EXHIBIT 10.10
CS FIRST XXXXXX
Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
October 2, 1996
T.A.R. Preferred Mortgage Corporation
00000 XxxXxxxxx Xxxx. - Xxxxx 000
Xxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxxxxx
Chief Executive Officer
Ladies and Gentlemen:
This letter agreement confirms our understanding that T.A.R. Preferred Mortgage
Corporation ("Preferred") has engaged CS First Boston Corporation ("CS First
Boston"), under the terms set forth herein, to assist Preferred in the
structuring and marketing of a program of offerings (the "Offerings") of AAA- or
Aaa-rated asset backed securities (the "Securities") evidencing ownership of, or
secured in whole or in part by, closed end first or second home equity mortgages
(the "Loans") originated or purchased by Preferred, and Preferred has agreed to
enter into a Repurchase Facility, as defined herein, with CS First Boston
Mortgage Capital Corp. ("CS First Boston Mortgage", and each of CS First Boston
and CS First Boston Mortgage, a "CSFB Entity").
Capitalized terms not defined in this letter agreement shall have the meanings
set forth in the Master Repurchase Agreement between Preferred and CS First
Boston Mortgage dated October 2, 1996 (the "Master Repurchase Agreement").
1. Terms of Assignment
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As of the later of (a) the MLI Release Date (as defined below) or (b)
October 2, 1996 (such later date the "Start Date"), Preferred hereby
appoints CS First Boston as Preferred's exclusive lead agent, lead
underwriter or financial advisor, as the case may be, in connection with
the structuring and marketing of the Offerings during the period commencing
on the Start Date and ending on December 31, 1997 (the "Exclusive Period").
CS First Boston accepts such appointment, subject to all terms and
conditions of this letter. Preferred agrees to (x) cause at least $400
million of public (or, if specified by CS First Boston, private placement)
Offerings of Securities to be underwritten by CS First Boston during the
Exclusive Period and (y) use commercially reasonable efforts to cause at
least an additional $400 million to be so underwritten, and if such
additional amount shall not be so underwritten during the Exclusive Period,
to use commercially reasonable efforts to cause any shortfall in such
additional amount to be
so underwritten as soon as practicable in 1998. Preferred and CS First
Boston shall enter into an underwriting agreement, in respect of Offerings
pursuant to a Preferred shelf registration statement or public offerings
made otherwise, in respect of each Offering (the "Underwriting Agreement")
or, if specified by CS First Boston a placement agent agreement (the
"Placement Agent Agreement"). The terms of the Placement Agent Agreement or
Underwriting Agreement, as the case may be, in respect of each Offering
shall supersede those in this letter agreement.
As part of its engagement, CS First Boston will undertake such of the
following as are appropriate under the circumstances:
(i) advise Preferred in the structuring and rating of each Offering;
(ii) assist Preferred with the systems development relating to the
Offerings;
(iii) assist Preferred and their lawyers in drafting the appropriate
documents;
(iv) make arrangements for the selection and appointment of a trustee;
(v) in conjunction with Preferred's accountants, assist Preferred in
evaluating the accounting and tax implications of the Offerings;
(vi) advise on the merits of obtaining a rating on the securities and
accordingly, assist with the ratings process; and
(vii) market and place or underwrite the Offerings.
Notwithstanding anything herein to the contrary, CS First Boston shall have
no obligation, expressed or implied, to underwrite or act as placement
agent for the Offerings if, in its sole good faith judgment, (a) given the
prevailing circumstances, CS First Boston would be exposed to unacceptable
risk or (b) CS First Boston is not satisfied with the results of CS First
Boston's due diligence review or (c) the parties fail to agree on
documentation satisfactory to CS First Boston. CS First Boston shall
notify Preferred as soon as possible of any determination not to underwrite
or act as placement agent, in which case Preferred shall be free to
securitize the offering in the manner and with the underwriter or placement
agent it selects at its sole discretion, and no fees or expenses shall be
due CS First Boston in regard to the offering to which it declines to act
as underwriter or placement agent. In the event that CS First Boston
declines to act as placement agent or underwriter for an Offering,
Preferred will not be required to xxxxx XX First Boston the underwriting
compensation referenced in Section 2 in respect of such specific Offering,
and this letter agreement shall be thereafter subject to termination by
Preferred pursuant to, and to the extent provided in, Section 9.
