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to protect
the Lender's interests in the Collateral and shall not impose any duty upon the
Lender to exercise any such powers. The Lender shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither the Lender nor any of its officers, directors, or employees shall be
responsible to the Borrowers for any act or failure to act hereunder, except for
its own gross negligence or willful misconduct.
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4.05 Performance by Lender of Borrowers' Obligations. If any
Borrower fails to perform or comply with any of its agreements contained in the
Loan Documents and the Lender may itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the Lender
incurred in connection with such performance or compliance, together with
interest thereon at a rate per annum equal to the Post-Default Rate, shall be
payable by the Borrowers to the Lender on demand and shall constitute Secured
Obligations.
4.06 Proceeds. If an Event of Default shall occur and be
continuing, (a) all proceeds of Collateral received by the Borrowers consisting
of cash, checks and other near-cash items shall be held by the Borrowers in
trust for the Lender, segregated from other funds of the Borrowers, and shall
forthwith upon receipt by the Borrowers be turned over to the Lender in the
exact form received by the Borrowers (duly endorsed by the Borrowers to the
Lender, if required) and (b) any and all such proceeds received by the Lender
(whether from the Borrowers or otherwise) may, in the sole discretion of the
Lender, be held by the Lender as collateral security for, and/or then or at any
time thereafter may be applied by the Lender against, the Secured Obligations
(whether matured or unmatured), such application to be in such order as the
Lender shall elect. Any balance of such proceeds remaining after the Secured
Obligations shall have been paid in full and this Loan Agreement shall have been
terminated shall be paid over to the Borrowers or to whomsoever may be lawfully
entitled to receive the same as soon as practicable. For purposes hereof,
proceeds shall include, but not be limited to, all principal and interest
payments, all prepayments and payoffs, insurance claims, condemnation awards,
sale proceeds, real estate owned rents and any other income and all other
amounts received with respect to the Collateral.
4.07 Remedies. If a Default shall occur and be continuing, the
Lender may, at its option, enter into one or more Interest Rate Protection
Agreements covering all or a portion of the Mortgage Loans pledged to the Lender
hereunder, and the Borrowers shall be responsible for all damages, judgments,
costs and expenses of any kind which may be imposed on, incurred by or asserted
against the Lender relating to or arising out of such Interest Rate Protection
Agreements; including without limitation any losses resulting from such Interest
Rate Protection Agreements. If an Event of Default shall occur and be
continuing, the Lender may exercise, in addition to all other rights and
remedies granted to it in this Loan Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, the Lender without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Borrowers or any other Person (each and all of which demands, presentments,
protests, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of the Lender or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Lender shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
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the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrowers, which right or equity is hereby waived or released.
The Borrowers further agree, at the Lender's request, to assemble the Collateral
and make it available to the Lender at places which the Lender shall reasonably
select, whether at the Borrowers' premises or elsewhere. The Lender shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Lender
hereunder, including without limitation reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Lender may elect, and only after such application and after
the payment by the Lender of any other amount required or permitted by any
provision of law, including without limitation Section 9-504(1)(c) of the
Uniform Commercial Code, need the Lender account for the surplus, if any, to the
Borrowers. To the extent permitted by applicable law, the Borrowers waive all
claims, damages and demands it may acquire against the Lender arising out of the
exercise by the Lender of any of its rights hereunder, other than those claims,
damages and demands arising from the gross negligence or willful misconduct of
the Lender. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Borrowers
shall remain liable for any deficiency (plus accrued interest thereon as
contemplated pursuant to Section 2.05(b) hereof) if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Secured
Obligations and the fees and disbursements of any attorneys employed by the
Lender to collect such deficiency.
4.08 Limitation on Duties Regarding Preservation of
Collateral. The Lender's duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code or otherwise, shall be to deal with it in the
same manner as the Lender deals with similar property held for its own account.
Neither the Lender nor any of its directors, officers or employees shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrowers or
otherwise.
4.09 Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
4.10 Release of Security Interest. Upon termination of this
Loan Agreement and repayment to the Lender of all Secured Obligations and the
performance of all obligations under the Loan Documents the Lender shall
promptly release its security interest in any Collateral and shall execute any
and all documents reasonably necessary to terminate such interests.
Section 5. Conditions Precedent.
5.01 Initial Loan. The obligation of the Lender to make its
initial Loan hereunder is subject to the satisfaction, immediately prior to or
concurrently with the making of such Loan, of the condition precedent that the
Lender shall have received all of the following items, each of which shall be
satisfactory to the Lender and its counsel in form and substance:
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(a) Loan Documents.
(i) Loan Agreement. The Loan Agreement, duly executed and
delivered by the Loan Parties;
(ii) Note. The Note, duly executed and delivered by the
Borrowers;
(iii) Custodial Agreement. The Custodial Agreement, duly
executed and delivered by the Borrowers and the Custodian;
(iv) Guarantee. The Guarantee, duly executed and delivered by
the Guarantor;
(b) Organizational Documents. A good standing certificate and
certified copies of the charter and by-laws (or equivalent documents) of each
Loan Party and of all corporate or other authority for such Loan Party with
respect to the execution, delivery and performance of the Loan Documents and
each other document to be delivered by such Loan Party from time to time in
connection herewith (and the Lender may conclusively rely on such certificate
until it receives notice in writing from the Borrower to the contrary);
(c) Legal Opinion. A legal opinion of outside counsel to the
Loan Parties, substantially in the form attached hereto as Exhibit C;
(d) Trust Receipt and Mortgage Loan Schedule and Exception
Report. A Trust Receipt, substantially in the form of Annex 2 of the Custodial
Agreement, dated the Effective Date, from the Custodian, duly completed, with a
Mortgage Loan Schedule and Exception Report attached thereto;
(e) Servicing Agreement(s). Any Servicing Agreement, certified
as a true, correct and complete copy of the original together, with a fully
executed Servicer Notice and, if the Servicer is a Borrower or an Affiliate of a
Borrower, the letter of the applicable Servicer consenting to termination of
such Servicing Agreement upon the occurrence of an Event of Default;
(f) Filings, Registrations, Recordings. Any documents
(including, without limitation, financing statements) required to be filed,
registered or recorded in order to create, in favor of the Lender, a perfected,
first-priority security interest in the Collateral, subject to no Liens other
than those created hereunder, shall have been properly prepared and executed for
filing (including the applicable county(ies) if the Lender determines such
filings are necessary in its sole discretion), registration or recording in each
office in each jurisdiction in which such filings, registrations and
recordations are required to perfect such first-priority security interest;
provided, that assignments of the Mortgages securing or related to the Mortgage
Loans shall not be required to be recorded prior to the occurrence of an Event
of Default;
(g) Financial Statements. The financial statements referenced
in Section 6.02;
(h) Underwriting Guidelines. A copy of the Underwriting
Guidelines, accompanied by a certificate of a Responsible Officer of the
Borrowers stating that such Underwriting Guidelines are a true and correct copy;
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(i) Consents, Licenses, Approvals, etc. Copies certified by
each Loan Party of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by the Loan Party of,
and the validity and enforceability of, the Loan Documents, which consents,
licenses and approvals shall be in full force and effect; and
(j) Other Documents. Such other documents as the Lender may
reasonably request.
5.02 Initial and Subsequent Loans. The making of each Loan to
the Borrowers (including the initial Loan) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Loan and also after giving effect thereto and to the
intended use thereof:
(a) No Default. No Default or Event of Default shall have
occurred and be continuing;
(b) Representations and Warranties. Both immediately prior to
the making of such Loan and also after giving effect thereto and to the intended
use thereof, the representations and warranties made by the Loan Parties in
Section 6 and Schedule 1 hereof, and elsewhere in each of the Loan Documents,
shall be true, correct and complete on and as of the date of the making of such
Loan in all material respects (in the case of the representations and warranties
in Section 6.10 and Schedule 1, solely with respect to Mortgage Loans included
in the Borrowing Base) with the same force and effect as if made on and as of
such date (or, if any such representation or warranty is expressly stated to
have been made as of a specific date, as of such specific date). The Lender
shall have received an officer's certificate signed by a Responsible Officer of
each Loan Party certifying as to the truth, accuracy and completeness of the
above, which certificate shall specifically include a statement that each Loan
Party is in compliance with all governmental licenses and authorizations and is
qualified to do business and in good standing in all required jurisdictions.
(c) Borrowing Base. The aggregate outstanding principal amount
of the Loans shall not exceed the Borrowing Base;
(d) Due Diligence. Subject to the Lender's right to perform
one or more Due Diligence Reviews pursuant to Section 11.15 hereof, the Lender
shall have completed its due diligence review of the Mortgage Loan Documents for
each Loan and such other documents, records, agreements, instruments, mortgaged
properties or information relating to such Mortgage Loans as the Lender in its
sole discretion deems appropriate to review and such review shall be
satisfactory to the Lender in its sole discretion;
(e) Mortgage Loan Schedule and Exception Report. The Lender
shall have received from the Custodian a Mortgage Loan Schedule and Exception
Report with Exceptions as are acceptable to the Lender in its sole discretion in
respect of Eligible Mortgage Loans to be pledged hereunder on such Business Day;
(f) Release Letter. The Lender shall have received from the
Borrowers a Warehouse Lender's Release Letter substantially in the form of
Exhibit E-2 hereto (or such other form acceptable to the Lender) or a Seller's
Release Letter substantially in the form of Exhibit E-1 hereto (or such other
form acceptable to the Lender) covering each Mortgage Loan to be pledged to the
Lender;
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(g) Fees and Expenses. The Lender shall have received all fees
and expenses of counsel to the Lender as contemplated by Section 11.03(b), which
amount, at the Lender's option, may be netted from any Loan advanced under this
Agreement;
(h) No Market Events. None of the following shall have
occurred and/or be continuing:
(i) an event or events shall have occurred resulting in the
effective absence of a "repo market" or comparable "lending market" for
financing debt obligations secured by mortgage loans or securities or
an event or events shall have occurred resulting in the Lender not
being able to finance any Mortgage Loans through the "repo market" or
"lending market" with traditional counterparties at rates which would
have been reasonable prior to the occurrence of such event or events;
or
(ii) an event or events shall have occurred resulting in the
effective absence of a "securities market" for securities backed by
mortgage loans or an event or events shall have occurred resulting in
the Lender not being able to sell securities backed by mortgage loans
at prices which would have been reasonable prior to such event or
events;
(i) No ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Downgrade. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ &
Co.'s corporate bond rating as calculated by S&P or ▇▇▇▇▇'▇ has not been lowered
or downgraded to a rating below A- as indicated by S&P or below A3 as indicated
by ▇▇▇▇▇'▇.
Each request for a borrowing by the Borrowers hereunder shall constitute a
certification by the Borrowers that all the conditions set forth in this Section
5 (other than Section 5.02(g)) have been satisfied (both as of the date of such
notice, request or confirmation and as of the date of such borrowing).
Section 6. Representations and Warranties. Each Loan Party
represents and warrants to the Lender that throughout the term of this Loan
Agreement:
6.01 Existence. Each Loan Party (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has all requisite corporate or other
power, and has all governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or as
proposed to be conducted, except where the lack of such licenses,
authorizations, consents and approvals would not be reasonably likely to have a
Material Adverse Effect; and (c) is qualified to do business and is in good
standing in all other jurisdictions in which the nature of the business
conducted by it makes such qualification necessary, except where failure so to
qualify would not be reasonably likely (either individually or in the aggregate)
to have a Material Adverse Effect.
6.02 Financial Condition. The Guarantor has heretofore
furnished to the Lender a copy of (a) its consolidated balance sheet and the
consolidated balance sheets of its consolidated Subsidiaries for the fiscal year
of the Guarantor ended June 30, 2000 and the related consolidated statements of
income and retained earnings and of cash flows for the Guarantor and its
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consolidated Subsidiaries for such fiscal year, setting forth in each case in
comparative form the figures for the previous year, with the opinion thereon of
BDO ▇▇▇▇▇▇▇, L.L.P. and (b) its consolidated balance sheet and the consolidated
balance sheets of its consolidated Subsidiaries for the quarterly fiscal periods
of the Guarantor ended March 31, 2000, June 30, 2000 and September 30, 2000 and
the related consolidated statements of income and retained earnings and of cash
flows for the Guarantor and its consolidated Subsidiaries for such quarterly
fiscal periods, setting forth in each case in comparative form the figures for
the previous year. All such financial statements are complete and correct and
fairly present, in all material respects, the consolidated financial condition
of the Guarantor and its Subsidiaries and the consolidated results of their
operations as at such dates and for such fiscal periods, all in accordance with
GAAP applied on a consistent basis. Since June 30, 2000, there has been no
material adverse change in the consolidated business, operations or financial
condition of the Guarantor and its consolidated Subsidiaries taken as a whole
from that set forth in said financial statements.
