1
EXHIBIT 10.10
STANDBY AND WORKING CAPITAL FINANCING AGREEMENT
This STANDBY AND WORKING CAPITAL FINANCING AGREEMENT, dated as of
December 17, 1996, among CMG Funding Corp., a Delaware corporation, Continental
Mortgage Group, L.C., a Utah limited liability company, CMG Funding Securities
Corp., a Delaware corporation and ContiTrade Services L.L.C., a Delaware limited
liability company.
WHEREAS, the Borrower wishes to (i) secure a collateralized
standby financing arrangement as a source of liquidity from the Lender and (ii)
obtain a working capital financing arrangement as a source of working capital
from the Lender and the Lender wishes to enter into such a standby financing
arrangement and such a working capital financing arrangement subject to the
terms and conditions set forth herein; and
WHEREAS, the Residualholder is the wholly-owned subsidiary of the
Borrower and may from time to time own various Residual Interests and I/O
Interests; and
WHEREAS, the Borrower intends to pledge the stock of the
Residualholder as well as certain other of its assets from time to time to
secure the standby financing arrangement.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
Unless otherwise specified, the following terms shall have the
following meanings when used in this Standby Agreement:
"Accrual Period" means, with respect to the initial Accrual Period, the
period commencing on the date of the initial Funding Date and ending on the last
day of the calendar month in which such initial Funding Date occurs and, with
respect to any subsequent Accrual Period, the calendar
2
month following the calendar month of the prior Accrual Period.
"Advance" means any Collateralized Advance or Working Capital Advance.
"Advance Balance" means, with respect to any Advance and any date of
determination, the sum of (a) the outstanding principal balance of such Advance,
determined as the difference between (i) the sum of all amounts of principal
lent by the Lender to the Borrower with respect to such Advance through the
close of the date of determination and (ii) the sum of all amounts of principal
repaid by the Borrower with respect to such Advance through the close of the
date prior to the date of determination, and (b) the interest accrued and unpaid
on such Advance which is due and payable prior to such date of determination.
"Advance Maturity Date" means, with respect to any Collateralized
Advance, the date agreed upon in writing by the parties, or, in the absence of
such an agreement, the earlier of (a) the first anniversary of the date on which
the first Collateralized Advance is made or (b) the Advance Termination Date;
provided, however, that if the Advance Maturity Date is determined pursuant to
clause (a) above and if on any anniversary each of the conditions set forth in
clauses (b) and (c) of Section 2.02 are satisfied, such Advance Maturity Date
shall be extended for one year; provided, further, however, that in no event
shall the Advance Maturity Date be extended beyond the Advance Termination Date.
"Advance Termination Date" means the earliest to occur of (a) the date
any Change of Control occurs, (b) December 17, 2001, or (c) the date of a
declaration of acceleration by the Lender pursuant to Section 7.02.
"Affiliate" means any Person: (a) which directly or indirectly controls,
or is controlled by, or is under common control with the Borrower; (b) which
directly or indirectly beneficially owns or holds five percent (5%) or more of
the voting stock of the Borrower; or (c) five percent (5%) or more of the voting
stock of which is directly or indirectly beneficially owned or held by the
Borrower. The term control means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
2
3
of a Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Advance Balance" means, with respect to any date of
determination, the aggregate amount of the outstanding Advance Balances, of all
Advances as of such date.
"Aggregate Available Collateralized Advance Amount" means, with respect
to any date of determination, the amount equal to the product of (a) the
Aggregate Financing Value of the Collateral on such date of determination and
(b) the difference between (i) one and (ii) Weighted Average Haircut.
"Aggregate Cashflow" means with respect to any Accrual Period, the
aggregate payments received in respect of all Residual Interests and I/O
Interests owned by the Borrower or the Residualholder and pledged to the Lender
under this Standby Agreement during such Accrual Period.
"Aggregate Collateralized Advance Balance" means, with respect to any
date of determination, the aggregate amount of the outstanding Advance Balances
of all Collateralized Advances at such date.
"Aggregate Financing Value" means the sum of all Financing Values set
forth on the related Financing Value Schedules.
"Aggregate Working Capital Advance Balance" means, with respect to any
date of determination, the aggregate amount of the outstanding Advance Balance
of all Working Capital Advances at such date.
"Bonus Compensation" means with respect to any employee the amount by
which the total compensation, excluding Fringe Benefits, for such employee
during any year exceeds such employee's base salary.
"Borrower" means CMGFC or CMLC.
"Borrower Collateral" has the meaning as set forth Section 5.01.
"Business Day" means any day, other than a Saturday or Sunday, that is
neither a legal holiday, nor a day on which banking institutions are authorized
or required by Law or
3
4
regulation to close, in the City of New York or the State of Utah.
"Change of Control" means:
(a) without the prior written consent of the Lender, the
issuance, distribution, sale or transfer by the Borrower or by any
Affiliate of the Borrower, including, without limitation, the
Controlling Shareholders of the Borrower's capital stock or securities
other than (i) the sale of the Borrower's common stock to the Lender
occurring upon the exercise of the Conversion Privileges, (ii) the
pledge of the Borrower's capital stock to the Lender, (iii) the transfer
of the Borrower's capital stock for estate planning purposes or pursuant
to a domestic relations settlement or order, (iv) the transfer of the
Borrower's Common Stock pursuant to the Stock Option Plan for a price
greater than or equal to the Share Fair Market Value, (v) pursuant to a
buy/sell agreement solely among the borrower's existing shareholders, or
(vi) the sale, transfer or issuance of no more than five (5%) percent of
the Borrower's Common Stock (which percentage shall be determined on a
cumulative basis together with all other sales, transfers or issuances
of the Borrower's Common Stock under this clause (vi) from the date of
this Agreement) at a price at least equal to Share Fair Market Value
with the prior written consent of the Lender;
(b) a sale or voluntary transfer or, in the aggregate, sales or
voluntary transfers, of more than five per cent (5%) of the Borrower's
assets (as set forth in the Borrower's most recently audited or
unaudited financial statement) other than the sale of loans in the
ordinary course of business, whether on a flow or pool basis; or
(c) the resignation, termination or departure of Xxxx X. Xxx or
Xxxxx X. Xxxx from the employ of the Borrower, or the reassignment of
Xxxx X. Xxx or Xxxxx X. Xxxx to a position of significantly reduced
responsibility within the Borrower.