The aggregate proceeds of the sale of Securities (the "Securitization
Proceeds") for each Offering will be applied, first, to repay CS First
Boston Mortgage the Repurchase Price with respect to those Purchased
Securities (as defined in the Master Repurchase Agreement) which are the
subject of the Offering, plus any other amounts then due and payable under
the facility provided under the Master Repurchase Agreement (the
"Repurchase Facility"). The obligation of Preferred to pay the Repurchase
Price and any other amounts due under the Repurchase Facility is a general
obligation of Preferred and shall not be limited in the event that the
Securitization Proceeds are insufficient to fund such repayment.
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2. MLI Release Date; Underwriting Compensation
-------------------------------------------
Preferred has furnished CS First Boston Mortgage with a copy of its
February 16, 1996 letter agreement with Xxxxxxx Lynch, Pierce, Xxxxxx &
Xxxxx Incorporated ("MLI") and hereby represents and warrants to the CSFB
Entities that MLI has breached such agreement and related agreements in
such manner that Preferred is entitled to withhold its performance under,
and terminate, such letter agreement provided, however, that, because of
the expense of litigation Preferred does not undertake to either guaranty
any result of litigation or to pursue or defend any litigation on the
matter. Preferred further represents and warrants to the CSFB Entities
that (a) there are no other agreements with MLI other than such February 16
letter agreement that would limit, restrict or conflict with CS First
Boston's ability to exclusively underwrite the Securities as contemplated
hereby; (b) there no other such agreements with any other person or entity;
(c) the information contained in the memorandum to Preferred of its
counsel, Xxxxx X. Xxxxx, dated October 2, 1996 regarding Preferred's
agreements with MLI, a copy of which was furnished to CS First Boston, is
true, correct and complete in all material respects; (d) other than the
CSFB Entities, no person or entity, including without limitation MLI, has
been granted the exclusive right to either purchase or finance (under a
repurchase arrangement or otherwise) the mortgage loan inventory of
Preferred (or any portion thereof or interest therein), except that the
February 16 letter agreement gives MLI the exclusive right to purchase or
place (but not to finance) mortgage loans to be sold to third parties
(other than MLI and its affiliates) subject to retained servicing by
Preferred, but such right does not apply to loans sold by Preferred on a
"servicing released" basis even if pursuant to such sale Advanta Mortgage
Corp. U.S.A. (or another servicer engaged by Preferred) is retained as
servicer by the buyer of such loans; and (e) Preferred has delivered to MLI
the demand letter attached hereto as Exhibit A and the notice letter
attached hereto as Exhibit B. Preferred agrees to indemnify and hold
harmless each CSFB Entity against any and all losses, claims, damages,
liabilities or expenses, including (without limitation) legal fees and
expenses, joint or several, to which they may become subject, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) arise out of or are based upon a
breach of the representations and warranties contained in clauses (a)
through (e) of this paragraph. Preferred shall use commercially reasonable
efforts from the date hereof through December 29, 1996 to obtain as soon as
practicable release or termination by MLI of all obligations existing under
the February 16 letter agreement (such release or termination to be
reasonably satisfactory to CS First Boston, provided, however, that it need
not apply or refer to this letter agreement or either CSFB Entity) and to
promptly deliver to CS First Boston evidence of such release or termination
(the date on which such evidence is furnished to CS First Boston, the "MLI
Release Date"). In the event that the MLI Release Date does not occur, CS
First Boston Mortgage shall have the option to purchase, under the terms
and conditions of the Mortgage Loan Purchase Agreement dated August 1,
1996, Mortgage Loans that are included in the Repurchase Facility from time
to time.