6.03 Litigation. There are no actions, suits, arbitrations,
investigations (including, without limitation, any of the foregoing which are
pending or threatened) or other legal or arbitrable proceedings affecting any
Loan Party or any of its Subsidiaries or affecting any of the Property of any of
them before any Governmental Authority that (i) questions or challenges the
validity or enforceability of any of the Loan Documents or any action to be
taken in connection with the transactions contemplated hereby, (ii) makes a
claim or claims in an aggregate amount greater than $1,000,000, (iii) which,
individually or in the aggregate, if adversely determined, could reasonably be
likely to have a Material Adverse Effect, or (iv) requires filing with the
Securities and Exchange Commission in accordance with the 1934 Act or any rules
thereunder.
6.04 No Breach. Neither (a) the execution and delivery of the
Loan Documents nor (b) the consummation of the transactions therein contemplated
in compliance with the terms and provisions thereof will conflict with or result
in a breach of the charter or by-laws of any Loan Party, or any applicable law,
rule or regulation, or any order, writ, injunction or decree of any Governmental
Authority, or any Servicing Agreement or other material agreement or instrument
to which any Loan Party or any of its Subsidiaries is a party or by which any of
them or any of their Property is bound or to which any of them is subject, or
constitute a default under any such material agreement or instrument or result
in the creation or imposition of any Lien (except for the Liens created pursuant
to this Loan Agreement) upon any Property of any Loan Party or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.
6.05 Action. Each Loan party has all necessary corporate or
other power, authority and legal right to execute, deliver and perform its
obligations under each of the Loan Documents; the execution, delivery and
performance by each Loan Party of each of the Loan Documents have been duly
authorized by all necessary corporate or other action on its part; and each Loan
Document has been duly and validly executed and delivered by such Loan Party and
constitutes a legal, valid and binding obligation of such Loan Party,
enforceable against the Borrower in accordance with its terms.
6.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority or any
securities exchange are necessary for the execution, delivery or performance by
any Loan Party of the Loan Documents or for the legality, validity or
enforceability thereof, except for filings and recordings in respect of the
Liens created pursuant to this Loan Agreement.
-24-
6.07 Margin Regulations. Neither the making of any Loan
hereunder, nor the use of the proceeds thereof, will violate or be inconsistent
with the provisions of Regulations T, U or X.
6.08 Taxes. Each Loan Party and its Subsidiaries have filed
all Federal income tax returns and all other material tax returns that are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by any of them, except for any
such taxes as are being appropriately contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
have been provided. The charges, accruals and reserves on the books of each Loan
Party and its Subsidiaries in respect of taxes and other governmental charges
are, in the opinion of the such Loan Party, adequate.
6.09 Investment Company Act. No Loan Party nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.10 Collateral; Collateral Security.
(a) No Borrower has assigned, pledged, or otherwise conveyed
or encumbered any Mortgage Loan or other Collateral to any other Person, and
immediately prior to the pledge of such Mortgage Loan or any other Collateral to
the Lender, the related Borrower was the sole owner of such Mortgage Loan or
such other Collateral and had good and marketable title thereto, free and clear
of all Liens, in each case except for Liens to be released simultaneously with
the Liens granted in favor of the Lender hereunder. No Mortgage Loan or other
Collateral pledged to the Lender hereunder was acquired (by purchase or
otherwise) by any Borrower from an Affiliate of such Borrower.
(b) The provisions of this Loan Agreement are effective to
create in favor of the Lender a valid security interest in all right, title and
interest of each Borrower in, to and under the Collateral.
(c) Upon receipt by the Custodian of each Mortgage Note,
endorsed in blank by a duly authorized officer of the related Borrower, the
Lender shall have a fully perfected first priority security interest therein, in
the Mortgage Loan evidenced thereby and in such Borrower's interest in the
related Mortgaged Property.
(d) Upon the filing of financing statements on Form UCC-1
naming the Lender as "Secured Party" and the Borrowers as "Debtor", and
describing the Collateral, in the jurisdictions and recording offices listed on
Schedule 2 attached hereto, the security interests granted hereunder in the
Collateral will constitute fully perfected first priority security interests
under the Uniform Commercial Code in all right, title and interest of the
Borrowers in, to and under such Collateral which can be perfected by filing
under the Uniform Commercial Code.
-25-
6.11 Chief Executive Office/Jurisdiction of Organization. On
the Effective Date, and during the four months immediately preceding the
Effective Date: (i) each of UPLAND's and ABC's chief executive office, is, and
has been, located at Bala Pointe Office Centre, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and (ii) ABMS's chief executive office is located at
▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇. On the Effective Date, each
Borrower's jurisdiction of organization is as set forth in the preamble to this
Agreement.
6.12 Location of Books and Records. The location where each
Borrower keeps its books and records, including all computer tapes and records
relating to the Collateral is its chief executive office.
6.13 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of each Loan Party to the Lender in connection with the negotiation,
preparation or delivery of this Loan Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole, do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading. All
written information furnished after the date hereof by or on behalf of any Loan
Party to the Lender in connection with this Loan Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of projections)
based on reasonable estimates, on the date as of which such information is
stated or certified. There is no fact known to a Responsible Officer of any Loan
Party, after due inquiry, that could reasonably be expected to have a Material
Adverse Effect that has not been disclosed herein, in the other Loan Documents
or in a report, financial statement, exhibit, schedule, disclosure letter or
other writing furnished to the Lender for use in connection with the
transactions contemplated hereby or thereby.
6.14 Tangible Net Worth. As of September 30, 2000, the
Tangible Net Worth is not less than $41,000,000.
6.15 ERISA. Each Plan to which any Loan Party or its
Subsidiaries make direct contributions, and, to the knowledge of each Loan
Party, each other Plan and each Multiemployer Plan, is in compliance in all
material respects with, and has been administered in all material respects in
compliance with, the applicable provisions of ERISA, the Code and any other
Federal or State law. No event or condition has occurred and is continuing as to
which any Loan Party would be under an obligation to furnish a report to the
Lender under Section 7.01(d) hereof.
6.16 Subsidiaries. Schedule 3 sets forth the name of each
direct or indirect Subsidiary of the Guarantor and of the holders of Capital
Stock of the Guarantor, its form of organization, its jurisdiction of
organization, the total number of issued and outstanding shares or other
interests of Capital Stock thereof, the classes and number of issued and
outstanding shares or other interests of Capital Stock of each such class, the
name of each holder of Capital Stock thereof and the number of shares or other
interests of such Capital Stock held by each such holder and the percentage of
all outstanding shares or other interests of such class of Capital Stock held by
such holders.
-26-
Section 7. Covenants of the Loan Parties. Each Loan Party
covenants and agrees with the Lender that, so long as any Loan is outstanding
and until payment in full of all Secured Obligations:
7.01 Financial Statements. The Guarantor shall deliver to the
Lender:
(a) as soon as available and in any event within 45 days after
the end of each of the first three quarterly fiscal periods of each fiscal year
of the Guarantor, the unaudited consolidated balance sheets of the Guarantor and
its consolidated Subsidiaries as at the end of such period and the related
unaudited consolidated statements of income and retained earnings and of cash
flows for the Guarantor and its consolidated Subsidiaries for such period and
the portion of the fiscal year through the end of such period, setting forth in
each case in comparative form the figures for the previous year, accompanied by
a certificate of a Responsible Officer of the Guarantor, which certificate shall
state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the Guarantor and
its consolidated Subsidiaries in accordance with GAAP, consistently applied, as
at the end of, and for, such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Guarantor, the consolidated balance sheets of
the Guarantor and its consolidated Subsidiaries as at the end of such fiscal
year and the related consolidated statements of income and retained earnings and
of cash flows for the Guarantor and its consolidated Subsidiaries for such year,
setting forth in each case in comparative form the figures for the previous
year, accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall not be
qualified as to scope of audit or going concern and shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Guarantor and its consolidated
Subsidiaries as at the end of, and for, such fiscal year in accordance with
GAAP;
(c) as soon as available and in any event within 30 days after
the end of each calendar month, the unaudited consolidated balance sheets of the
Guarantor and its consolidated Subsidiaries as at the end of such period and the
related unaudited consolidated statements of income and retained earnings and of
cash flows for the Guarantor and its consolidated Subsidiaries for such period
and the portion of the fiscal year through the end of such period, setting forth
in each case in comparative form the figures for the previous year, accompanied
by a certificate of a Responsible Officer of the Guarantor, which certificate
shall state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the Guarantor and
its consolidated Subsidiaries in accordance with GAAP, consistently applied, as
at the end of, and for, such period (subject to normal year-end audit
adjustments);
(d) from time to time such other information regarding the
financial condition, operations, or business of any Loan Party as the Lender may
reasonably request in writing; and
-27-
(e) as soon as reasonably possible, and in any event within
thirty (30) days after a Responsible Officer of any Loan Party knows, or with
respect to any Plan or Multiemployer Plan to which any Loan Party or any of its
Subsidiaries makes direct contributions, has reason to believe, that any of the
events or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a senior financial officer of
the relevant Loan Party setting forth details respecting such event or condition
and the action, if any, that such Loan Party or its ERISA Affiliate proposes to
take with respect thereto (and a copy of any report or notice required to be
filed with or given to PBGC by such Loan Party or an ERISA Affiliate with
respect to such event or condition):
(i) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a Plan, as
to which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within thirty (30) days of the
occurrence of such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA,
including without limitation the failure to make on or before its due
date a required installment under Section 412(m) of the Code or Section
302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code); and any
request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of ERISA of a
notice of intent to terminate any Plan or any action taken by any Loan
Party or an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the receipt by the Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the
receipt by any Loan Party or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Loan Party or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that would
result in the loss of tax-exempt status of the Plan and trust of which
such Plan is a part if a Loan Party or an ERISA Affiliate fails to
provide timely security to such Plan if and as required by the
provisions of Section 401(a)(29) of the Code or Section 307 of ERISA.
-28-
Each Loan Party will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraphs (a), (b) and (c) above, a
certificate of a Responsible Officer of such Loan Party to the effect that, to
the best of such Responsible Officer's knowledge, each Loan party during such
fiscal period or year has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Loan Agreement and
the other Loan Documents to be observed, performed or satisfied by it, and that
such Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate (and, if any Default or Event of
Default has occurred and is continuing, describing the same in reasonable detail
and describing the action the Borrower has taken or proposes to take with
respect thereto).
7.02 Litigation. Each Loan Party will promptly, and in any
event within 10 days after service of process on any of the following, give to
the Lender notice of all litigation, actions, suits, arbitrations,
investigations (including, without limitation, any of the foregoing which are
pending or threatened) or other legal or arbitrable proceedings affecting any
Loan Party or any of its Subsidiaries or affecting any of the Property of any of
them before any Governmental Authority that (i) questions or challenges the
validity or enforceability of any of the Loan Documents or any action to be
taken in connection with the transactions contemplated hereby, (ii) makes a
claim or claims in an aggregate amount greater than $1,000,000, (iii) which,
individually or in the aggregate, if adversely determined, could be reasonably
likely to have a Material Adverse Effect, or (iii) requires filing with the
Securities and Exchange Commission in accordance with the 1934 Act and any rules
thereunder.
7.03 Existence, etc. Each Loan Party will:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that nothing in
this Section 7.03(a) shall prohibit any transaction expressly permitted under
Section 7.04 hereof);
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws, all laws with respect to unfair and
deceptive lending practices and predatory lending practices and consumer
protection laws) if failure to comply with such requirements would be reasonably
likely (either individually or in the aggregate) to have a Material Adverse
Effect;
(c) keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP consistently applied;
(d) not move its chief executive office from the address
referred to in Section 6.11 or change its jurisdiction of organization from the
jurisdiction referred to in Section 6.11 unless it shall have provided the
Lender 30 days' prior written notice of such change;
(e) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves are
being maintained; and
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(f) permit representatives of the Lender, during normal
business hours, to examine, copy and make extracts from its books and records,
to inspect any of its Properties, and to discuss its business and affairs with
its officers, all to the extent reasonably requested, upon not less than two (2)
Business Days notice, by the Lender.