"CMGFC" means CMG Funding Corp., a Delaware corporation, or its
successors.
4
5
"CMLC" means Continental Mortgage Group, L.C., a Utah limited liability
company, or its successors.
"Collateral" means all Pledged Shares, Residual Interests and/or I/O
Interests pledged hereunder, together with any and all proceeds thereof.
"Collateralized Advance" means an amount of funds borrowed by the
Borrower from the Lender pursuant to the provisions of Article II of this
Standby Agreement, for which specific Collateral was pledged by the Borrower as
security therefor.
"Collateralized Loan" means the aggregate of the sums borrowed by the
Borrower from the Lender pursuant to all Collateralized Advances which remain
unpaid, together with accrued and unpaid interest thereon.
"Collection Account" means the account established and maintained by the
Lender in the name of the Lender for the collection of Aggregate Cashflows
pursuant to the terms of this Standby Agreement.
"Common Stock" means shares of the Common Stock of the Borrower, a class
of capital stock of the Borrower which (i) possesses full voting rights, and
(ii) is the sole class which fully participates in the income and value of the
Borrower.
"Consolidated Tangible Equity" means the aggregate "assets" of the
Borrower and its Subsidiaries less the aggregate "liabilities" of the Borrower
and its Subsidiaries and all intangible assets, with the term "asset" having the
meaning ascribed to such term by GAAP and the term "liability" being those
obligations or liabilities of the Borrower and its Subsidiaries which, in
accordance with GAAP, would be included in the liability side of the Borrower's
balance sheet on a consolidated basis.
"Controlling Shareholders" means each of Xxxx X. Xxx and Xxxxx X. Xxxx.
"Conversion Privileges" means the rights which the Lender has pursuant
to the terms of (i) the Subordinated Debt Agreement to convert to Preferred
Stock of the Borrower and (ii) the Preferred Stock to convert to Common Stock of
the Borrower.
5
6
"Custodial Agreement" shall have the meaning assigned to it under the
Purchase Agreement.
"Default Rate" means the related Interest Rate plus 4.00%.
"Determination Date" means, with respect to any Accrual Period, the
second Business Day following the end of such Accrual Period.
"Effective Advancing Value" means with respect to each item of
Collateral the product of (a) the Financing Value of such item of Collateral and
(b) the difference between (i) one and (ii) the Haircut related to such item of
Collateral; provided, however, for the purpose of this definition the Financing
Value of an item of Collateral shall be zero with respect to a Residual Interest
or an I/O Interest which was issued more than one year prior to the date of
request of such Advance.
"Event of Default" has the meaning set forth in Article VII hereof.
"FHA" means the Federal Housing Administration.
"FHLMC" means the Federal Home Loan Mortgage Corporation or any
successor thereto.
"Financing Value" means, on any Funding Date, the value of the related
Residual Interests and/or I/O Interests as specified by Lender on the related
Financing Value Schedule executed by the Borrower and the Lender prior to such
Funding Date. On any date other than a Funding Date, "Financing Value" means the
Market Value of the related Residual Interests and/or I/O Interests, as
determined by the Lender in its sole discretion, including, but not limited to,
revisions to the related Financing Value Schedule pursuant to Section 2.08
hereof. Although constituting a part of the Collateral, no independent Advance
shall be made with respect to the Pledged Shares and the Pledged Shares do not
have a Financing Value.
"Financing Value Schedule" means, with respect to the related Residual
Interests and/or I/O Interests, a schedule, substantially in the form attached
hereto as Exhibit B, agreed to by the Borrower and the Lender prior to the
initial Funding
6
7
Date, as such Financing Value Schedule may be amended from time to time by the
Lender pursuant to Section 2.10 hereof, setting forth the Financing Value of the
related Residual Interests and/or I/O Interests.
"FNMA" means The Federal National Mortgage Association or any successor
thereto.
"Fringe Benefits" means the payment of premiums for health insurance,
life insurance, xxxxxxx'x compensation, disability insurance and the payment of
payroll taxes for social security and Medicare.
"Funding Date" means, with respect to any Advance, the date on which
such Advance is made.
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Haircut" means (a), with respect to any I/O Interest, 0.35, and (b)
with respect to any Residual Interest, 0.35.
"HUD" means the United States Department of Housing and Urban
Development.
"Indemnified Party" has the meaning ascribed thereto in Article 6 of
this Standby Agreement.
"Interest Rate" means, with respect to any Collateralized Advance and
any Accrual Period, LIBOR on the related LIBOR Reset Date plus 5.00%; and with
respect to any Working Capital Advance and any Accrual Period, LIBOR on the
related LIBOR Reset Date plus 4.50%.
"I/O Interest" means the certificate or certificates, rated in one of
the two highest categories by Xxxxx'x Investors Service, Inc., Standard and
Poor's Corporation or any other nationally recognized statistical rating agency,
representing the interest-only interest or interests in one or more securitized
mortgage pools of Securitizable Mortgage Loans, with the prior written
permission of the Lender as to
7
8
such interest or interests, originated by the Borrower which shall have been
rated in one of the two highest categories by any of such rating agencies and
sold by, through or to the Lender or one of its Affiliates in a public offering
or private placement.
"Investment Banking Services Agreement" means the Investment Banking
Services Agreement, dated as of December 17, 1996, among the Borrower, the
Lender and ContiFinancial Services Corporation, as may be amended from time to
time pursuant to the terms thereof.
"Law" means any federal, state or local statute, law, rule, regulation,
ordinance, order, code, policy or rule of common law, now or hereafter in
effect, and in each case as amended, and any judicial or administrative
interpretation thereof by a Governmental Authority or otherwise, including any
judicial or administrative order, consent, decree or judgment.