Preferred will pay to CS First Boston promptly upon the closing of each
Offering during the Exclusive Period, a placement fee or underwriting
discount (as appropriate) equal to
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the product of (a) the applicable Underwriting Fee Percentage multiplied by
(b) the aggregate amount of the Securities (other than Residuals, as
defined herein) sold pursuant to Offerings (the "Underwriting Fee"). The
Underwriting Fee Percentage with respect to each Offering shall be one-half
of one percent (0.50%) for Offerings of Securities of $200 million
principal amount or greater, and shall be five-eighths of one percent
(0.625%) for Offerings of Securities of less than $200 million. In the
event that less than $400 million of Securities is underwritten by CS First
Boston during the Exclusive Period, Preferred shall pay to CS First Boston
on or before December 31, 1997 five-eighths of one percent of the amount of
the shortfall. In addition, in the event that both (x) the MLI Release
Date has occurred and (y) as of December 31, 1998 less than $800 million of
Securities has been underwritten by CS First Boston pursuant to this
letter, Preferred shall pay to CS First Boston on or before such date five-
eighths of one percent of the amount of the shortfall. It is understood
that such fees shall be earned by CS First Boston whether or not
"commercially reasonable efforts" were made by Preferred pursuant to
Section 1.
3. Expenses
--------
Preferred shall pay all reasonable costs and expenses arising from the
preparation for and execution of the Offerings (unless such Offering does
not close because of any event described in the third paragraph of Section
2) including but not limited to the fees and disbursements of legal counsel
(including CS First Boston's counsel and investor's counsel in any private
placement, if retained) rating agency fees, credit enhancement fees, SEC
registration fees (or equivalent ratable fees of a CS First Boston
affiliate in lieu thereof if such affiliate's shelf registration is
utilized), auditors' fees, due diligence expenses and trustee fees. It is
understood and agreed that Preferred may require that the parties incurring
or charging such costs and expenses agree in advance that they are payable
or reimbursable by Preferred only to a specified reasonable extent or cap.
4. Information
-----------
(a) Preferred will furnish CS First Boston with all financial and other
information concerning Preferred as CS First Boston deems reasonably
appropriate in connection with the performance of the services
contemplated by this letter and in that connection will provide CS
First Boston with reasonable access during normal business hours to
Preferred's officers, directors, employees, accountants, and other
representatives. Preferred acknowledges and confirms that CS First
Boston (i) will rely on such information in the performance of the
services contemplated by this letter without independently
investigating or verifying any of it, (ii) assumes no responsibility
for the accuracy or completeness of such information and (iii) will
not make any appraisal of any assets of Preferred.
(b) Preferred will be solely responsible for the contents of the private
placement memorandum or other offering document used in connection
with the placement of the Securities contemplated hereby (as such
private placement memorandum or other document may be amended or
supplemented and including any
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information incorporated therein by reference, the "Private Placement
Memorandum") and any and all other written communications provided by,
or authorized to be provided on behalf of, Preferred to any actual or
prospective purchaser of the Securities except to the extent such
contents of the Private Placement Memorandum are provided by CS First
Boston in writing expressly for use in the Private Placement
Memorandum and provided that any statistical, tabular or similar
information, including computer runs, initially prepared by or on
behalf of CS First Boston (but as to which CS First Boston is not
taking responsibility in the PPM) shall have been verified by
Preferred's independent public accountants. Preferred represents and
warrants that the Private Placement Memorandum and such other written
communications will not, as of the date of the offer or sale of the
Securities or the closing date of any such sale, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, provided however that such representation and warranty
will not cover information provided in writing by CS First Boston for
use specifically in such Private Placement Memorandum. Preferred
authorizes CS First Boston to provide the Private Placement Memorandum
to prospective purchasers of the Securities. If at any time prior to
the completion of the offer and sale of the Securities an event occurs
as a result of which the Private Placement Memorandum (as then
supplemented or amended) would include any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, Preferred will promptly notify CS
First Boston of such event and CS First Boston will suspend
solicitations of prospective purchasers of the Securities until such
time as Preferred shall prepare (and Preferred agrees that, if it
shall have notified CS First Boston to suspend solicitations after
Preferred has accepted orders from prospective purchasers, it will
promptly prepare) a supplement or amendment to the Private Placement
Memorandum which corrects such statement or omission.