7.04 Prohibition of Fundamental Changes. No Loan Party shall
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution) or sell all or substantially all of its assets; provided, that, (a)
any Loan Party may engage in asset sales pursuant to any securitization or
off-balance sheet financing, and (b) the Guarantor may merge or consolidate with
(i) any wholly owned subsidiary of the Guarantor, or (ii) any other Person if
the Guarantor is the surviving corporation; and provided further, that if after
giving effect thereto, no Default would exist hereunder.
7.05 Borrowing Base Deficiency. If at any time there exists a
Borrowing Base Deficiency the Borrowers shall cure same in accordance with
Section 2.06 hereof.
7.06 Notices. Each Loan Party shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the
occurrence of any Default or Event of Default;
(b) with respect to any Mortgage Loan pledged to the Lender
hereunder, within three (3) Business Days upon receipt of good funds with
respect to any principal prepayment in full of such pledged Mortgage Loan;
(c) with respect to any Mortgage Loan pledged to the Lender
hereunder, immediately upon receipt of notice or knowledge that the underlying
Mortgaged Property has been damaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, or otherwise damaged so
as to affect adversely the Collateral Value of such pledged Mortgage Loan; and
(d) promptly upon receipt of notice or knowledge of (i) any
default related to any Collateral, (ii) any Lien or security interest (other
than security interests created hereby or by the other Loan Documents) on, or
claim asserted against, any of the Collateral or (iii) any event or change in
circumstances which could reasonably be expected to have a Material Adverse
Effect.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of such Loan Party setting forth details of
the occurrence referred to therein and stating what action the such Loan Party
has taken or to take with respect thereto.
7.07 Reports. Each Borrower shall provide the Lender with a
quarterly report, which report shall include, among other items, a summary of
such Borrower's delinquency and loss experience with respect to mortgage loans
serviced by such Borrower, any Servicer or any designee of either, plus any such
additional reports as the Lender may reasonably request with respect to the
Borrower's or any Servicer's servicing portfolio or pending originations of
mortgage loans.
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7.08 Underwriting Guidelines. (a) Without the prior written
consent of the Lender, such consent not to be unreasonably conditioned, withheld
or delayed, the Borrowers shall not amend or otherwise modify the Underwriting
Guidelines or originate Mortgage Loans in a manner inconsistent with the
Underwriting Guidelines, except for technical matters which shall in no way
impact any aspects of the credit review process. Notwithstanding the preceding
sentence, in the event that the Borrowers make any amendment or modification to
the Underwriting Guidelines, the Borrowers shall promptly deliver to the Lender
a complete copy of the amended or modified Underwriting Guidelines. Pursuant to
subsection (a) hereto, upon any modification of the Underwriting Guidelines or
manner of origination of Mortgage Loans without the consent of the Lender, the
Lender shall have the sole discretion to determine whether any Mortgage Loans
originated in compliance with such modified Underwriting Guidelines or manner of
origination is an Eligible Mortgage Loan.
(b) Each Borrower shall originate Mortgage Loans in a manner
which is consistent with sound underwriting and appraisal practices, and in
compliance with applicable federal and state consumer protection laws including,
without limitation, all laws with respect to unfair or deceptive practices and
all laws relating to predatory lending practices.
7.09 Transactions with Affiliates. No Borrower shall enter
into any transaction, including without limitation any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Loan Agreement, (b) in
the ordinary course of such Borrower's business and (c) upon fair and reasonable
terms no less favorable to such Borrower than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate, or make a
payment that is not otherwise permitted by this Section
7.10 to any Affiliate. In no event shall a Borrower pledge to
the Lender hereunder any Mortgage Loan acquired by such Borrower from an
Affiliate of the Borrower. 7.10 Limitation on Liens. Each Loan Party will defend
the Collateral against, and will take such other action as is necessary to
remove, any Lien, security interest or claim on or to the Collateral, other than
the security interests created under this Loan Agreement, and each Loan Party
will defend the right, title and interest of the Lenders in and to any of the
Collateral against the claims and demands of all persons whomsoever.
7.11 Limitation on Distributions. After the occurrence and
during the continuation of any Event of Default, no Loan Party shall make any
payment on account of, or set apart assets for, a sinking or other analogous
fund for the purchase, redemption, defeasance, retirement or other acquisition
of any equity or partnership interest of such Loan Party, whether now or
hereafter outstanding, or make any other distribution in respect of any of the
foregoing or to any shareholder or equity owner of such Loan Party, either
directly or indirectly, whether in cash or property or in obligations of such
Loan Party or any of such Loan Party's consolidated Subsidiaries.
7.12 Maintenance of Tangible Net Worth. The Guarantor shall
not permit, Tangible Net Worth as of the end of any fiscal quarter to be less
than the sum of (i) $35,000,000.00 plus (ii) an amount equal to 75% of the
aggregate positive Net Income (without deduction for quarterly losses) for such
fiscal quarter.
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7.13 Maintenance of Ratio of Total Indebtedness to Tangible
Net Worth. The Guarantor shall not permit as of the end of any fiscal quarter
the ratio of Total Indebtedness to Tangible Net Worth at any time to be greater
than 13:1.
7.14 Maintenance of Profitability. The Guarantor shall not
permit, for any fiscal quarter, Net Income for such quarter, before income taxes
for such Test Period and distributions made during such quarter, to be less than
$1.00.
7.15 Servicer; Servicing Tape. The Borrowers shall provide to
the Lender on the fifth Business Day after the end of each month a computer
readable file containing servicing information, including without limitation
those fields specified by the Lender from time to time, on a loan-by-loan basis
and in the aggregate, with respect to the Mortgage Loans serviced hereunder by
the Borrowers or any Servicer. The Borrowers shall not cause the Mortgage Loans
to be serviced by any servicer other than a servicer expressly approved in
writing by the Lender.
7.16 Maintenance of Liquidity. The Loan Parties shall
maintain, at all times, cash, unencumbered Cash Equivalents or Eligible Mortgage
Loans (other than Defaulted Loans) which are subject to any Liens, in an
aggregate amount equal to 30% of the aggregate principal amount of all
subordinated Indebtedness of the Loan Parties that will mature during the next
three calendar months; provided, that at least 50% of the preceding amount shall
be in the form of cash or Cash Equivalents. For purpose of this Section, the
value of the Eligible Mortgage Loans at any time shall be the lesser of (i) 85%
of the outstanding principal balance of such Eligible Mortgage Loans at such
time and (ii) or the Market Value of such Eligible Mortgage Loans at such time.
7.17 Required Filings. Each Loan Party shall promptly provide
the Lender with copies of all documents which such Loan Party or any Affiliate
of such Loan Party is required to file with the Securities and Exchange
Commission in accordance with the 1934 Act or any rules thereunder.
7.18 No Adverse Selection. No Loan Party has selected the
Collateral in a manner so as to adversely affect the Lender's interests.
7.19 Remittance of Collections and Prepayments. The Borrowers
shall give written notice to the Lender on each Thursday (or the next Business
Day if such Thursday is not a Business Day) of all principal prepayments and
scheduled principal payments that the Borrowers have received during the
previous week, with sufficient detail to enable the Lender to appropriately
identify the Mortgage Loan to which any amount prepayment or payment applies.
7.20 Agency Approvals. Should any Borrower, for any reason,
cease to possess all applicable Agency Approvals, or should notification to the
relevant Agency be required, such Borrower shall so notify the Lender
immediately in writing. Notwithstanding the preceding sentence, each Borrower
shall take all necessary action to maintain all of its (and each Servicer's)
applicable Agency Approvals at all times during the term of this Loan Agreement
and so long as any Loan remains outstanding.
7.21 Interest Rate Protection Agreements. No Loan Party shall
assign, pledge or grant a security interest in any of its right, title or
interest in, to and under any Interest Rate Protection Agreement to any Person
(other than in favor of the Lender) to secure any Indebtedness or for any other
purpose.
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Section 8. Events of Default. Each of the following events
shall constitute an event of default (an "Event of Default") hereunder:
(a) any Borrower shall default in the payment of any principal
of or interest on any Loan when due (whether at stated maturity, upon
acceleration or at mandatory or optional prepayment); or
(b) any Borrower shall default in the payment of any other
amount payable by it hereunder or under any other Loan Document after
notification by the Lender of such default, and such default shall have
continued unremedied for five Business Days; or
(c) any representation, warranty or certification made or
deemed made herein or in any other Loan Document by any Loan Party or any
certificate furnished to the Lender pursuant to the provisions hereof or thereof
shall prove to have been false or misleading in any material respect as of the
time made or furnished (other than the representations and warranties set forth
in Schedule 1, which shall be considered solely for the purpose of determining
the Collateral Value of the Mortgage Loans; unless (i) such Loan Party shall
have made any such representations and warranties with knowledge that they were
materially false or misleading at the time made or (ii) any such representations
and warranties have been determined by the Lender in its sole discretion
(exercised in good faith) to be materially false or misleading; or
(d) any Loan Party shall fail to comply with the requirements
of Section 7.03(a), Section 7.04, Section 7.05, Section 7.06, or Sections 7.09
through 7.21 hereof; or any Loan Party shall otherwise fail to comply with the
requirements of Section 7.03 hereof and such default shall continue unremedied
for a period of five Business Days; or any Loan Party shall fail to observe or
perform any other covenant or agreement contained in this Loan Agreement or any
other Loan Document and such failure to observe or perform shall continue
unremedied for a period of seven (7) Business Days; or
(e) a final judgment or judgments for the payment of money in
excess of $500,000 in the aggregate shall be rendered against any Loan Party or
any of its Affiliates by one or more courts, administrative tribunals or other
bodies having jurisdiction and the same shall not be satisfied, discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within 30 days from the date of entry
thereof, and any Loan Party or any such Affiliate shall not, within said period
of 30 days, or such longer period during which execution of the same shall have
been stayed or bonded, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
(f) any Loan Party shall admit in writing its inability to pay
its debts as such debts become due; or
(g) any Loan Party or any of its Affiliates shall (i) apply
for or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner or liquidator or the like of itself or of
all or a substantial part of its property, (ii) make a general assignment for
the benefit of its creditors, (iii) commence a voluntary case under the
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Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code or
(vi) take any corporate or other action for the purpose of effecting any of the
foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of any Loan Party or any of its Affiliates, in any court
of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner, liquidator or the like of any Loan Party or any
such Affiliate or of all or any substantial part of its property, or (iii)
similar relief in respect of any Loan Party or any such Affiliate under any law
relating to bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 30 or more days; or an order for relief
against any Loan Party or any such Affiliate shall be entered in an involuntary
case under the Bankruptcy Code; or
(i) the Custodial Agreement or any Loan Document shall for
whatever reason be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by any Loan Party; or
(j) any Loan Party shall grant, or suffer to exist, any Lien
on any Collateral except the Liens contemplated hereby; or the Liens
contemplated hereby shall cease to be first priority perfected Liens on the
Collateral in favor of the Lender or shall be Liens in favor of any Person other
than the Lender; or
(k) any Loan Party or any of its Affiliates shall be in
default under any note, indenture, loan agreement, guaranty, swap agreement or
any other contract to which it is a party, including, without limitation, any MS
Indebtedness, which default (i) involves the failure to pay a matured obligation
greater than $500,000, or (ii) permits the acceleration of the maturity of
obligations greater than $500,000 by any other party to or beneficiary of such
note, indenture, loan agreement, guaranty, swap agreement or other contract; or
(l) any materially adverse change in the Property, business,
financial condition or prospects of any Loan Party or any of its Affiliates
shall occur, in each case as determined by the Lender in its sole discretion, or
any other condition shall exist which, in the Lender's sole discretion,
constitutes a material impairment of such Loan Party's ability to perform its
obligations under this Loan Agreement, the Note or any other Loan Document;
(m) MS & Co.'s corporate bond rating has been lowered or
downgraded to a rating below A- by S&P or A3 by ▇▇▇▇▇'▇ and the Borrowers shall
have failed to repay all amounts owing to the Lender under this Agreement, the
Note and the other Loan Documents within 90 days following such downgrade; or
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(n) the discovery by the Lender of a condition or event which
existed at or prior to the execution hereof and which the Lender, in its sole
discretion, determines materially and adversely affects: (i) the condition
(financial or otherwise) of any Loan Party, its Subsidiaries or Affiliates; or
(ii) the ability of either any Loan Party or the Lender to fulfill its
respective obligations under this Loan Agreement.
Section 9. Remedies Upon Default.