"Lender" means ContiTrade Services L.L.C., a Delaware limited liability
company, its successors in interest and its permitted assigns.
"Letter Agreement" means the Letter Agreement, dated as of December 17,
1996, of the Controlling Shareholders to the Lender.
"LIBOR" means, as of 11:00 a.m. London time on any date of
determination, the 30 day London Interbank Offering Rate as of such date, as
indicated on page number 3750 of the Telerate Service. If LIBOR cannot be so
determined, then LIBOR shall mean the rate so quoted on such date and time by
the London branch of Union Bank of Switzerland.
"LIBOR Reset Date" means, with respect to any Accrual Period, unless
otherwise agreed to, the Business Day immediately preceding the start of such
Accrual Period, provided that if such Business Day is not a London Business Day,
then the London Business Day immediately preceding such Business Day.
"Loan" means any Collateralized Loan or any Working Capital Loan.
8
9
"London Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday, nor a day on which banking institutions are
authorized or required by Law or regulation to close, in The City of London.
"Market Value" means, with respect to any item of Collateral on any date
of determination in respect of an Advance, the market value of the related item
of Collateral, as determined by the Lender in its sole discretion, and taking
into account (a) the performance of such item of Collateral; (b) the performance
of the assets which underlie such item of Collateral; (c) general industry and
overall economic conditions; (d) current interest rates; (e) availability,
likelihood or commitment (if applicable) of purchasers; and (f) such other
considerations as reasonably appropriate in the circumstances.
"Material Change" means, with respect to the Securitizable Mortgage Loan
Underwriting Guidelines, any change to such guidelines other than a change (i)
correcting typographical errors, spelling, grammar or punctuation in such
guidelines or (ii) modifying such guidelines provided that such modification
does not lower the quality of the loans underwritten pursuant thereto.
"Maximum Collateralized Advance Aggregate Amount" means $0 (however,
solely with respect to Working Capital Advances, $400,000) until the Closing of
all of the Significant Documents and $10,000,000 thereafter.
"Maximum Working Capital Advance Aggregate Amount" means $400,000 until
the Closing of all of the Significant Documents, and $2,000,000 thereafter.
"Merger Agreement" means the Merger Agreement and Plan of Reorganization
dated as of December 16, 1996 by and between Continental Mortgage Group, L.C.
and the Borrower.
"Monetary Default" means:
(a) a failure to pay interest due on any Payment Date as required
by Section 2.05 of this Standby Agreement;
9
10
(b) a failure to pay any amount due on any date as required by
Sections 2.06 and 2.07 of this Standby Agreement;
(c) a breach of the covenant set forth in Section 4.01(a),
4.01(b)(i) or 4.01(v) of this Standby Agreement;
(d) a failure by the Borrower to pay any Taxes and a failure to
reimburse the Lender for any losses due to Taxes as required by
Section 8.04 of this Standby Agreement; and/or
(e) a breach of any of the representations or warranties set
forth in Section 3.01 or Section 3.02 herein which causes the
Borrower to be unable to make any payments due under this Standby
Agreement.
"New York UCC" means the Uniform Commercial Code of the State of New
York.
"Non-Monetary Default" means:
(a) a breach of any of the representations and warranties set
forth in Section 3.01 or 3.02 of this Standby Agreement;
(b) a breach of any of the covenants set forth in Section 4.01,
4.02, 4.03 or 4.04 of this Standby Agreement (other than the covenant
set forth in Section 4.01(a), 4.01(b)(i) or 4.01(v); and/or
(c) a breach of any of the representations, warranties or
covenants contained in the Significant Documents other than one which
constitutes a Non-Monetary Default as so defined in clauses (a) or (b)
of the definition thereof under the Subordinated Debt Agreement.
"Payment Date" means, with respect to any Accrual Period, the later to
occur of (a) the fifth calendar day of the month following the month in which
such Accrual Period ends, provided that if such day is not a Business Day, then
the Business Day immediately following such day, or (b) the second Business Day
immediately following the related Determination Date.
10
11
"Person" means an individual, general partnership, limited partnership,
limited liability partnership, corporation, business trust, joint stock company,
limited liability company, trust, unincorporated association, joint venture,
Governmental Authority, or other entity of whatever nature.
"Pledged Shares" means one hundred percent of the outstanding common
stock of the Residualholder.
"Preferred Stock" means shares of the Class A Preferred Stock of the
Borrower, a class of capital stock of the Borrower which (i) possesses full
voting rights, and (ii) is the sole class preferred as to the payment of
dividends and payment upon liquidation.
"Preferred Stock Purchase Agreement" means the Preferred Stock Purchase
Agreement dated as of December 17, 1996, between CMGFC and ContiFinancial
Corporation.
"Purchase Agreement" means the Purchase and Sale Agreement, dated as of
December 17, 1996 between the Lender and CMGFC, as may be amended from time to
time pursuant to the terms thereof.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of December 17, 1996 between CMGFC and the Lender, as may be amended
from time to time pursuant to the terms thereof.
"REMIC" means Real Estate Mortgage Investment Conduit.
"Residual Interest" means the certificate or certificates representing
the residual interest in a securitized mortgage pool of Securitizable Mortgage
Loans, with the prior written permission of the Lender as to such interest or
interests, originated by the Borrower and at least one class of the certificates
relating to such pool shall have been rated in one of the two highest rating
categories by Xxxxx'x Investors Service, Inc., Standard and Poor's Corporation
or any other nationally recognized statistical rating agency and sold by,
through or to the Lender or one of its Affiliates in a public offering or
private placement.
11
12
"Residualholder" means CMG Funding Securities Corp., a Delaware
corporation, and its successors.
"Residualholder Collateral" has the meaning as set forth Section 5.01.
"Secured Note" means any secured promissory note evidencing the related
Loan, in the form attached hereto as Exhibit A-1 or Exhibit A-2.
"Securitizable Mortgage Loan" means a mortgage loan originated pursuant
to, and which complies with, the Securitizable Mortgage Loan Underwriting
Guidelines and is security for a Collateralized Advance hereunder.