Preferred agrees to indemnify and hold harmless CS First Boston and
each person who controls CS First Boston within the meaning of either
the Securities Act of 1933, as amended (the "Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act") against any and
all losses, claims, damages or liabilities, joint or several, suffered
or incurred which arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the
Private Placement Memorandum or in any revision or amendment thereof
or supplement thereof or arise out of or are based upon the omission
or alleged omission to state in the Private Placement Memorandum or in
any revision or amendment thereof or supplement thereto a material
fact required to be stated therein or the omission or alleged omission
to state a material fact in the Private Placement Memorandum or in any
revision or amendment thereof or supplement thereto necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, and agrees to reimburse each such
indemnified party for any legal or other expenses reasonably incurred
by it or
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him in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however that Preferred
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shall not be liable to CS First Boston or any person who controls CS
First Boston to the extent that any misstatement or alleged
misstatement or omission or alleged omission was made in reliance upon
and in conformity with the information provided in writing to
Preferred by CS First Boston specifically for inclusion in the Private
Placement Memorandum. This indemnity agreement will be in addition to
any liability which Preferred may otherwise have.
(c) All non-public information provided by Preferred to CS First Boston
will be used solely in the course of the performance of the above-
mentioned services, and will be treated confidentially. Except as
otherwise required by law, CS First Boston will not disclose this
information to any third party other than its own counsel without
Preferred's prior written consent.
(d) All financial data and other documentation prepared by CS First Boston
in connection with the transactions contemplated hereby (including,
without limitation, any computer models, cash flow analyses, and any
documentation prepared by counsel for CS First Boston) shall be
proprietary to CS First Boston. Except as otherwise required by law,
neither Preferred, any Preferred affiliate, nor any person acting on
behalf of any of them (including, without limitation, counsel and the
independent accountants to Preferred) shall disseminate, distribute,
or otherwise make available such data or documentation without CS
First Boston's prior written consent (other than Preferred making such
data available to any Preferred affiliate, its counsel or its
independent accountants, in each case on a need-to-know basis). This
paragraph shall in all cases be subject to and limited by the
confidentiality obligations of CS First Boston contained in the
immediately preceding paragraph.
This paragraph 4 shall survive termination of this agreement.
5. Exemption from Registration; Restrictions on Offer and Sale of Same or
----------------------------------------------------------------------
Similar Securities
------------------
It is understood that, unless Preferred and CS First Boston agree
otherwise, the offer and sale of the Securities will be made under an
exemption from the registration requirements of the Act, pursuant to
Section 4(2) thereof. Preferred has not made and will not make,
directly or indirectly, any offer or sale of Securities or of
securities of the same or a similar class as the Securities if as a
result the offer and sale of Securities contemplated hereby would fail
to be entitled to the exemption from the registration requirements of
the Act provided for in such Section 4(2) (unless the parties are not
relying on such exemption). As used herein, the terms "offer" and
"sale" have the meanings specified in Section 2(3) of the Act.
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6. Additional Restrictions
-----------------------
In connection with all private offers and sales of the Securities pursuant
to an exemption from registration under the Act:
(a) Preferred will not offer or sell the Securities by means of any form
of general solicitation or general advertising that would violate the
exemption from registration under section 4(2) of the Act. Preferred
will not at any time during the term of this engagement, or for a
period of six months following completion of the placement of
Securities contemplated hereby, make any reference publicly to the
transactions contemplated hereby, by way of the issuance of a press
release, the placement of an advertisement or otherwise that would
violate the exemption from registration under the Act pursuant to
Section 4(2), without the prior consent of CS First Boston which
consent shall not be unreasonably withheld or delayed.