(a) An Event of Default shall be deemed to be continuing
unless expressly waived by the Lender in writing. Upon the occurrence of one or
more Events of Default hereunder, the Lender's obligation to make additional
Loans to the Borrowers shall automatically terminate without further action by
any Person. Upon the occurrence of one or more Events of Default other than
those referred to in Section 8(g) or (h), the Lender may immediately declare the
principal amount of the Loans then outstanding under the Note to be immediately
due and payable, together with all interest thereon and fees and expenses
accruing under this Loan Agreement. Upon the occurrence of an Event of Default
referred to in Sections 8(g) or (h), such amounts shall immediately and
automatically become due and payable without any further action by any Person.
Upon such declaration or such automatic acceleration, the balance then
outstanding on the Note shall become immediately due and payable, without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrowers.
(b) Upon the occurrence of one or more Events of Default, the
Lender shall have the right to obtain physical possession of the Servicing
Records and all other files of the Borrowers relating to the Collateral and all
documents relating to the Collateral which are then or may thereafter come in to
the possession of the Borrowers or any third party acting for the Borrowers and
the Borrowers shall deliver to the Lender such assignments as the Lender shall
request. The Lender shall be entitled to specific performance of all agreements
of the Borrowers contained in this Loan Agreement.
Section 10. No Duty of Lender. The powers conferred on the
Lender hereunder are solely to protect the Lender's interests in the Collateral
and shall not impose any duty upon it to exercise any such powers. The Lender
shall be accountable only for amounts that it actually receives as a result of
the exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrowers for any act or failure
to act hereunder, except for its or their own gross negligence or willful
misconduct.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Lender to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
any Loan Document 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.
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11.02 Notices. Except as otherwise expressly permitted by this
Loan Agreement, all notices, requests and other communications provided for
herein and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or thereof); or, as to
any party, at such other address as shall be designated by such party in a
written notice to each other party provided, that a copy of all notices given
under Section 7.01 shall simultaneously be delivered to Credit Department,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, 1221 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇; Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇. Except as otherwise provided in this
Loan Agreement and except for notices given under Section 2 (which shall be
effective only on receipt), all such communications shall be deemed to have been
duly given when transmitted by telex or telecopy or personally delivered or, in
the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
11.03 Indemnification and Expenses.
(a) The Borrowers agree, jointly and severally, to hold the
Lender, and its Affiliates and their officers, directors, employees, agents and
advisors (each an "Indemnified Party") harmless from and indemnify any
Indemnified Party against all liabilities, losses, damages, judgments, costs and
expenses of any kind which may be imposed on, incurred by or asserted against
such Indemnified Party (collectively, the "Costs") relating to or arising out of
this Loan Agreement, the Note, any other Loan Document or any transaction
contemplated hereby or thereby, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Loan Agreement, the Note,
any other Loan Document or any transaction contemplated hereby or thereby, that,
in each case, results from anything other than any Indemnified Party's gross
negligence or willful misconduct. Without limiting the generality of the
foregoing, the Borrowers agree, jointly and severally, to hold any Indemnified
Party harmless from and indemnify such Indemnified Party against all Costs with
respect to all Mortgage Loans relating to or arising out of any violation or
alleged violation of any environmental law, rule or regulation, or any consumer
credit laws, including without limitation laws with respect to unfair or
deceptive lending practices, and predatory lending practices, the Truth in
Lending Act and/or the Real Estate Settlement Procedures Act, that, in each
case, results from anything other than such Indemnified Party's gross negligence
or willful misconduct. In any suit, proceeding or action brought by an
Indemnified Party in connection with any Mortgage Loan for any sum owing
thereunder, or to enforce any provisions of any Mortgage Loan, the Borrowers,
jointly and severally, will save, indemnify and hold such Indemnified Party
harmless from and against all expense, loss or damage suffered by reason of any
defense, set-off, counterclaim, recoupment or reduction or liability whatsoever
of the account debtor or obligor thereunder, arising out of a breach by the
Borrowers of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account
debtor or obligor or its successors from the Borrowers. The Borrowers also
agree, jointly and severally, to reimburse an Indemnified Party as and when
billed by such Indemnified Party for all such Indemnified Party's costs and
expenses incurred in connection with the enforcement or the preservation of such
Indemnified Party's rights under this Loan Agreement, the Note, any other Loan
Document or any transaction contemplated hereby or thereby, including without
limitation the reasonable fees and disbursements of its counsel. The Borrowers
hereby acknowledge that, notwithstanding the fact that the Note is secured by
the Collateral, the obligation of the Borrowers under the Note is a recourse
obligation of the Borrower.
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(b) The Borrowers agree, jointly and severally, to pay as and
when billed by the Lender all of the out-of-pocket costs and expenses incurred
by the Lender in connection with the development, preparation and execution of,
and any amendment, supplement or modification to, this Loan Agreement, the Note,
any other Loan Document or any other documents prepared in connection herewith
or therewith. The Borrowers agree, jointly and severally, to pay as and when
billed by the Lender all of the out-of-pocket costs and expenses incurred in
connection with the consummation and administration of the transactions
contemplated hereby and thereby including without limitation (i) all the
reasonable fees, disbursements and expenses of counsel to the Lender and (ii)
all the due diligence, inspection, testing and review costs and expenses
incurred by the Lender with respect to Collateral under this Loan Agreement,
including, but not limited to, those costs and expenses incurred by the Lender
pursuant to Sections 11.03(a), 11.14 and 11.15 hereof.
11.04 Amendments. Except as otherwise expressly provided in
this Loan Agreement, any provision of this Loan Agreement may be modified or
supplemented only by an instrument in writing signed by each Loan Party and the
Lender and any provision of this Loan Agreement may be waived by the Lender.
11.05 Successors and Assigns This Loan Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.06 Survival. The obligations of the Borrowers under
Sections 3.03 and 11.03 hereof shall survive the repayment of the Loans and the
termination of this Loan Agreement. In addition, each representation and
warranty made or deemed to be made by a request for a borrowing, herein or
pursuant hereto shall survive the making of such representation and warranty,
and the Lender shall not be deemed to have waived, by reason of making any Loan,
any Default that may arise because any such representation or warranty shall
have proved to be false or misleading, notwithstanding that the Lender may have
had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
11.07 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this Loan
Agreement.
11.08 Counterparts. This Loan 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 Loan Agreement
by signing any such counterpart.
11.09 Loan Agreement Constitutes Security Agreement; Governing
Law. This Loan Agreement shall be governed by New York law without reference to
choice of law doctrine, and shall constitute a security agreement within the
meaning of the Uniform Commercial Code.
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11.10 Submission To Jurisdiction; Waivers. Each Loan Party
hereby irrevocably and unconditionally:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS
ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH
THE LENDER SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
11.11 WAIVER OF JURY TRIAL. EACH LOAN PARTY AND THE LENDER
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
11.12 Acknowledgments. Each Loan Party hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Loan Agreement, the Note and the other Loan
Documents;
(b) the Lender has no fiduciary relationship to any Loan
Party, and the relationship between the Loan Parties and the Lender is solely
that of debtor and creditor; and
(c) no joint venture exists between the Lender and any Loan
Party.
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11.13 Hypothecation or Pledge of Loans. The Lender shall have
free and unrestricted use of all Collateral and nothing in this Loan Agreement
shall preclude the Lender from engaging in repurchase transactions with the
Collateral or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrower.
11.14 Servicing.
(a) The Borrowers covenant to maintain or cause the servicing
of the Mortgage Loans to be maintained in conformity with accepted and prudent
servicing practices in the industry for the same type of mortgage loans as the
Mortgage Loans and in a manner at least equal in quality to the servicing the
Borrowers provide for mortgage loans which it owns. In the event that the
preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an Event of Default, (ii) the date on which all the Secured
Obligations have been paid in full or (iii) the transfer of servicing approved
by the Borrowers.
(b) If the Mortgage Loans are serviced by the Borrowers, (i)
the Borrowers agree that the Lender is the collateral assignee of all servicing
records, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Mortgage Loans (the "Servicing Records"), and (ii)
the Borrowers grant the Lender a security interest in all servicing fees and
rights relating to the Mortgage Loans and all Servicing Records to secure the
obligation of the Borrowers or their designees to service in conformity with
this Section and any other obligation of the Borrowers to the Lender. The
Borrowers covenant to safeguard such Servicing Records and to deliver them
promptly to the Lender or its designee (including the Custodian) at the Lender's
request.
(c) If the Mortgage Loans are serviced by a third party
servicer (such third party servicer, the "Servicer"), the Borrowers (i) shall
provide a copy of the servicing agreement to the Lender, which shall be in form
and substance acceptable to the Lender (the "Servicing Agreement"), and (ii)
shall provide a Servicer Notice to the Servicer substantially in the form of
Exhibit G hereto (a "Servicer Notice") and shall cause the Servicer to
acknowledge and agree to the same. Any successor or assignee of a Servicer shall
be approved in writing by the Lender and shall acknowledge and agree to a
Servicer Notice prior to such successor's assumption of servicing obligations
with respect to the Mortgage Loans.
(d) If the servicer of the Mortgage Loans is the Borrowers or
the Servicer is an Affiliate of the Borrowers, the Borrowers shall provide to
the Lender a letter from the Borrowers or the Servicer, as the case may be, to
the effect that upon the occurrence of an Event of Default, the Lender may
terminate any Servicing Agreement and in any event transfer servicing to the
Lender's designee, at no cost or expense to the Lender, it being agreed that the
Borrowers will pay any and all fees required to terminate the Servicing
Agreement and to effectuate the transfer of servicing to the designee of the
Lender.
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(e) After the Funding Date, until the pledge of any Mortgage
Loan is relinquished by the Custodian, the Borrowers will have no right to
modify or alter the terms of such Mortgage Loan and the Borrowers will have no
obligation or right to repossess such Mortgage Loan or substitute another
Mortgage Loan, except as provided in the Custodial Agreement.
(f) In the event the Borrowers or its Affiliate is servicing
the Mortgage Loans, the Borrowers shall permit the Lender from time to time,
with one (1) Business Day's notice, to inspect the Borrowers' or its Affiliate's
servicing facilities, as the case may be, for the purpose of satisfying the
Lender that the Borrowers or its Affiliate, as the case may be, has the ability
to service the Mortgage Loans as provided in this Loan Agreement.
11.15 Periodic Due Diligence Review. Each Loan Party
acknowledges that the Lender has the right to perform continuing due diligence
reviews with respect to the Mortgage Loans and the manner in which they were
originated, for purposes of verifying compliance with the representations,
warranties and specifications made hereunder, or otherwise, each Loan Party
agrees that upon reasonable (but no less than two (2) Business Days) prior
notice to the Loan Parties, the Lender or its authorized representatives will be
permitted during normal business hours to examine, inspect, and make copies and
extracts of, the Mortgage Files and any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession or
under the control of any Loan Party and/or the Custodian. The Loan Parties also
shall make available to the Lender a knowledgeable financial or accounting
officer for the purpose of answering questions respecting the Mortgage Files and
the Mortgage Loans. Without limiting the generality of the foregoing, each Loan
Party acknowledges that the Lender may make Loans to the Borrowers based solely
upon the information provided by the Loan Parties to the Lender in the Mortgage
Loan Tape and the representations, warranties and covenants contained herein,
and that the Lender, at its option, has the right at any time to conduct a
partial or complete due diligence review on some or all of the Mortgage Loans
securing such Loan, including without limitation ordering new credit reports and
new appraisals on the related Mortgaged Properties and otherwise re-generating
the information used to originate such Mortgage Loan. The Lender may underwrite
such Mortgage Loans itself or engage a mutually agreed upon third party
underwriter to perform such underwriting. Each Loan Party agrees to cooperate
with the Lender and any third party underwriter in connection with such
underwriting, including, but not limited to, providing the Lender and any third
party underwriter with access to any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession, or
under the control, of the Loan Parties. The Loan Parties further agree that the
Borrowers shall reimburse the Lender for any and all out-of-pocket costs and
expenses incurred by the Lender in connection with the Lender's activities
pursuant to this Section 11.15; provided that the Borrowers shall not be
responsible for such out-of-pocket costs and expenses in excess of $35,000
during any period of twelve consecutive calendar months.
11.16 Set-Off. In addition to any rights and remedies of the
Lender provided by this Loan Agreement and by law, the Lender shall have the
right, without prior notice to the Borrowers, any such notice being expressly
waived by the Borrowers to the extent permitted by applicable law, upon any
amount becoming due and payable by the Borrowers hereunder (whether at the
stated maturity, by acceleration or otherwise) to set-off and appropriate and
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apply against such amount any and all deposits (general or special, time or
demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Lender or any Affiliate thereof to or for the credit or the account
of the Borrowers. The Lender agrees promptly to notify the Borrowers after any
such set-off and application made by the Lender; provided that the failure to
give such notice shall not affect the validity of such set-off and application.