"Securitizable Mortgage Loan Underwriting Guidelines" means the
underwriting guidelines for Securitizable Mortgage Loans attached hereto as
Exhibit D, as may be amended from time to time by the Borrower and, with respect
to any Material Changes, after obtaining the Lender's prior written consent
regarding such Material Changes.
"Securitization" means the securitization of mortgages with
ContiFinancial Services Corporation as lead or sole underwriter or placement
agent.
"Senior Officers" means the Chairman of the Board, the Chief Executive
Officer, the Chief Operating Officer, the Chief Financial Officer, the General
Counsel, the Controller, the President, the Executive Vice President, the Senior
Vice President for Administration, the Senior Vice President for Secondary
Marketing, the Senior Vice President for Retail Production, the Senior Vice
President Wholesale Production, and any other Senior Vice President of the
Borrower and any other Person who performs similar policy-making functions for
the Borrower on a regular basis.
"Servicing Agreement" means the Servicing Agreement dated as of December
17, 1996 among CMGFC, ContiMortgage Corporation and Xxxxx Fargo Bank, as may be
amended from time to time pursuant to the terms thereof.
"Share Fair Market Value" means, as of any date of determination, a
price per share of Common Stock determined by dividing (x) the product of (i)
the pretax profits of the Borrower for the twelve (12) month period ended as of
the most
12
13
recent fiscal quarter and (ii) five (5) by (y) the number of shares of Common
Stock outstanding on the date of grant (on a fully diluted basis assuming the
conversion of all convertible securities of the Borrower and the exercise of all
options to purchase the Common Stock or other securities of the Borrower which
have been granted); provided, however in no event shall such price per share be
less than $3.96 per share of Common Stock.
"Significant Documents" means this Standby Agreement, the Purchase
Agreement, the Subordinated Debt Agreement, the Registration Rights Agreement,
the Investment Banking Services Agreement, the Secured Notes under both this
Standby Agreement and the Subordinated Debt Agreement, the Letter Agreement, the
Preferred Stock Purchase Agreement, the Custodial Agreement, the Merger
Agreement and the Servicing Agreement.
"Standby Agreement" means this Standby Financing and Working Capital
Agreement dated as of December 17, 1996 among the Borrower, the Lender and the
Residualholder, as may be amended from time to time pursuant to the terms
hereof.
"Stock Option Plan" means the employee stock option plan of the Borrower
which appears as Exhibit F hereto and which has been approved by the management
of the Borrower and by the Lender.
"Subordinated Debt Agreement" means the Subordinated Debt Agreement
dated as of December 17, 1996 between CMGFC and the Lender, as may be amended
from time to time pursuant to the terms hereof.
"Subsidiaries" means those entities in which any Person has an ownership
interest sufficient to cause the assets and liabilities of such entities to be
consolidated with those of such Person in the preparation of a consolidated
balance sheet of such Person in accordance with GAAP.
"Weighted Average Haircut" means the weighted average of the related
Haircut for all Collateral securing Collateralized Advances financed hereunder
weighted in proportion to the Financing Value of each item of Collateral.
"Working Capital Advance" means an amount of funds borrowed by the
Borrower pursuant to the provisions of Section 2.04 of this Standby Agreement,
which is secured through the
13
14
grant to the Lender by the Borrower of a general security interest in the assets
of the Borrower.
"Working Capital Advance Maturity Date" means, with respect to any
Working Capital Advance, the date agreed upon in writing by the parties, or, in
the absence of such an agreement, the earlier of (a) the first anniversary of
such Working Capital Advance, (b) the Advance Termination Date or (c) the
Working Capital Advance Termination Date.
"Working Capital Advance Termination Date" means the later to occur of
(i) the first anniversary of the date of this Standby Agreement, or (ii) the
second anniversary of the date of this Standby Agreement following the Lender's
most recent notice of renewal of the working capital component of this Standby
Agreement pursuant to Section 2.12 hereof, if any.
"Working Capital Loan" means the aggregate of the sums borrowed by the
Borrower from the Lender pursuant to all Working Capital Advances which remain
unrepaid, together with accrued and unpaid interest thereon.
ARTICLE II.
STANDBY AND WORKING CAPITAL FACILITY
Section 2.01. General Advance Requirements. (a) From time to
time pursuant to the terms of this Standby Agreement, the Borrower may request
to borrow Advances from the Lender. The Borrower hereby acknowledges that,
notwithstanding the fact that the Secured Note is secured by the Collateral, the
Borrower Collateral and the Residualholder Collateral, the obligations of the
Borrower under the Secured Note are recourse obligations of the Borrower. The
Borrower shall not request an Advance from the Lender with an initial Advance
Balance less than $250,000.
(b) The Lender shall be obligated to make each such Advance not
more than five Business Days following the date of receipt by the Lender of a
written notification of such Advance from the Borrower, substantially in the
form of (i) Exhibit E-2 for Working Capital Advances and (ii) Exhibit
14
15
E-1 for Collateralized Advances and satisfaction of the requirements of Section
2.02.
(c) An Advance hereunder may only be requested if the proceeds
thereof are to be used for one or more of the purposes set forth on Schedule I
hereto.
Section 2.02. Advance Conditions Precedent. With respect to each
proposed Advance the following conditions precedent shall have been met as of
the related Funding Date of such Advance:
(a) with respect to the initial Advance made hereunder, the
Borrower shall have executed the Significant Documents;
(b) all of the representations and warranties of the Borrower and
the Residualholder in this Standby Agreement shall be true and correct in all
material respects as of such Funding Date;
(c) neither a Monetary Default nor a Non-Monetary Default shall
have occurred and be continuing and no Event of Default shall have occurred;
(d) the Borrower shall have delivered to the Lender (i) the
certificate or certificates evidencing the Collateral, each with all necessary
stock or bond powers or transfer instruments executed in blank by the
appropriate representatives of the Borrower, (ii) such other documents as the
Lender shall deem necessary or convenient to perfect its first priority security
interest in such Collateral, including, without limitation, the filing or
amendment of all necessary UCC Statements in all applicable jurisdictions and
any signature guarantees and (iii) such other documents as the Lender shall deem
necessary or convenient to perfect its security interest in the Borrower
Collateral and the Residualholder Collateral including, without limitation the
filing or amendment of all necessary UCC Statements in all applicable
jurisdictions and any signature guarantees;
(e) the Borrower has obtained the Lender's prior written approval
of the related servicer and the related trustee employed in the securitization
which issued the Residual Interest or I/O Interest which is to serve as
Collateral for the requested Advance; and
15
16
(f) the Borrower shall have delivered the Pledged Shares together
with appropriate stock powers to the Lender (or the Lender's designee).