(b) Neither Preferred nor CS First Boston will offer or sell the
Securities to any person who is not an "accredited investor" as
defined in Rule 501 under the Act or a "qualified institutional buyer"
as defined under Rule 144A under Act.
(c) Preferred and CS First Boston will exercise reasonable care to ensure
that the purchasers of the Securities are not underwriters within the
meaning of Section 2(11) of the Act and, without limiting the
foregoing, that such purchases will comply with Rule 502(d) under the
Act.
(d) Preferred will not make any Form D or other filings with the
Securities and Exchange Commission with respect to the offer and sale
of the Securities without CS First Boston's prior written consent.
(e) Preferred will cause to be delivered to CS First Boston the same
opinions of counsel and accountants' letters that it provides to
purchasers of the Securities.
(f) Preferred shall be deemed to make to CS First Boston all
representations and warranties which Preferred makes to purchasers of
Securities in any purchase agreement or other documents.
7. Compliance with State Securities Laws
-------------------------------------
Preferred will take such action as is necessary to qualify the Securities
for offer and sale under the securities laws of such states and other
jurisdictions of the United States as CS First Boston may specify.
8. Indemnification
---------------
Because CS First Boston will be acting on behalf of Preferred in connection
with the engagement of CS First Boston hereunder, Preferred has entered
into a separate letter
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agreement (the "Indemnification Agreement") providing for the
indemnification by Preferred of CS First Boston and certain related persons
and entities.
9. Termination
-----------
(a) No termination of CS First Boston's engagement hereunder shall affect
Preferred's obligations under the Indemnification Agreement.
(b) In the event that (i) either CS First Boston Mortgage or the
Designated Affiliate, as defined herein, shall breach any of its
obligations in a material respect under, or terminate without cause,
any Facility Agreement, as defined herein, (ii) CS First Boston
Mortgage unreasonably withholds its consent to a change in Preferred's
loan origination, underwriting or acquisition guidelines, or (iii) CS
First Boston Mortgage exercises its right of either Unilateral
Termination or Illiquidity Termination (each as defined below) of the
Master Repurchase Agreement (any such event described in clauses (i),
(ii) or (iii), subject in the case of clause (i) to the ten-day cure
period referred to below, a "Warrant Call Event") then, provided an
Event of Default of Seller shall not have occurred and be continuing,
Preferred shall be entitled to terminate this letter agreement without
obligation or liability upon at least ten days' prior written notice
to CS First Boston unless any such breach is cured within such period.
(c) No termination by Preferred of CS First Boston's engagement hereunder
other than as discussed in Section 2 of this letter agreement, Section
9(b) of this letter agreement or for material cause shall affect
Preferred's obligation to pay fees to CS First Boston agreed in
section 2 of this letter in respect of the remaining amount of
Offerings.
(d) Subject to subparagraphs (a) and (b), the engagement of CS First
Boston hereunder (i) may be terminated at any time, with or without
cause, by either Preferred or CS First Boston, upon prior written
notice to the other of ten days and (ii) shall terminate, in any
event, upon completion of the Exclusive Period.
10. Repurchase Facility
-------------------
CS First Boston Mortgage shall provide Preferred during the Exclusive
Period with the Repurchase Facility upon the terms and conditions provided
for in this Section 10, Section 11 hereof and in the Master Repurchase
Agreement and the Custody Agreement, as defined therein (this Section 10,
Section 11 hereof the Master Repurchase Agreement and the Custody
Agreement, collectively, the "Facility Agreements"). The Facility
Agreements shall constitute the entire agreement between the parties with
respect to the transactions contemplated by this Section 10.