11.17 Intent. The parties recognize that each Loan is a
"securities contract" as that term is defined in Section 741 of Title 11 of the
United States Code, as amended.
11.18 Unsecuritized Mortgage Loans. At the Lender's
discretion, all mortgage Loans which remain part of the Borrowing Base following
any securitization transaction may, at the Lender's sole discretion, be 100%
re-underwritten.
11.19 Confidentiality. The Lender agrees to keep confidential
in accordance with such procedures as it normally applies to such information
all non-public information provided to it by each Loan Party pursuant to this
Agreement that is designated by such Loan Parties in writing as confidential;
provided that nothing herein shall prevent the Lender from disclosing any such
information (i) to its employees, directors, agents, attorneys, accountants and
other professional advisors, (ii) upon the request or demand of any examiner or
other Governmental Authority having jurisdiction over the Lender, (iii) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (iv) which has been
publicly disclosed other than in breach of this Agreement, or (v) in connection
with the exercise of any remedy hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed and delivered as of the day and year first above
written.
BORROWERS
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AMERICAN BUSINESS CREDIT, INC.
By:
----------------------------------
Name:
Title:
Address for Notices:
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▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
HOMEAMERICAN CREDIT, INC.,
d/b/a UPLAND MORTGAGE
By:
----------------------------------
Name:
Title:
Address for Notices:
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▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
AMERICAN BUSINESS MORTGAGE
SERVICES, INC., f/k/a NEW JERSEY
MORTGAGE AND INVESTMENT CORP.
By:
----------------------------------
Name:
Title:
Address for Notices:
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▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
GUARANTOR
---------
AMERICAN BUSINESS FINANCIAL
SERVICES, INC.
By:
----------------------------------
Name:
Title:
Address for Notices:
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▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
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LENDER
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
MORTGAGE CAPITAL INC.
By:
----------------------------------
Name:
Title:
Address for Notices:
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▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
-3-
Schedule 1
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Part I. Eligible Mortgage Loans
-----------------------
As to each Mortgage Loan included in the Borrowing Base on a
Funding Date (and the related Mortgage, Mortgage Note, Assignment of Mortgage
and Mortgaged Property), each Borrower shall be deemed to make the following
representations and warranties to the Lender as of such date and as of each date
Collateral Value is determined (certain defined terms used herein and not
otherwise defined in the Loan Agreement appearing in Part III to this Schedule
1):
(a) Mortgage Loans as Described. The information set forth in
the Mortgage Loan Schedule with respect to the Mortgage Loan is complete, true
and correct in all material respects.
(b) Payments Current. Except in the case of a Defaulted Loan
and to the extent contemplated by the definition of the applicable Class of
Defaulted Loan, all payments required to be made up to the Funding Date for the
Mortgage Loan under the terms of the Mortgage Note have been made and credited.
Except in the case of a Defaulted Loan, no payment required under the Mortgage
Loan is delinquent nor has any payment under the Mortgage Loan been delinquent
at any time since the origination of the Mortgage Loan. Except in the case of a
Defaulted Loan, the first Monthly Payment shall be made, or shall have been
made, with respect to the Mortgage Loan on its Due Date or within the grace
period, all in accordance with the terms of the related Mortgage Note.
(c) No Outstanding Charges. Except in the case of a Defaulted
Loan, there are no defaults in complying with the terms of the Mortgage securing
the Mortgage Loan, and all taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments or ground rents which
previously became due and owing have been paid, or an escrow of funds has been
established in an amount sufficient to pay for every such item which remains
unpaid and which has been assessed but is not yet due and payable. Neither the
Borrower nor the originator from which such Borrower acquired the Mortgage Loans
has advanced funds, or induced, solicited or knowingly received any advance of
funds by a party other than the Mortgagor, directly or indirectly, for the
payment of any amount required under the Mortgage Loan, except for interest
accruing from the date of the Mortgage Note or date of disbursement of the
proceeds of the Mortgage Loan, whichever is earlier, to the day which precedes
by one month the Due Date of the first installment of principal and interest
thereunder.
(d) Original Terms Unmodified. The terms of the Mortgage Note
and Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of origination; except by a written instrument which has been
recorded, if necessary, to protect the interests of the Lender, and which has
been delivered to the Custodian and the terms of which are reflected in the
Mortgage Loan Schedule. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required, and
its terms are reflected on the Mortgage Loan Schedule. No Mortgagor in respect
of the Mortgage Loan has been released, in whole or in part, except in
connection with an assumption agreement approved by the title insurer, to the
extent required by such policy, and which assumption agreement is part of the
Mortgage File delivered to the Custodian and the terms of which are reflected in
the Mortgage Loan Schedule.
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(e) No Defenses. The Mortgage Loan is not subject to any right
of rescission, set-off, counterclaim or defense, including without limitation
the defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor
in any state or Federal bankruptcy or insolvency proceeding at the time the
Mortgage Loan was originated. No Borrower has knowledge nor has it received any
notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any
state or federal bankruptcy or insolvency proceeding.
(f) Hazard Insurance. The Mortgaged Property is insured by a
fire and extended perils insurance policy, issued by a Qualified Insurer, and
such other hazards as are customary in the area where the Mortgaged Property is
located, and to the extent required by the Borrower as of the date of
origination consistent with the Underwriting Guidelines, against earthquake and
other risks insured against by Persons operating like properties in the locality
of the Mortgaged Property, in an amount required as of the date of origination
in accordance with the Underwriting Guidelines. If any portion of the Mortgaged
Property is in an area identified by any federal Governmental Authority as
having special flood hazards, and flood insurance is available, a flood
insurance policy meeting the current guidelines of the Federal Emergency
Management Agency is in effect with a generally acceptable insurance carrier, in
an amount representing coverage not less than the least of (1) the outstanding
principal balance of the Mortgage Loan, (2) the full insurable value of the
Mortgaged Property, and (3) the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended by the Flood Disaster
Protection Act of 1974. All such insurance policies (collectively, the "hazard
insurance policy") contain a standard mortgagee clause naming the applicable
Borrower, its successors and assigns (including without limitation, subsequent
owners of the Mortgage Loan), as mortgagee, and may not be reduced, terminated
or canceled without 30 days' prior written notice to the mortgagee. No such
notice has been received by the applicable Borrower. All premiums on such
insurance policy have been paid. The related Mortgage obligates the Mortgagor to
maintain all such insurance and, at such Mortgagor's failure to do so,
authorizes the mortgagee to maintain such insurance at the Mortgagor's cost and
expense and to seek reimbursement therefor from such Mortgagor. Where required
by state law or regulation, the Mortgagor has been given an opportunity to
choose the carrier of the required hazard insurance, provided the policy is not
a "master" or "blanket" hazard insurance policy covering a condominium, or any
hazard insurance policy covering the common facilities of a planned unit
development. The hazard insurance policy is the valid and binding obligation of
the insurer and is in full force and effect. No Borrowers have engaged in, and
no Borrowers have knowledge of the Mortgagor's having engaged in, any act or
omission which would impair the coverage of any such policy, the benefits of the
endorsement provided for herein, or the validity and binding effect of either
including, without limitation, no unlawful fee, commission, kickback or other
unlawful compensation or value of any kind has been or will be received,
retained or realized by any attorney, firm or other Person, and no such unlawful
items have been received, retained or realized by a Borrower.
1-2
(g) Compliance with Applicable Laws. Any and all requirements
of any federal, state or local law including, without limitation, laws with
respect to unfair and deceptive lending practices and predatory lending
practices, usury, truth-in-lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity or disclosure laws applicable to the
Mortgage Loan have been complied with, the consummation of the transactions
contemplated hereby will not involve the violation of any such laws or
regulations, and each Borrower shall maintain or shall cause its agent to
maintain in its possession, available for the inspection of the Lender, and
shall deliver to the Lender, upon demand, evidence of compliance with all such
requirements.
(h) No Satisfaction of Mortgage. The Mortgage has not been
satisfied, canceled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in whole
or in part, nor has any instrument been executed that would effect any such
release, cancellation, subordination or rescission. No Borrowers have waived the
performance by the Mortgagor of any action, if the Mortgagor's failure to
perform such action would cause the Mortgage Loan to be in default, nor has any
Borrower waived any default resulting from any action or inaction by the
Mortgagor.
(i) Location and Type of Mortgaged Property. The Mortgaged
Property is located in an Acceptable State as identified in the Mortgage Loan
Schedule and consists of a single parcel of real property with a detached single
family residence erected thereon, or a two- to four-family dwelling, or an
individual condominium unit in a low-rise condominium project, or, in New York,
New York only, an individual condominium unit in a high-rise condominium
project, or an individual unit in a planned unit development or a de minimis
planned unit development, provided, however, that any condominium unit or
planned unit development shall conform with the applicable FNMA and FHLMC
requirements regarding such dwellings and that no residence or dwelling is a
mobile home or a manufactured dwelling.
(j) Valid First or Second Lien. The Mortgage is a valid,
subsisting, enforceable and perfected first lien, in the case of a First Lien
Loan, or second lien, in the case of a Second Lien Loan, on the real property
included in the Mortgaged Property, including all buildings on the Mortgaged
Property and fixtures (as defined in the UCC), and all additions, alterations
and replacements made at any time with respect to the foregoing. The lien of the
Mortgage is subject only to:
(1) the lien of current real property taxes and assessments
not yet due and payable;
(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to prudent mortgage lending institutions generally
and specifically referred to in the lender's title insurance policy
delivered to the originator of the Mortgage Loan and (a) referred to or
otherwise considered in the appraisal made for the originator of the
Mortgage Loan or (b) which do not adversely affect the Appraised Value
of the Mortgaged Property set forth in such appraisal;
1-3
(3) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment,
value or marketability of the related Mortgaged Property;
(4) in the case of a Second Lien Loan, the lien of the related
primary mortgage.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan, other than with respect to
Second Lien Loans, establishes and creates a valid, subsisting and enforceable
first lien and first priority security interest on the property described
therein and each Borrower has full right to pledge and assign the same to the
Lender.
(k) Validity of Mortgage Documents. The Mortgage Note and the
Mortgage and any other agreement executed and delivered by a Mortgagor or
guarantor, if applicable, in connection with a Mortgage Loan are genuine, and
each is the legal, valid and binding obligation of the maker thereof enforceable
in accordance with its terms. All parties to the Mortgage Note, the Mortgage and
any other such related agreement had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note, the Mortgage and any such
agreement, and the Mortgage Note, the Mortgage and any other such related
agreement have been duly and properly executed by such related parties. No
fraud, error, omission, misrepresentation, negligence or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any Person, including,
without limitation, the Mortgagor, any appraiser, any builder or developer, or
any other party involved in the origination of the Mortgage Loan. The Borrower
has reviewed all of the documents constituting the Servicing File and has made
such inquiries as it deems necessary to make and confirm the accuracy of the
representations set forth herein.
(l) Full Disbursement of Proceeds. The Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully disbursed and there
is no further requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds other than for escrows for taxes and other
funds typically escrowed therefor have been complied with. All costs, fees and
expenses incurred in making or closing the Mortgage Loan and the recording of
the Mortgage were paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage.
(m) Ownership. Each Borrower is the sole owner and holder of
the Mortgage Loan. The Mortgage Loan is not assigned or pledged, and each
Borrower has good, indefeasible and marketable title thereto, and has full right
to transfer, pledge and assign the Mortgage Loan to the Lender free and clear of
any encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest, and has full right and authority subject to no interest or
participation of, or agreement with, any other party, to assign, transfer and
pledge each Mortgage Loan pursuant to this Loan Agreement and following the
pledge of each Mortgage Loan, the Lender will hold such Mortgage Loan free and
clear of any encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest except any such security interest created pursuant to
the terms of this Loan Agreement.
1-4
(n) Doing Business. All parties which have had any interest in
the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are
(or, during the period in which they held and disposed of such interest, were)
(i) in compliance with any and all applicable licensing requirements of the laws
of the state wherein the Mortgaged Property is located, and (ii) either (A)
organized under the laws of such state, (B) qualified to do business in such
state, (C) a federal savings and loan association, a savings bank or a national
bank having a principal office in such state, or (D) not doing business in such
state.
(o) LTV. No Mortgage Loan which is a First Lien Loan has an
LTV greater than 90%. No Mortgage Loan which is a Second Lien Loan has a
combined LTV greater than 100% (determined by taking the sum of the unpaid
principal balance of the first mortgage loan on the related Mortgaged Property
and the unpaid principal balance of the Second Lien Loan and treating such
amount as the amount of the Mortgage Loan).