Section 2.03.Collateralized Advance Requirements.
(a) the Lender's obligation to make Collateralized Advances to
the Borrower shall terminate on the Advance Termination Date.
(b) In no event shall any Collateralized Advance be made which
would cause the sum of (i) the Aggregate Collateralized Advance Balance and (ii)
the Aggregate Working Capital Advance Balance to exceed the Maximum
Collateralized Advance Aggregate Amount.
(c) Each Collateralized Advance on the related Funding Date shall
be for an amount equal to the lowest of:
(i) the amount requested by the Borrower on such Funding
Date;
(ii) the sum of the Effective Advancing Values for each item
of Collateral pledged to collateralize such Advance; or
(iii) the amount by which (A) Aggregate Available
Collateralized Advance Amount on such Funding Date exceeds (B) the sum
of (x) the Aggregate Collateralized Advance Balance and (y) the
Aggregate Working Capital Advance
Balance, if any.
Section 2.04.Working Capital Advance Requirements.
(a) The Lender's obligation to make Working Capital Advances to
the Borrower shall terminate on the Working Capital Advance Termination Date.
(b) In no event shall any Working Capital Advance be made which
would cause the Aggregate Working Capital Advance Balance to exceed the Maximum
Working Capital Advance Aggregate Amount.
(c) In no event shall any Working Capital Advance be made which
would cause the sum of the (i) the Aggregate Working Capital Advance Balance and
(ii) the Aggregate
16
17
Collateralized Advance Balance to exceed the Maximum Collateralized Advance
Aggregate Amount.
(d) Prior to requesting a Working Capital Request hereunder
during any calendar year, the Borrower shall have delivered to the Lender an
annual operating and capital budget in full compliance with Section 4.01(t) for
such calendar year.
Section 2.05.Interest Payments. (a) Interest shall accrue daily
on each day during each Accrual Period on each Advance from and including the
Funding Date of such Advance at a rate equal to the product of (i) 1/360, (ii)
the related Interest Rate, and (iii) the related Advance Balance for such
Advance on such day. With respect to each Accrual Period, the Lender shall
notify the Borrower on the related Determination Date of the amount of interest
which accrued on the Loan during such Accrual Period and such accrued interest
shall be due and payable on the related Payment Date. The Lender's failure to
notify the Borrower of the accrued interest due on any Determination Date shall
not affect the Borrower's obligation to pay the interest due on the related
Payment Date.
(b) If any payment with respect to any Advance which is due under
the terms of this Standby Agreement is not paid when due, then commencing on the
day such payment is not made and continuing until the day such payment is
finally made, all interest payments under this Standby Agreement shall use the
Default Rate rather than the Interest Rate to calculate the interest which is to
be paid under this Standby Agreement.
(c) It is intended that the rate of interest on any Advance
hereunder shall never exceed the maximum rate, if any, which may be legally
charged on this Loan, and if the provisions for interest hereunder would result
in a rate higher than such maximum rate, interest shall nevertheless be limited
to such maximum rate and any amounts which may be paid toward interest in excess
of such maximum rate shall be applied to the reduction of principal, or, at the
option of the Lender, returned to the Borrower.
Section 2.06.Collateralized Advance Principal Payments. (a) Each
Collateralized Advance shall mature and the related Advance Balance shall be due
and payable, together
17
18
with all interest accrued and unpaid thereon, on the related Advance Maturity
Date.
(b) In the event that any Advance Balance is not repaid in full
on the related Advance Maturity Date, the Aggregate Advance Balance shall
immediately become due and payable and the Lender may exercise all rights and
remedies available to it as the holder of a first perfected security interest
under the New York UCC.
(c) If on any date the amount of (i) the Aggregate Collateralized
Advance Balance is greater than (ii) the Aggregate Available Collateralized
Advance Amount on such date, then the Borrower shall, within two Business Days
after receiving notice thereof from the Lender, prepay the related Loan in an
amount necessary to reduce the amount of the Aggregate Collateralized Advance
Balance to the Aggregate Available Collateralized Advance Amount.
(d) If no Working Capital Advances remain outstanding, the
Borrower may at any time voluntarily prepay all or any part of any
Collateralized Advance from its own funds; provided that if such prepayment is
not made on a Payment Date the amount of prepayment must be $50,000 or greater.
(e) If at any time during the term of this Standby Agreement, the
Borrower shall effect a public sale of any of its capital stock, then within
thirty days of the initial issuance of such capital stock to the public, the
Borrower shall prepay all amounts due hereunder; provided, however, that if the
underwriter of such public sale of capital stock reasonably believes that such
prepayment will make a public sale impossible, then the Borrower shall prepay
the largest amount the underwriter reasonably believes will not adversely affect
such public sale.
Section 2.07. Working Capital Advance Principal Payments. (a)
Each Working Capital Advance shall mature and the related Advance Balance shall
be due and payable, together with all interest accrued and unpaid thereon, on
the related Working Capital Advance Maturity Date.
(b) The Borrower may at any time voluntarily prepay any Working
Capital Advance from its own funds; provided that
18
19
if such prepayment is not made on a Payment Date the amount of prepayment must
be $50,000 or greater.
(c) If at any time during the term of this Standby Agreement, the
Borrower shall effect a public sale of any of its capital stock, then within
thirty days of the initial issuance of such capital stock to the public the
Borrower shall prepay no less than 100% of the outstanding Advance Balance of
all of the Working Capital Advances.