The Repurchase Facility available to Preferred shall be in an amount not
less than $100,000,000 of outstanding principal balance of Mortgage Loans
and $60 million aggregate Market Value of Residuals (as defined in Section
11) at any time; provided,
--------
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however, that CS First Boston Mortgage shall not be obligated to purchase,
-------
on any given Purchase Date, Mortgage Loans either (a) having an aggregate
unpaid principal balance in amount less than $5,000,000 or (b) more
frequently than twice per calendar week; and provided, further that CS
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First Boston Mortgage may (i) refuse to purchase or (ii) require Preferred
to immediately repurchase any Mortgage Loan offered for sale under the
Master Repurchase Agreement if CS First Boston Mortgage has reason to
believe in good faith either that such Mortgage Loan fails to comply in a
material respect with the requirements of the Facility Agreements or that,
taking into account the Mortgage Loans then subject to the Repurchase
Facility, such Mortgage Loan would not be eligible for a securitization of
such Mortgage Loans without unreasonable credit enhancement. The Purchase
Price for the Mortgage Loans shall be 95% of Market Value.
CS First Boston Mortgage shall be entitled to cease to purchase Mortgage
Loans and/or Residuals (including Mortgage Loans previously purchased) if
(i) the Master Repurchase Agreement is terminated pursuant to its terms,
(ii) CS First Boston Mortgage is entitled to exercise its remedies in
accordance with Paragraph 11 of the Master Repurchase Agreement, or (iii) a
Facility Termination Event (as defined below) occurs, or (iv) CS First
Boston Mortgage determines that unilateral termination (a "Unilateral
Termination") by it of the Master Repurchase Agreement is reasonable under
the circumstances, taking into consideration, among other things, the
volatility or illiquidity of the market for the Mortgage Loans or
securities backed thereby, the extent and nature of any event which is, or
with notice or passage of time would become, a Facility Termination Event
(as defined below), or the availability of financing to CS First Boston
Mortgage;
CS First Boston Mortgage shall have the right to terminate its obligations
under this Section 10 and CS First Boston Mortgage shall no longer be
obligated to make purchases under this Section 10 and may accelerate the
Repurchase Date for all Mortgage Loans and/or Residuals then subject to
repurchase by Preferred as provided in the Master Repurchase Agreement,
immediately upon the occurrence of a Facility Termination Event (as defined
herein) irrespective of whether the Master Repurchase Agreement
specifIcally so provides with respect to a Facility Termination Event.
Upon such termination, CS First Boston Mortgage may utilize any remedy
provided for in the Facility Agreements. A Facility Termination Event (a
"Facility Termination Event") shall include any one or more of the
following:
(a) the judgment by CS First Boston Mortgage in good faith that a material
adverse change has occurred with respect to the business, properties,
assets or condition (financial or otherwise) of Preferred or the
Servicer; provided, however, that in the case of any such material
adverse change as described above with respect only to the Servicer,
such Facility Termination Event shall only be applicable until a
successor Servicer acceptable to CS First Boston Mortgage has become
the Servicer, and shall not give CS First Boston Mortgage the right to
terminate such obligations (absent a resulting material adverse change
to the business, properties, assets or condition of Preferred or a
failure by Preferred to appoint such successor within 45 days and
transfer such servicing within an additional 45 days);
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(b) CS First Boston Mortgage shall reasonably request, specifying the
reasons for such request, information, and/or written responses to
such requests, regarding the financial well-being of Preferred and
such information and/or responses shall not have been provided within
three business days of such request;
(c) Either (i) a change in control of Preferred shall have occurred other
than in connection with and as a result of the issuance and sale by
Preferred of registered, publicly offered common stock, the issuance
of employee stock options of up to 12%, or the issuance of the
Warrants (as defined below); or (ii) Xx. Xxxx X. Xxxxxxxxx, currently
acting in the capacity of chief executive officer of Preferred, ceases
to be employed by Preferred and functioning in such capacity;
(d) There is (i) a material breach by Preferred of any representation and
warranty contained in the Master Repurchase Agreement, other than a
representation or warranty relating to particular Mortgage Loans, and
CS First Boston Mortgage has reason to believe in good faith either