(p) Title Insurance. The Mortgage Loan is covered by either
(i) an attorney's opinion of title and abstract of title, the form and substance
of which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC and each such title insurance policy is
issued by a title insurer acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
each Borrower, its successors and assigns, as to the first priority lien of the
Mortgage in the original principal amount of the Mortgage Loan (or to the extent
a Mortgage Note provides for negative amortization, the maximum amount of
negative amortization in accordance with the Mortgage), subject only to the
exceptions contained in clauses (1), (2) and (3) of paragraph (j) of this Part I
of Schedule 1, and in the case of adjustable rate Mortgage Loans, against any
loss by reason of the invalidity or unenforceability of the lien resulting from
the provisions of the Mortgage providing for adjustment to the Mortgage Interest
Rate and Monthly Payment. Where required by state law or regulation, the
Mortgagor has been given the opportunity to choose the carrier of the required
mortgage title insurance. Additionally, such lender's title insurance policy
affirmatively insures ingress and egress and against encroachments by or upon
the Mortgaged Property or any interest therein. The title policy does not
contain any special exceptions (other than the standard exclusions) for zoning
and uses and has been marked to delete the standard survey exception or to
replace the standard survey exception with a specific survey reading. Each
Borrower, its successors and assigns, are the sole insureds of such lender's
title insurance policy, and such lender's title insurance policy is valid and
remains in full force and effect and will be in force and effect upon the
consummation of the transactions contemplated by this Loan Agreement. No claims
have been made under such lender's title insurance policy, and no prior holder
or servicer of the related Mortgage, including each Borrower, has done, by act
or omission, anything which would impair the coverage of such lender's title
insurance policy, including, without limitation, no unlawful fee, commission,
kickback or other unlawful compensation or value of any kind has been or will be
received, retained or realized by any attorney, firm or other Person, and no
such unlawful items have been received, retained or realized by either Borrower.
1-5
(q) No Defaults. There is no default, breach, violation or
event of acceleration existing under the Mortgage or the Mortgage Note and no
event has occurred which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration, and no Borrower nor its predecessors have
waived any default, breach, violation or event of acceleration.
(r) No Mechanics' Liens. There are no mechanics' or similar
liens or claims which have been filed for work, labor or material (and no rights
are outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage.
(s) Location of Improvements; No Encroachments. All
improvements which were considered in determining the Appraised Value of the
Mortgaged Property lie wholly within the boundaries and building restriction
lines of the Mortgaged Property, and no improvements on adjoining properties
encroach upon the Mortgaged Property. No improvement located on or being part of
the Mortgaged Property is in violation of any applicable zoning and building
law, ordinance or regulation.
(t) Origination; Payment Terms. The Mortgage Loan was
originated by or in conjunction with a mortgagee approved by the Secretary of
Housing and Urban Development pursuant to Sections 203 and 211 of the National
Housing Act, a savings and loan association, a savings bank, a commercial bank,
credit union, insurance company or similar banking institution which is
supervised and examined by a federal or state authority. Principal payments on
the Mortgage Loan commenced no more than 60 days after funds were disbursed in
connection with the Mortgage Loan. The Mortgage Interest Rate is adjusted, with
respect to adjustable rate Mortgage Loans, on each Interest Rate Adjustment Date
to equal the Index plus the Gross Margin (rounded up or down to the nearest
.125%), subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable
on the first day of each month in equal monthly installments of principal and
interest, which installments of interest, with respect to adjustable rate
Mortgage Loans, are subject to change due to the adjustments to the Mortgage
Interest Rate on each Interest Rate Adjustment Date, with interest calculated
and payable in arrears, sufficient to amortize the Mortgage Loan fully by the
stated maturity date, over an original term of not more than 30 years from
commencement of amortization. The due date of the first payment under the
Mortgage Note is no more than 60 days from the date of the Mortgage Note.
(u) Customary Provisions. The Mortgage Note has a stated
maturity. The Mortgage contains customary and enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including, (i) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. Upon
default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee's sale
of, the Mortgaged Property pursuant to the proper procedures, the holder of the
Mortgage Loan will be able to deliver good and merchantable title to the
Mortgaged Property. There is no homestead or other exemption available to a
Mortgagor which would interfere with the right to sell the Mortgaged Property at
a trustee's sale or the right to foreclose the Mortgage.
1-6
(v) Conformance with Underwriting Guidelines and Agency
Standards. The Mortgage Loan was underwritten in accordance with the
Underwriting Guidelines. The Mortgage Note and Mortgage are on forms similar to
those used by FHLMC or FNMA and no Borrower has made any representations to a
Mortgagor that are inconsistent with the mortgage instruments used.
(w) Occupancy of the Mortgaged Property. As of the Funding
Date the Mortgaged Property is lawfully occupied under applicable law. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities. No Borrower has received notification from any
Governmental Authority that the Mortgaged Property is in material non-compliance
with such laws or regulations, is being used, operated or occupied unlawfully or
has failed to have or obtain such inspection, licenses or certificates, as the
case may be. No Borrower has received notice of any violation or failure to
conform with any such law, ordinance, regulation, standard, license or
certificate and the Mortgagor represented at the time of origination of the
Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence.
(x) No Additional Collateral. The Mortgage Note is not and has
not been secured by any collateral except the lien of the corresponding Mortgage
and the security interest of any applicable security agreement or chattel
mortgage referred to in clause (j) above.
(y) Deeds of Trust. In the event the Mortgage constitutes a
deed of trust, a trustee, authorized and duly qualified under applicable law to
serve as such, has been properly designated and currently so serves and is named
in the Mortgage, and no fees or expenses are or will become payable by the
Custodian or the Lender to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor.
(z) Delivery of Mortgage Documents. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other documents required to be
delivered under the Custodial Agreement for each Mortgage Loan have been
delivered to the Custodian. Each Borrower or its agent is in possession of a
complete, true and accurate Mortgage File in compliance with the Custodial
Agreement, except for such documents the originals of which have been delivered
to the Custodian.
(aa) Transfer of Mortgage Loans. The Assignment of Mortgage is
in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
(bb) Due-On-Sale. The Mortgage contains an enforceable
provision for the acceleration of the payment of the unpaid principal balance of
the Mortgage Loan in the event that the Mortgaged Property is sold or
transferred without the prior written consent of the mortgagee thereunder.
1-7
(cc) No Buydown Provisions; No Graduated Payments or
Contingent Interests. The Mortgage Loan does not contain provisions pursuant to
which Monthly Payments are paid or partially paid with funds deposited in any
separate account established by the Borrower, the Mortgagor, or anyone on behalf
of the Mortgagor, or paid by any source other than the Mortgagor nor does it
contain any other similar provisions which may constitute a "buydown" provision.
The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature.
(dd) Consolidation of Future Advances. Any future advances
made to the Mortgagor prior to the Funding Date have been consolidated with the
outstanding principal amount secured by the Mortgage, and the secured principal
amount, as consolidated, bears a single interest rate and single repayment term.
The lien of the Mortgage securing the consolidated principal amount is expressly
insured as having first lien priority by a title insurance policy, an
endorsement to the policy insuring the mortgagee's consolidated interest or by
other title evidence acceptable to FNMA and FHLMC. The consolidated principal
amount does not exceed the original principal amount of the Mortgage Loan.
(ee) Mortgaged Property Undamaged. The Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect adversely the value of the Mortgaged
Property as security for the Mortgage Loan or the use for which the premises
were intended and each Mortgaged Property is in good repair. There have not been
any condemnation proceedings with respect to the Mortgaged Property and no
Borrower has knowledge of any such proceedings.
(ff) Collection Practices; Escrow Deposits; Interest Rate
Adjustments. The origination and collection practices used by the originator,
each servicer of the Mortgage Loan and each Borrower with respect to the
Mortgage Loan have been in all respects in compliance with Accepted Servicing
Practices, applicable laws and regulations, and have been in all respects legal
and proper. With respect to escrow deposits and Escrow Payments, all such
payments are in the possession of, or under the control of, each Borrower and
there exists no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. All Escrow Payments have
been collected in full compliance with state and federal law. An escrow of funds
is not prohibited by applicable law and has been established in an amount
sufficient to pay for every item that remains unpaid and has been assessed but
is not yet due and payable. No escrow deposits or Escrow Payments or other
charges or payments due to any Borrower have been capitalized under the Mortgage
or the Mortgage Note. All Mortgage Interest Rate adjustments have been made in
strict compliance with state and federal law and the terms of the related
Mortgage Note. Any interest required to be paid pursuant to state, federal and
local law has been properly paid and credited.
(gg) Conversion to Fixed Interest Rate. With respect to
adjustable rate Mortgage Loans, the Mortgage Loan is not convertible to a fixed
interest rate Mortgage Loan.
(hh) Other Insurance Policies. No action, inaction or event
has occurred and no state of facts exists or has existed that has resulted or
will result in the exclusion from, denial of, or defense to coverage under any
applicable special hazard insurance policy, PMI Policy or bankruptcy bond,
irrespective of the cause of such failure of coverage. In connection with the
placement of any such insurance, no commission, fee, or other compensation has
been or will be received by any Borrower or by any officer, director, or
employee of such Borrower or any designee of such Borrower or any corporation in
which such Borrower or any officer, director, or employee had a financial
interest at the time of placement of such insurance.
1-8
(ii) Soldiers' and Sailors' Civil Relief Act. The Mortgagor
has not notified any Borrower, and no Borrower has knowledge, of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940.
(jj) Appraisal. The Mortgage File contains an appraisal of the
related Mortgaged Property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, duly appointed by each Borrower, who had
no interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof, and whose compensation is not affected by the approval or
disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy
the requirements of FNMA or FHLMC and Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 as amended and the regulations
promulgated thereunder, all as in effect on the date the Mortgage Loan was
originated.
(kk) Disclosure Materials. The Mortgagor has executed a
statement to the effect that the Mortgagor has received all disclosure materials
required by applicable law with respect to the making of adjustable rate
mortgage loans, and each Borrower maintains such statement in the Mortgage File.
(ll) Construction or Rehabilitation of Mortgaged Property. No
Mortgage Loan was made in connection with the construction or rehabilitation of
a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged
Property.
(mm) No Defense to Insurance Coverage. No action has been
taken or failed to be taken, no event has occurred and no state of facts exists
or has existed on or prior to the Funding Date (whether or not known to each
Borrower on or prior to such date) which has resulted or will result in an
exclusion from, denial of, or defense to coverage under any private mortgage
insurance (including, without limitation, any exclusions, denials or defenses
which would limit or reduce the availability of the timely payment of the full
amount of the loss otherwise due thereunder to the insured) whether arising out
of actions, representations, errors, omissions, negligence, or fraud of any
Borrower, the related Mortgagor or any party involved in the application for
such coverage, including the appraisal, plans and specifications and other
exhibits or documents submitted therewith to the insurer under such insurance
policy, or for any other reason under such coverage, but not including the
failure of such insurer to pay by reason of such insurer's breach of such
insurance policy or such insurer's financial inability to pay.
(nn) Capitalization of Interest. The Mortgage Note does not by
its terms provide for the capitalization or forbearance of interest.
(oo) No Equity Participation. No document relating to the
Mortgage Loan provides for any contingent or additional interest in the form of
participation in the cash flow of the Mortgaged Property or a sharing in the
appreciation of the value of the Mortgaged Property. The indebtedness evidenced
by the Mortgage Note is not convertible to an ownership interest in the
Mortgaged Property or the Mortgagor and no Borrower has financed nor does any
Borrower own directly or indirectly, any equity of any form in the Mortgaged
Property or the Mortgagor.
1-9
(pp) Withdrawn Mortgage Loans. If the Mortgage Loan has been
released to a Borrower pursuant to a Request for Release as permitted under
Section 5 of the Custodial Agreement, then the promissory note relating to the
Mortgage Loan was returned to the Custodian within 10 days (or if such tenth day
was not a Business Day, the next succeeding Business Day).
(qq) Origination Date. The Origination Date is no earlier than
nine months prior to the date the Mortgage Loan is first included in the
Borrowing Base.
(rr) No Exception. The Custodian has not noted any material
exceptions on an Exception Report (as defined in the Custodial Agreement) with
respect to the Mortgage Loan which would materially adversely affect the
Mortgage Loan or the Lender's security interest, granted by any Borrower, in the
Mortgage Loan.
(ss) Mortgage Submitted for Recordation. The Mortgage either
has been or will promptly be submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property
is located.