(d) In the event that any Advance Balance of Working Capital
Advance is not repaid in full on the related Working Capital Advance Maturity
Date, the Aggregate Advance Balance shall immediately become due and payable and
the Lender may exercise all rights and remedies available to it as the holder of
a first perfected security interest under the New York UCC.
Section 2.08.Collateral. (a) The Borrower and the Residualholder
shall deliver to the Lender, no later than on the Funding Date of any
Collateralized Advance, the related Collateral, which the Lender shall hold
pursuant to the terms of this Standby Agreement.
(b) The Borrower and the Residualholder each hereby pledges all
of its right, title, and interest in and to, and grants a first lien and
security interest in, the Collateral to the Lender to secure (i) first, the
repayment of principal and interest on any Advance and all other amounts owing
to the Lender pursuant to this Standby Agreement, and (ii) second, the repayment
of any amounts owing to the Lender pursuant to the Purchase Agreement.
(c) As additional security for its obligations hereunder, the
Borrower and the Residualholder hereby assigns to the Lender all its right,
title and interest in any distributions it is entitled to receive in respect of
any Collateral pledged hereunder or pursuant to the Purchase Agreement. The
Borrower and the Residualholder agree to execute any and all documents requested
by the Lender to evidence the assignment of the right to receive such
distributions and to take all actions necessary to effectuate any assignment
made pursuant to this subsection. All amounts received in respect of such
assignment shall be immediately deposited into the Collection Account. With
respect to any Accrual Period, the related Aggregate Cashflow shall be
19
20
applied to make payments on the Loans on the related Payment Date pursuant to
the terms of this Standby Agreement, in the manner described in Section 2.09.
(d) The Borrower hereby authorizes the Lender, at the Borrower's
expense, to file such financing statement or statements relating to the
Collateral without the Borrower's signature thereon as the Lender at its option
may deem appropriate, and appoints the Lender as the Borrower's
attorney-in-fact, without requiring the Lender, to execute any such financing
statement or statements in the Borrower's name and to perform all other acts
which the Lender deems appropriate to perfect and continue the security interest
granted hereby and to protect, preserve and realize upon the Collateral,
including, but not limited to, the right to endorse notes, complete blanks in
documents and sign assignments on behalf of the Borrower as its
attorney-in-fact. This power of attorney is coupled with an interest and is
irrevocable without the Lender's consent. Notwithstanding the foregoing, the
power of attorney hereby granted shall only be effective during the occurrence
and continuance of any Event of Default hereunder.
Section 2.09. Information. The Borrower shall deliver to the
Lender, with respect to each securitized pool of mortgage loans, underlying any
Collateral; (i) any report relating to such pool, including, without limitation,
any trustee's report; (ii) any notice of transfer of servicing; (iii) monthly
reports detailing the delinquency, loss, prepayment and foreclosure experience
of each such pool; (iv) any public document filed with any regulatory body or
agency; and (v) any other such document or information as the Lender may request
from time to time.
Section 2.10. Collateral Valuation. The Lender, in its sole
discretion, shall have the right to change (a) the assumptions with respect to
the valuation of the Collateral, and (b) the valuation of Collateral set forth
on the Financing Value Schedule, in order to reflect actual Collateral
performance and actual changes in facts affecting the Collateral performance and
market value.
Section 2.11. Application of Payments.
Any payment made under this Standby Agreement from funds which
comprise the Aggregate Cashflow shall, unless
20
21
otherwise specified herein, be applied (i) first, to pay any unpaid fees,
costs, expenses or obligations (A) which arise hereunder, (B) which are to be
paid by the Borrower, and (C) which are due and payable, (ii) second, to pay any
accrued and unpaid interest on the related Advances pursuant to Section 2.05
which is due and payable on or prior to the date of such payment, (iii) third,
to make required principal payments on the related Collateralized Advances
pursuant to Section 2.06(c) and (e) which are due and payable on or prior to the
date of such payment, and (iv) fourth, to reduce the outstanding principal
balance of the Working Capital Advances to the date of such payment, and (v)
finally, to reduce the outstanding principal balance of the Collateralized
Advances.
Any payment made under this Standby Agreement from funds other than from the
Aggregate Cashflow shall, unless otherwise specified herein, be applied (i)
first, to pay any unpaid fees, costs, expenses or obligations (A) which arise
hereunder, (B) which are to be paid by the Borrower, and (C) which are due and
payable, (ii) second, to pay any accrued and unpaid interest on the related
Advances pursuant to Section 2.05 which is due and payable on or prior to the
date of such payment, (iii) third, to make required principal payments on the
related Working Capital Advances pursuant to Section 2.07 which are due and
payable on or prior to the date of such payment, (iv) fourth, to make required
principal payments on the related Collateralized Advances pursuant to Section
2.06(c) and (e) which are due and payable on or prior to the date of such
payment, (v) fifth, to reduce the outstanding principal balance of the Working
Capital Advances, and (vi) finally, to reduce the outstanding principal balance
of the Collateralized Advances.
Section 2.12. Renewal Notice. The Lender shall give the Borrower
at least ninety (90) days prior written notice of its respective intention to
renew or not renew the standby facility component or the working capital
component of this Standby Agreement, as the case may be, prior to the scheduled
expiration date of such component. If the standby facility component or the
working capital component of this Standby Agreement are not renewed prior to
their respective scheduled expiration dates, then each such component that was
not renewed shall automatically expire.
ARTICLE III.