that such breach is not curable within 30 days or that such breach may
not have been cured in all material respects at the expiration of 30
days following discovery thereof by Preferred or (ii) a failure by
--
Preferred to make any payment (or transfer of Additional Purchased
Securities) payable (or required to be transferred) by it under the
Facility Agreements or (iii) any other failure by Preferred to observe
--
and perform in any material respect its material covenants, agreements
and obligations with CS First Boston Mortgage, including without
limitation those contained in the Facility Agreements, and CS First
Boston Mortgage has reason to believe in good faith that such failure
may not have been cured in all material respects at the expiration of
30 days following discovery thereof by Preferred;
(e) There occurs a catastrophic event or events resulting in the effective
absence of a "repo market" for a period of thirty (30) consecutive
days respecting mortgage loans and/or Residuals and the same results
in CS First Boston Mortgage not being able to finance any purchase
through the repo market with CS First Boston Mortgage's traditional
repo counterparties (an "Illiquidity Termination");
(f) Preferred, without the prior written consent of CS First Boston
Mortgage (which shall not be unreasonably withheld), amends its loan
origination or acquisition guidelines or practices;
(g) With respect to the Mortgage Loans which are held by CS First Boston
Mortgage pursuant to the Facility Agreements (i) Mortgage Loans
constituting more than 1% (when measured by aggregate unpaid principal
balance) of all such Mortgage Loans held by CS First Boston Mortgage
experience annualized net losses, and (ii) Mortgage Loans constituting
more than 4% (when measured by aggregate unpaid principal balance) of
all such Mortgage Loans held by CS First Boston Mortgage are more than
sixty (60) days delinquent as to a scheduled payment of principal and
interest.
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Notwithstanding any other provision of this Section 10, any grace or notice
period provided herein in respect of a notice to be given or action to be taken
by CS First Boston Mortgage may be shortened or eliminated by CS First Boston
Mortgage if, in its sole good faith discretion, it is unreasonable to do so
under the circumstances, taking into consideration, among other things, the
volatility of the market for the Mortgage Loans or other Securities involved,
the extent and nature of any Facility Termination Event (or events which with
the giving of such notice and passage of time would constitute Facility
Termination Events) and the risks inherent in deferring the exercise of remedies
for the otherwise applicable grace or notice period.
CS First Boston Mortgage's obligations hereunder with respect to a Purchase Date
are all subject to each of the following conditions:
I. At or prior to the first Purchase Date:
(a) a blanket UCC financing statement acceptable to CS First Boston
Mortgage, suitable for filing in the jurisdiction in which
Preferred's principal place of business is located, and
identifying CS First Boston Mortgage as the secured party and all
Mortgage Loans to be Purchased by CS First Boston Mortgage
hereunder as collateral, shall have been filed by Preferred and
evidence of such filing to CS First Boston Mortgage;
(b) there shall have been delivered to CS First Boston Mortgage such
favorable opinion or opinions of counsel and a certificate of the
secretary of Preferred, in each case as are reasonably requested
by CS First Boston Mortgage; and
(c) there shall have been delivered to CS First Boston Mortgage a
Servicing Agreement and a fully executed Assignment, Assumption
and Recognition Agreement with respect thereto (the
"Assignment"), each in form acceptable to CS First Boston
Mortgage.
II. In the case of each Purchase Date:
(a) there shall have been delivered to CS First Boston Mortgage a
Trust Receipt with a Mortgage Loan Schedule attached;
(b) Preferred shall have, if requested by CS First Boston Mortgage,
disclosed information satisfactory to CS First Boston Mortgage
regarding the amounts (balances, credit limits, etc.), scheduled
maturities and termination provisions of, and creditors under,
all outstanding credit facilities and debt of Preferred reflected
in its financial and accounting records; and
(c) Preferred shall have provided to CS First Boston Mortgage such
other documents which are then required to have been delivered
under the
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Facility Agreements or which are reasonably requested by CS First
Boston Mortgage, which other documents may include another UCC
financing statement, another favorable opinion or opinions of
counsel with respect to matters which are reasonably requested by
CS First Boston Mortgage, and/or an officers' or secretary's
certificate from Preferred.