(tt) ▇▇▇▇▇▇ Act. None of the Mortgage Loans are classified as
"high cost" loans under the Home Ownership and Equity Protection Act of 1994.
1-10
Part II. Defined Terms
-------------
In addition to terms defined elsewhere in the Loan Agreement,
the following terms shall have the following meanings when used in this Schedule
1:
"Acceptable State" shall mean any state notified by the
Borrowers to the Lender from time to time and approved in writing by the Lender,
which approval has not been revoked by the Lender in their sole discretion, any
such notice of revocation to be given no later than 10 Business Days prior to
its intended effective date.
"Accepted Servicing Practices" shall mean, with respect to any
Mortgage Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loans in the jurisdiction where the related Mortgaged Property is located.
"ALTA" means the American Land Title Association.
"Appraised Value" shall mean the value set forth in an
appraisal made in connection with the origination of the related Mortgage Loan
as the value of the Mortgaged Property.
"Best's" means Best's Key Rating Guide, as the same shall be
amended from time to time.
"Due Date" means the day of the month on which the Monthly
Payment is due on a Mortgage Loan, exclusive of any days of grace.
"Escrow Payments" means with respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or
any successor thereto.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"Gross Margin" means with respect to each adjustable rate
Mortgage Loan, the fixed percentage amount set forth in the related Mortgage
Note.
"Ground Lease" means a lease for all or any portion of the
real property comprising the Mortgaged Property, the lessee's interest in which
is held by the Mortgagor of the related Mortgage Loan.
1-11
"Index" means with respect to each adjustable rate Mortgage
Loan, the index set forth in the related Mortgage Note for the purpose of
calculating the interest rate thereon.
"Insurance Proceeds" means with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
"Interest Rate Adjustment Date" means with respect to each
adjustable rate Mortgage Loan, the date, specified in the related Mortgage Note
and the Mortgage Loan Schedule, on which the Mortgage Interest Rate is adjusted.
"Loan-to-Value Ratio" or "LTV" means with respect to any
Mortgage Loan, the ratio of the original outstanding principal amount of the
Mortgage Loan to the lesser of (a) the Appraised Value of the Mortgaged Property
at origination or (b) if the Mortgaged Property was purchased within 12 months
of the origination of the Mortgage Loan, the purchase price of the Mortgaged
Property.
"Monthly Payment" means the scheduled monthly payment of
principal and interest on a Mortgage Loan as adjusted in accordance with changes
in the Mortgage Interest Rate pursuant to the provisions of the Mortgage Note
for an adjustable rate Mortgage Loan.
"Mortgage Interest Rate" means the annual rate of interest
borne on a Mortgage Note, which shall be adjusted from time to time with respect
to adjustable rate Mortgage Loans.
"Mortgage Interest Rate Cap" means with respect to an
adjustable rate Mortgage Loan, the limit on each Mortgage Interest Rate
adjustment as set forth in the related Mortgage Note.
"Mortgagee" means a Borrower or any subsequent holder of a
Mortgage Loan.
"Origination Date" shall mean, with respect to each Mortgage
Loan, the date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by a Borrower with respect to such Mortgage Loan, in
which case the Origination Date shall be deemed to be the date that is 40 days
prior to the date of the first payment under the Mortgage Note relating to such
Mortgage Loan.
"PMI Policy" or "Primary Insurance Policy" means a policy of
primary mortgage guaranty insurance issued by a Qualified Insurer.
"Qualified Insurer" means an insurance company duly qualified
as such under the laws of the states in which the Mortgaged Property is located,
duly authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and approved as an insurer by FNMA
and FHLMC and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best's with respect to
hazard and flood insurance.
1-12
"Servicing File" means with respect to each Mortgage Loan, the
file retained by a Borrower consisting of originals of all documents in the
Mortgage File which are not delivered to a Custodian and copies of the Mortgage
Loan Documents set forth in Section 2 of the Custodial Agreement.
"Underwriting Guidelines" means the underwriting guidelines
attached as Exhibit E hereto.
1-13
Schedule 2
FILING JURISDICTIONS AND OFFICES
[TO BE PROVIDED BY COUNSEL TO BORROWER]
2-1
Schedule 3
SUBSIDIARIES
3-1
EXHIBIT A
[FORM OF PROMISSORY NOTE]
$200,000,000.00 January 22, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
FOR VALUE RECEIVED, AMERICAN BUSINESS CREDIT, INC. ("ABC"), a
Pennsylvania corporation, HOMEAMERICAN CREDIT, INC., d/b/a UPLAND MORTGAGE
("UPLAND"), a Pennsylvania corporation, and AMERICAN BUSINESS MORTGAGE SERVICES,
INC., f/k/a NEW JERSEY MORTGAGE AND INVESTMENT CORP. ("ABMS"), a New Jersey
corporation (each a "Borrower"; collectively the "Borrowers"), hereby promises
to pay, jointly and severally, to the order of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
MORTGAGE CAPITAL INC. (the "Lender"), at the principal office of the Lender at
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, in lawful money of the United States,
and in immediately available funds, the principal sum of TWO HUNDRED MILLION
DOLLARS ($200,000,000.00) (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Loans made by the Lender to the Borrowers under
the Loan Agreement), on the dates and in the principal amounts provided in the
Loan Agreement, and to pay , jointly and severally, interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Loan Agreement.
The date, amount and interest rate of each Loan made by the
Lender to the Borrowers, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof; provided, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrowers to
make a payment when due of any amount owing under the Loan Agreement or
hereunder in respect of the Loans made by the Lender.
This Note is the Note referred to in the Master Loan and
Security Agreement dated as of January 22, 2001 (as amended, supplemented or
otherwise modified and in effect from time to time, the "Loan Agreement")
between the Borrowers, American Business Financial Services, Inc., as Guarantor
and the Lender, and evidences Loans made by the Lender thereunder. Terms used
but not defined in this Note have the respective meanings assigned to them in
the Loan Agreement.
The Borrowers agree to pay, jointly and severaly, all the
Lender's costs of collection and enforcement (including reasonable attorneys'
fees and disbursements of Lender's counsel) in respect of this Note when
incurred, including, without limitation, reasonable attorneys' fees through
appellate proceedings.
Notwithstanding the pledge of the Collateral, the Borrowers
hereby acknowledge, admit and agree that the Borrowers' obligations under this
Note are recourse obligations of the Borrowers to which the Borrowers pledge
their full faith and credit.
A-1
The Borrowers, and any indorsers or guarantors hereof, (a)
severally waive diligence, presentment, protest and demand and also notice of
protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that
this Note, or any payment hereunder, may be extended from time to time, and
consent to the acceptance of further Collateral, the release of any Collateral
for this Note, the release of any party primarily or secondarily liable hereon,
and (c) expressly agree that it will not be necessary for the Lender, in order
to enforce payment of this Note, to first institute or exhaust the Lender's
remedies against the Borrowers or any other party liable hereon or against any
Collateral for this Note. No extension of time for the payment of this Note, or
any installment hereof, made by agreement by the Lender with any person now or
hereafter liable for the payment of this Note, shall affect the liability under
this Note of the Borrowers, even if the Borrowers are not a party to such
agreement; provided, however, that the Lender and the Borrowers, by written
agreement between them, may affect the liability of the Borrowers.
Any reference herein to the Lender shall be deemed to include
and apply to every subsequent holder of this Note. Reference is made to the Loan
Agreement for provisions concerning optional and mandatory prepayments,
Collateral, acceleration and other material terms affecting this Note.
This Note shall be governed by and construed under the laws of
the State of New York (without reference to choice of law doctrine) whose laws
the Borrowers expressly elect to apply to this Note. The Borrowers agree that
any action or proceeding brought to enforce or arising out of this Note may be
commenced in the Supreme Court of the State of New York, Borough of Manhattan,
or in the District Court of the United States for the Southern District of New
York.
AMERICAN BUSINESS CREDIT, INC.
By:
-----------------------------------
Name:
Title:
HOMEAMERICAN CREDIT, INC., d/b/a
UPLAND MORTGAGE
By:
-----------------------------------
Name:
Title:
AMERICAN BUSINESS MORTGAGE
SERVICES, INC., f/k/a NEW JERSEY
MORTGAGE AND INVESTMENT CORP.
By:
-----------------------------------
Name:
Title:
A-2
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Loan
Agreement to the Borrowers, on the dates, in the principal amounts and bearing
interest at the rates set forth below, and subject to the payments and
prepayments of principal set forth below:
Principal Amount Interest Amount Paid Unpaid Principal Notation
Date Made of Loan Rate or Prepaid Amount Made by
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A-3
EXHIBIT B
[FORM OF CUSTODIAL AGREEMENT]
[STORED AS A SEPARATE DOCUMENT]
B-1
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO BORROWERS]
(date)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
You have requested [our] [my] opinion, as counsel to AMERICAN
BUSINESS CREDIT, INC. ("ABC"), a Pennsylvania corporation, HOMEAMERICAN CREDIT,
INC., d/b/a UPLAND MORTGAGE ("UPLAND"), a Pennsylvania corporation, and AMERICAN
BUSINESS MORTGAGE SERVICES, INC., f/k/a NEW JERSEY MORTGAGE AND INVESTMENT CORP.
("ABMS"), a New Jersey corporation (each a "Borrower"; collectively the
"Borrowers"), with respect to certain matters in connection with that certain
Master Loan and Security Agreement, dated January 22, 2001 (the "Loan and
Security Agreement"), by and between the Borrowers, AMERICAN BUSINESS FINANCIAL
SERVICES, INC., a Delaware corporation (the "Guarantor") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ MORTGAGE CAPITAL INC., a New York corporation (the "Lender")., being
executed contemporaneously with a Promissory Note, dated January 22, 2001, from
the Borrowers to the Lender (the "Note"), a Custodial Agreement, dated as of
January 22, 2001, (the "Custodial Agreement"), by and among the Borrower and The
Chase Manhattan Bank (the "Custodian"), and the Lender. Capitalized terms not
otherwise defined herein have the meanings set forth in the Loan and Security
Agreement.
[We] [I] have examined the following documents:
1. the Loan and Security Agreement;
2. the Note;
3. Custodial Agreement;
4. unfiled copies of the financing statements listed on
Schedule 1 (collectively, the "Financing Statements") naming the Borrower as
Debtor and the Lender as Secured Party and describing the Collateral (as defined
in the Loan and Security Agreement) as to which security interests may be
perfected by filing under the Uniform Commercial Code of the States listed on
Schedule 1 (the "Filing Collateral"), which [we][I] understand will be filed in
the filing offices listed on Schedule 1 (the "Filing Offices");
5. the reports listed on Schedule 2 as to UCC financing
statements (collectively, the "UCC Search Report");
C-1
6. such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
To the extent [we] [I] have deemed necessary and proper, [we]
[I] have relied upon the representations and warranties of each Borrower
contained in the Loan and Security Agreement. [We] [I] have assumed the
authenticity of all documents submitted to [us][me] as originals, the
genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents submitted to [us][me] as originals.
Based upon the foregoing, it is [our] [my] opinion that:
1. Each Borrower is a [________ corporation] duly organized,
validly existing and in good standing under the laws of [state] and is qualified
to transact business in, and is in good standing under, the laws of the [state].
2. Each Borrower has the corporate power to engage in the
transactions contemplated by the Loan and Security Agreement, the Note, and the
Custodial Agreement and all requisite corporate power, authority and legal right
to execute and deliver the Loan and Security Agreement, the Note, and the
Custodial Agreement and observe the terms and conditions of such instruments.
Each Borrower has all requisite corporate power to borrow under the Loan and
Security Agreement and to grant a security interest in the Collateral under the
Loan and Security Agreement.
3. The execution, delivery and performance by each Borrower of
the Loan and Security Agreement, the Note, and the Custodial Agreement, and the
borrowings by the Borrower and the pledge of the Collateral under the Loan and
Security Agreement have been duly authorized by all necessary corporate action
on the part of such Borrower. Each of the Loan and Security Agreement, the Note
and the Custodial Agreement have been executed and delivered by each Borrower
and are legal, valid and binding agreements enforceable in accordance with their
respective terms against such Borrower, subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject to
the application of the rules of equity, including those respecting the
availability of specific performance, none of which will materially interfere
with the realization of the benefits provided thereunder or with the Lender's
security interest in the Collateral.
4. No consent, approval, authorization or order of, and no
filing or registration with, any court or governmental agency or regulatory body
is required on the part of any Borrower for the execution, delivery or
performance by such Borrower of the Loan and Security Agreement, the Note and
the Custodial Agreement or for the borrowings by such Borrower under the Loan
and Security Agreement or the granting of a security interest to the Lender in
the Collateral, under the Loan and Security Agreement.