21
22
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Borrower. (a) The
Borrower hereby makes the following representations and warranties, as of the
date of this Standby Agreement and as of each Funding Date:
(i) the Borrower has been duly organized and is validly
existing as a corporation under the Laws of the State of Delaware;
(ii) the Borrower is duly licensed where required as a
"Licensee" or is otherwise qualified in each state in which it transacts
business and is not in default of such state's applicable Laws, rules
and regulations;
(iii) the Borrower has the requisite power and authority and
legal right to own and xxxxx x xxxx on all of its right, title and
interest in and to the Collateral and the Borrower has the requisite
power and authority and legal right to execute and deliver, engage in
the transactions contemplated by, and perform and observe the terms and
conditions of, the Significant Documents;
(iv) the Borrower is able to meet its obligations when they
become due and is not in default (beyond any applicable cure period)
under any mortgage, borrowing agreement or other instrument or agreement
pertaining to indebtedness for borrowed money, and the execution and
delivery by the Borrower of the Significant Documents will not result in
any violation of any such mortgage, instrument or agreement to which the
Borrower is a party or by which its property is bound;
(v) (A) all audited and unaudited financial statements,
budgets and certificates of the Borrower or any of its officers
furnished to the Lender are true and complete and do not omit to
disclose any material liabilities, contingent or otherwise, or other
facts relevant to the condition of the Borrower; and (B) all such
audited financial statements have been prepared in accordance with GAAP;
(vi) no consent, approval, authorization or order of,
registration or filing with, or notice to any Governmental Authority or
court is required under
22
23
applicable Law in connection with the execution, delivery and performance
by the Borrower of the Significant Documents;
(vii) there is no action, proceeding or investigation pending
or, to the best knowledge of the Borrower, threatened against it before
any court, administrative agency or other tribunal (A) asserting the
invalidity of any of the Significant Documents, (B) seeking to prevent
the consummation of any of the transactions contemplated by any of the
Significant Documents, or (C) which might materially and adversely
affect the performance by the Borrower of its obligations under, or the
validity or enforceability of, any of the Significant Documents;
(viii) since the date of this Standby Agreement, there has been
no material adverse change in the business, operations, financial
condition, properties or business plan of the Borrower, taken as a
whole;
(ix) the information provided by the Borrower in each
Financing Value Schedule is true and complete as of the date of the
related Advance;
(x) the person or persons signatory to this Standby
Agreement and any document executed pursuant to it on behalf of the
Borrower have full power and authority to bind the Borrower;
(xi) each of the Significant Documents has been duly
authorized and executed by the Borrower and is a legal, valid and
binding agreement and is enforceable against the Borrower in accordance
with its terms;
(xii) the execution, delivery and performance of any of the
Significant Documents, and the exhibits attached thereto, if any, and
the other documents contemplated herein, and the performance by it of
all transactions contemplated herein and therein, (A) have been duly
authorized by all necessary and appropriate corporate action on the part
of the Borrower, (B) will not violate any provision of the Certificate
of Incorporation or Bylaws of the Borrower, (C) does not conflict with
any term or provision of any other agreement to which the Borrower is a
party, and (D) will
23
24
not cause a breach of any applicable federal, state or municipal
governmental Law or regulations, or any order, judgment, writ, award,
injunction or decree of any court or Governmental Authority which is
binding upon the Borrower;
(xiii) the Borrower has not pledged any of its capital stock to
any entity or person;
(xiv) neither the Borrower nor any Affiliate of the Borrower
is involved in the day-to-day management of the Residualholder;
(xv) there has been no (A) filing against the Borrower of a
petition for liquidation, reorganization, arrangement or adjudication as
a bankrupt or similar relief under the bankruptcy, insolvency or similar
laws of the United States or any state or territory thereof or of any
foreign jurisdiction as to which the Borrower fails to secure dismissal
within 60 days of such filing, or (B) commencement by the Borrower of a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Borrower
to the entry of an order for relief in an involuntary case under any
such law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Borrower or of any substantial part of its property, or
the making by the Borrower of any general assignment for the benefit of
creditors, or the failure of the Borrower generally to pay its debts as
such debts become due, or the taking of corporate action by the Borrower
in furtherance of any of the foregoing.
(xvi) neither the Borrower nor any Affiliate of the Borrower
(A) pays the Residualholder's expenses; (B) guarantees the
Residualholder's obligations, or (C) advances funds to the
Residualholder for the payment of expenses or otherwise (other than
additional contributions of capital);
(xvii) all business correspondence of the Borrower and other
communications are conducted in the Borrower's own name, on its own
stationery and through a separately-listed telephone number;
24
25
(xviii) the Borrower does not act as agent for the
Residualholder, but instead presents itself to the public as a
corporation separate from the Residualholder;
(xix) all representations and warranties made pursuant to this
Standby Agreement and any Significant Documents are and will be true and
correct at the time when made and at all times thereafter under this
Standby Agreement and any Significant Documents or, if limited to a
specific date, as of the date to which they refer;
(xx) to the knowledge of the Borrower, all written information
and documents or copies of documents furnished to the Lender pursuant to
or in connection with this Standby Agreement and any Significant
Documents are and will be true and correct in all material respects at
the time when made and at all times thereafter under this Standby
Agreement and any Significant Documents or, if limited to a specific
date, as of the date to which they refer;
(xxi) Immediately after the pledge, assignment and transfer to
the Lender as herein contemplated, all necessary action will have been
taken to grant a valid and enforceable first priority perfected security
interest in the Collateral, the Borrower Collateral, and the
Residualholder Collateral (including the filing or amendment of UCC
Statements in all applicable jurisdictions, if necessary) free and clear
of all liens and encumbrances, except for those subsequent liens which,
by operation of law take priority over a previously perfected security
interest; and
(xxii) The Borrower has not originated title I home improvement
loans during any immediately preceding three consecutive calendar month
period such that such loans represents more than 49% of all loans which
the Borrower originated during such three calendar month period,
determined on the basis of the initial principal balances of the loans.
(b) The Borrower agrees and acknowledges that each of the
representations and warranties set forth in subsection (a) hereof and Section
3.02(a) below (i) is material and being relied upon by the Lender, (ii) is true
in all respects as of the date of this Standby Agreement, and (iii) shall
survive
25
26
the execution, termination and expiration of this Standby Agreement.