11. Additional Collateral
---------------------
In connection with entering into a particular Placement Agent Agreement or
Underwriting Agreement pursuant to this letter, Preferred may require CS
First Boston Mortgage or an affiliate (the "Designated Affiliate") to
undertake to enter into reverse repurchase transactions under a Master
Repurchase Agreement with CS First Boston (Hong Kong) Limited substantially
in the form annexed hereto as Exhibit C for the balance of the Exclusive
Period with respect to a maximum of $60 million of Market Value, as
determined in good faith by CS First Boston, of certain interest-only or
REMIC residual securities (collectively, "Residuals") backed by the related
Mortgage Loans and retained by Preferred in connection with the related
Offering. It is understood that such an Offering must have been
underwritten by CS First Boston. The provisions of Section 10 shall be
applicable to such undertaking, provided, however, that (i) the Pricing
Rate shall be LIBOR plus 325 basis points; (ii) the Buyer's Margin Amount
percentage will be 200%; (iii) there will be rolling 30-day Repurchase
Dates; (iv) a UCC financing statement reasonably acceptable to CS First
Boston, describing the particular Purchased Securities as collateral, will
be filed; and (v) references to CS First Boston Mortgage in Section 10
shall be deemed as applicable to refer to CS First Boston (Hong Kong)
Limited. This Section 11 shall cease to be applicable whenever the
outstanding aggregate Market Value of the Residuals then the subject of
Transactions is $60 million.
12. General
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CS First Boston agrees to perform its duties and responsibilities hereunder
with the exercise of such standard due care as is customary for similarly
situated investment banking firms. Other than the Master Repurchase
Agreement, the Custody Agreement, that certain Fee Agreement letter dated
August 20, 1996 and those certain common stock warrants evidenced by that
certain Warrant No. 1 issued as of the date hereof by Preferred to CS First
Boston Mortgage (the "Warrants"), to the extent that each party hereto has
executed the same, this letter and the Indemnification Agreement contain
the entire agreement of the parties with respect to the subject matter
hereof and supersede and take precedence over all prior agreements or
understandings, whether oral or written, between CS First Boston and
Preferred with respect to the subject matter hereof.
It is understood and agreed that the sale and delivery by Preferred of
Mortgage Loans pursuant to the Repurchase Facility does not satisfy in
whole or in part the obligations of Preferred under the Purchase Price and
Terms Letter dated June 27, 1996 or the related purchase agreement to be
dated August 30, 1996 with respect to whole loans sales.
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The invalidity or unenforceability of any provision of this letter shall
not affect the validity or enforceability of any other provisions of this
agreement or the Indemnification Agreement, which shall remain in full
force and effect.
This letter agreement may not be amended or modified except in writing
signed by each of the parties hereto.
This agreement shall be governed by and construed in accordance with the
laws of the State of New York (without regard to its conflicts of laws
principles).
We are delighted to accept this engagement and look forward to working with you
on the foregoing. Please confirm that the foregoing is in accordance with your
understanding by signing this letter of agreement and two enclosed copies and
returning to us the enclosed copies. The letter signed by you shall constitute a
binding agreement between us as of the date first above written.
Yours sincerely,
By:_________________________
Name:_______________________
Title:______________________
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
By:_________________________
Name:_______________________
Title:______________________
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN:
T.A.R. PREFERRED MORTGAGE CORPORATION
By:_________________________
Xxxx X. Xxxxxxxxx
Title: Chief Executive Officer
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EXHIBIT A
Notice to Xxxxxxx Xxxxx of the intention of PMC to terminate the agreement set
forth in the Engagement letter and the underlying Repurchase Agreement date
February 16, 1996.
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