5. The execution, delivery and performance by each Borrower
of, and the consummation of the transactions contemplated by, the Loan and
Security Agreement, the Note and the Custodial Agreement do not and will not (a)
violate any provision of such Borrower's charter or by-laws, (b) violate any
applicable law, rule or regulation, (c) violate any order, writ, injunction or
decree of any court or governmental authority or agency or any arbitral award
C-2
applicable to such Borrower of which I have knowledge (after due inquiry) or (d)
result in a breach of, constitute a default under, require any consent under, or
result in the acceleration or required prepayment of any indebtedness pursuant
to the terms of, any agreement or instrument of which [we][I] have knowledge
(after due inquiry) to which such Borrower is a party or by which it is bound or
to which it is subject, or (except for the Liens created pursuant to the Loan
and Security Agreement) result in the creation or imposition of any Lien upon
any Property of such Borrower pursuant to the terms of any such agreement or
instrument.
6. There is no action, suit, proceeding or investigation
pending or, to the best of [our] [my] knowledge, threatened against any Borrower
which, in [our] [my] judgment, either in any one instance or in the aggregate,
would be reasonably likely to result in any material adverse change in the
properties, business or financial condition, or prospects of such Borrower or in
any material impairment of the right or ability of such Borrower to carry on its
business substantially as now conducted or in any material liability on the part
of such Borrower or which would draw into question the validity of the Loan and
Security Agreement, the Note, the Custodial Agreement or the Mortgage Loans or
of any action taken or to be taken in connection with the transactions
contemplated thereby, or which would be reasonably likely to impair materially
the ability of such Borrower to perform under the terms of the Loan and Security
Agreement, the Note, the Custodial Agreement or the Mortgage Loans.
7. The Loan and Security Agreement is effective to create, in
favor of the Lender, a valid security interest under the Uniform Commercial Code
in all of the right, title and interest of each Borrower in, to and under the
Collateral as collateral security for the payment of the Secured Obligations (as
defined in the Loan and Security Agreement), except that (a) such security
interests will continue in Collateral after its sale, exchange or other
disposition only to the extent provided in Section 9-306 of the Uniform
Commercial Code, and (b) the security interests in Collateral in which such
Borrower acquires rights after the commencement of a case under the Bankruptcy
Code in respect of the Borrower may be limited by Section 552 of the Bankruptcy
Code.
8. When the Mortgage Notes are delivered to the Custodian,
endorsed in blank by a duly authorized officer of the Borrower, the security
interest referred to in paragraph 7 above in the Mortgage Notes will constitute
a fully perfected first priority security interest in all right, title and
interest of the Borrower therein, in the Mortgage Loan evidenced thereby and in
the Borrower's interest in the related Mortgaged Property.
9. (a) Upon the filing of financing statements on Form UCC-1
naming the Lender as "Secured Party" and each Borrower as "Debtor", and
describing the Collateral, in the jurisdictions and recording offices listed on
Schedule 1 attached hereto, the security interests referred to in paragraph 7
above will constitute fully perfected security interests under the Uniform
Commercial Code in all right, title and interest of such Borrower in, to and
under such Collateral, which can be perfected by filing under the Uniform
Commercial Code.
(b) The UCC Search Report sets forth the proper filing offices
and the proper debtors necessary to identify those Persons who have on file in
the jurisdictions listed on Schedule 1 financing statements covering the Filing
Collateral as of the dates and times specified on Schedule 2. The UCC Search
Report identifies no Person who has filed in any Filing Office a financing
statement describing the Filing Collateral prior to the effective dates of the
UCC Search Report.
C-3
10 The Assignments of Mortgage are in recordable form, except
for the insertion of the name of the assignee, and upon the name of the assignee
being inserted, are acceptable for recording under the laws of the state where
each related Mortgaged Property is located.
11. No Borrower is an "investment company", or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
Very truly yours,
C-4
EXHIBIT D
[FORM OF REQUEST FOR BORROWING]
Master Loan and Security Agreement, dated as of January 22,
2001 (the "Loan and Security Agreement"), by and between the Borrowers,
Guarantor and the Lender,
Lender: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ MORTGAGE
CAPITAL INC.
Borrowers AMERICAN BUSINESS CREDIT, INC.,
HOMEAMERICAN CREDIT, INC., d/b/a UPLAND
MORTGAGE, and AMERICAN BUSINESS
MORTGAGE SERVICES, INC., f/k/a NEW JERSEY
MORTGAGE AND INVESTMENT CORP.
Guarantor: AMERICAN BUSINESS FINANCIAL SERVICES, INC.
Requested Fund Date: ______________________________
Transmission Date: ______________________________
Transmission Time:
[Type of Funding:
(Wet or Dry) ______________________________]
[Type of Loan Requested:
(Committed or Uncommitted) ______________________________]
Mortgage
Loans to be Pledged: See Attached
UPB: $_____________________________
Requested Wire Amount: $_____________________________
Wire Instructions:
Requested by:
D-1
AMERICAN BUSINESS CREDIT, INC.
By:
------------------------------------
Name:
Title:
HOMEAMERICAN CREDIT, INC.,
d/b/a UPLAND MORTGAGE
By:
------------------------------------
Name:
Title:
AMERICAN BUSINESS MORTGAGE
SERVICES, INC., f/k/a NEW JERSEY
MORTGAGE AND INVESTMENT CORP.
By:
------------------------------------
Name:
Title:
D-2
Attachment 1
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SCHEDULE OF ELIGIBLE MORTGAGE LOANS PROPOSED TO BE PLEDGED
D-3
Attachment 2
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OFFICER'S CERTIFICATE
The undersigned hereby certifies to the Lender on behalf of
the Borrower, as of the requested Funding Date, that:
(a) no Default or Event of Default has occurred and is
continuing on the date hereof nor will occur after giving effect to such Loan as
a result of such Loan;
(b) each of the representations and warranties made by such
Borrower in or pursuant to the Loan Documents is true and correct in all
material respects on and as of such date (in the case of the representations and
warranties in respect of Leases, solely with respect to Leases being included
the Borrowing Base on such Funding Date) as if made on and as of the date hereof
(or, if any such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date); and
(c) such Borrower is in compliance with all governmental
licenses and authorizations and is qualified to do business and in good standing
in all required jurisdictions.
Responsible Officer Certification:
By:
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Name:
Title:
D-4
EXHIBIT E-1
[FORM OF BORROWER'S RELEASE LETTER]
[Date]
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
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Facsimile:
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Re: Master Loan and Security Agreement, dated as of January 22,
2001 (the "Loan and Security Agreement"), by and between
AMERICAN BUSINESS CREDIT, INC. ("ABC"), a Pennsylvania
corporation, HOMEAMERICAN CREDIT, INC., d/b/a UPLAND MORTGAGE
("UPLAND"), a Pennsylvania corporation, and AMERICAN BUSINESS
MORTGAGE SERVICES, INC., f/k/a NEW JERSEY MORTGAGE AND
INVESTMENT CORP. ("ABMS"), a New Jersey corporation (each a
"Borrower"; collectively the "Borrowers"), AMERICAN BUSINESS
FINANCIAL SERVICES, INC., a Delaware corporation (the
"Guarantor") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ MORTGAGE CAPITAL
INC., a New York corporation (the "Lender").
Ladies and Gentlemen:
With respect to the mortgage loans described in the attached
Schedule A (the "Mortgage Loans") (a) we hereby certify to you that the Mortgage
Loans are not subject to a lien of any third party and (b) we hereby release all
right, interest or claim of any kind with respect to such Mortgage Loans, such
release to be effective automatically without further action by any party upon
payment from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Mortgage Capital Inc., of the amount of
the Loan contemplated under the Loan and Security Agreement (calculated in
accordance with the terms thereof) in accordance with the wiring instructions
set forth in the Loan and Security Agreement.
Very truly yours,
[SELLER]
By:
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Name:
Title:
E-1-1
EXHIBIT E-2
[FORM OF WAREHOUSE LENDER'S RELEASE LETTER]
(Date)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Mortgage Capital Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
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Facsimile:
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Re: Certain Mortgage Loans Identified on Schedule A hereto and
owned by AMERICAN BUSINESS CREDIT, INC., HOMEAMERICAN CREDIT,
INC., d/b/a UPLAND MORTGAGE, AND AMERICAN BUSINESS MORTGAGE
SERVICES, INC., f/k/a NEW JERSEY MORTGAGE AND INVESTMENT CORP.
The undersigned hereby releases all right, interest, lien or
claim of any kind with respect to the mortgage loan(s) described in the attached
Schedule A, such release to be effective automatically without any further
action by any party upon payment in one or more installments, in immediately
available funds of $__________________, in accordance with the following wire
instructions:
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Very truly yours,
[WAREHOUSE LENDER]
By:
-----------------------------------
Name:
Title:
E-2-1
EXHIBIT F
UNDERWRITING GUIDELINES
[TO BE PROVIDED BY THE BORROWER]
F-1
EXHIBIT G
[PURPOSEFULLY OMITTED]
G-1
EXHIBIT G
FORM OF SERVICER NOTICE
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__________ __, 200__
[SERVICER], as Servicer
[ADDRESS]
Attention:
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Re: Master Loan and Security Agreement, dated as of January 22,
2001 (the "Loan Agreement"), by and between AMERICAN BUSINESS
CREDIT, INC. ("ABC"), a Pennsylvania corporation, HOMEAMERICAN
CREDIT, INC., d/b/a UPLAND MORTGAGE ("UPLAND"), a Pennsylvania
corporation, and AMERICAN BUSINESS MORTGAGE SERVICES, INC.,
f/k/a NEW JERSEY MORTGAGE AND INVESTMENT CORP. ("ABMS"), a New
Jersey corporation (each a "Borrower"; collectively the
"Borrowers"), AMERICAN BUSINESS FINANCIAL SERVICES, INC., a
Delaware corporation (the "Guarantor") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ MORTGAGE CAPITAL INC., a New York corporation (the
"Lender").
Ladies and Gentlemen:
[SERVICER] (the "Servicer") is servicing certain mortgage
loans for the Borrowers pursuant to certain Servicing Agreements between the
Servicer and the Borrowers. Pursuant to the Loan Agreement between the Lender
and the Borrowers, the Servicer is hereby notified that the Borrowers have
granted a security interest to the Lender in certain mortgage loans which are
serviced by Servicer.
Upon receipt of a Notice of Event of Default from the Lender
in which the Lender shall identify the mortgage loans which are then pledged to
the Lender under the Loan Agreement (the "Pledged Mortgage Loans"), the Servicer
shall segregate all amounts collected on account of such Pledged Mortgage Loans,
hold them in trust for the sole and exclusive benefit of the Lender, and remit
such collections in accordance with the Lender's written instructions. Following
such Notice of Event of Default, the Servicer shall follow the instructions of
the Lender with respect to the Pledged Mortgage Loans, and shall deliver to the
Lender any information with respect to the Pledged Mortgage Loans reasonably
requested by the Lender.
Notwithstanding any contrary information or direction which
may be delivered to the Servicer by the Borrowers, the Servicer may conclusively
rely on any information, direction or notice of an Event of Default delivered by
the Lender, and the Borrowers shall indemnify and hold the Servicer harmless for
any and all claims asserted against the Servicer for any actions taken in good
faith by the Servicer in connection with the delivery of such information or
Notice of Event of Default.
No provision of this letter may be amended, countermanded or
otherwise modified without the prior written consent of the Lender. The Lender
is an intended third party beneficiary of this letter.
H-1
Please acknowledge receipt and your agreement to the terms of
this instruction letter by signing in the signature block below and forwarding
an executed copy to the Lender promptly upon receipt. Any notices to the Lender
should be delivered to the following address: ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇; Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇; Telephone: ______________; Facsimile:
______________, with a copy to Mr. ▇▇▇▇ ▇▇▇▇▇▇; Telephone: (▇▇▇) ▇▇▇-▇▇▇▇;
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇.
Very truly yours,
AMERICAN BUSINESS CREDIT, INC.
By:
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Name:
Title:
HOMEAMERICAN CREDIT, INC., d/b/a
UPLAND MORTGAGE
By:
-----------------------------------
Name:
Title:
AMERICAN BUSINESS MORTGAGE
SERVICES, INC., f/k/a NEW JERSEY
MORTGAGE AND INVESTMENT CORP.
By:
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Name:
Title:
ACKNOWLEDGED AND AGREED TO:
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as Servicer
By:
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Title:
Telephone:
Facsimile:
H-2