Section 3.02. Representations and Warranties of the Residualholder. (a)
the Residualholder hereby makes the following representations and warranties as
of the date of this Standby Agreement:
(i) the Residualholder has been duly organized and is
validly existing as a corporation under the Laws of the State of
Delaware;
(ii) the Residualholder has the requisite power and authority
and legal right to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and conditions of,
this Standby Agreement to be performed by it;
(iii) no consent, approval, authorization or order of,
registration or filing with, or notice to any Governmental Authority or
court is required under applicable Law in connection with the execution
and delivery by the Residualholder of this Standby Agreement;
(iv) the person or persons signatory to this Standby
Agreement and any document executed pursuant to it on behalf of the
Residualholder have full power and authority to bind the Residualholder;
(v) this Standby Agreement is valid, binding and enforceable
against the Residualholder in accordance with its terms;
(vi) the execution, delivery and performance of this Standby
Agreement, and the exhibits attached hereto and the other documents
contemplated herein to which the Residualholder is a party, and the
performance by the Residualholder of all transactions contemplated
herein and therein (A) have been duly authorized by all necessary and
appropriate corporate action on the part of the Residualholder, (B) will
not violate any provision of the Certificate of Incorporation or Bylaws
of the Residualholder, and (C) will not cause a breach of any applicable
federal, state or municipal governmental Law or regulations, or any
order, judgment, writ, award,
26
27
injunction or decree of any court or Governmental Authority which is
binding upon the Residualholder;
(vii) the Residualholder is a limited purpose corporation
whose activities are restricted in its Certificate of Incorporation;
(viii) the Residualholder shall at all times have at least one
independent director and officer, both of which positions may be held by
the same person.
(ix) the Residualholder is not involved in the day-to-day
management of the Borrower;
(x) other than the payment of dividends, the return of
capital and additional contributions to capital by the Borrower, the
Residualholder engages in no intercorporate transactions with the
Borrower or any Affiliate of the Borrower;
(xi) the financial statements and books and records of the
Residualholder and the Borrower reflect the separate corporate existence
of the Residualholder;
(xii) the Residualholder maintains separate corporate records
and books of account from the Borrower, holds regular corporate meetings
and otherwise observes corporate formalities and has a separate business
office from the Borrower;
(xiii) the Residualholder maintains its assets separately from
the assets of the Borrower and any Affiliate of the Borrower (including
through the maintenance of separate bank accounts), the Residualholder's
funds and assets, and records relating thereto, have not been and are
not commingled with those of the Borrower or any Affiliate of the
Borrower and the separate creditors of the Residualholder are entitled
to be satisfied out of the Residualholder's assets prior to any value in
the Residualholder becoming available to the Residualholder's
equityholders;
(xiv) the Residualholder does not (A) pay the expenses of the
Borrower or any Affiliate of the Borrower, (B) guarantee the obligations
of any other
27
28
Person, or (C) advance funds to the Borrower or any Affiliate of the
Borrower;
(xv) all business correspondence of the Residualholder and
other communications are conducted in the Residualholder's own name, on
its own stationery and through a separately-listed telephone number;
(xvi) the Residualholder does not act as agent for the
Borrower, but instead presents itself to the public as a corporation
separate from the Borrower;
(xvii) the Residualholder has no debt and has not and will not
incur any indebtedness, except for operating expenses and dividends
declared and unpaid;
(xviii) Immediately after the pledge, assignment and transfer to
the Lender as herein contemplated, all necessary action will have been
taken to grant a valid and enforceable first priority perfected security
interest in the Collateral (including the filing or amendment of UCC
Statements in all applicable jurisdictions, if necessary) free and clear
of all liens and encumbrances, except for those subsequent liens which,
by operation of law take priority over a previously perfected security
interest;
(xix) all representations and warranties made pursuant to this
Standby Agreement and any Significant Documents are and will be true and
correct at the time when made and at all times thereafter under this
Standby Agreement and any Significant Documents or if limited to a
specific date, as of the date to which they refer; and
(xx) to the knowledge of the Residualholder, all written
information and documents or copies of documents furnished to the Lender
pursuant to or in connection with this Standby Agreement and any
Significant Documents are and will be true and correct in all material
respects at the time when made and at all times thereafter under this
Standby Agreement and any Significant Documents or, if limited to a
specific date, as of the date to which they refer.
(b) the Residualholder agrees and acknowledges that each of the
representations and warranties set forth in
28
29
subsection (a) hereof (i) is material and being relied upon by the Lender, (ii)
is true in all respects as of the date of this Standby Agreement, and (iii)
shall survive the execution, termination and expiration of this Standby
Agreement.
Section 3.03. Representations and Warranties of the Lender. (a) The
Lender hereby makes the following representations and warranties as of the date
of this Standby Agreement:
(i) the Lender has been duly organized and is validly
existing as a limited liability company under the Laws of the State of
Delaware;
(ii) the Lender has the requisite power and authority and
legal right to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and conditions of,
this Standby Agreement to be performed by it;
(iii) no consent, approval, authorization or order of,
registration or filing with, or notice to any Governmental Authority or
court is required under applicable Law in connection with the execution
and delivery by the Lender of this Standby Agreement;
(iv) the person or persons signatory to this Standby
Agreement and any document executed pursuant to it on behalf of the
Lender have full power and authority to bind the Lender;
(v) this Standby Agreement is valid, binding and enforceable
against the Lender in accordance with its terms; and
(vi) the execution, delivery and performance of this Standby
Agreement, and the exhibits attached hereto and the other documents
contemplated herein to which the Lender is a party, and the performance
by the Lender of all transactions contemplated herein and therein (A)
have been duly authorized by all necessary and appropriate corporate
action on the part of the Lender, (B) will not violate any provision of
the Articles of Organization of the Lender, (C) does not conflict with
any term or provision of any other agreement to which the Lender is a
party, and (D) will not cause a breach of any
29
30
applicable federal, state or municipal governmental Law or regulations,
or any order, judgment, writ, award, injunction or decree of any court
or Governmental Authority which is binding upon the Lender.
(b) The Lender agrees and acknowledges that each of the
representations and warranties set forth in subsection (a) hereof (i) is
material and being relied upon by the Borrower, (ii) is true in all respects as
of the date of this Standby Agreement, and (iii) shall survive the execution and
termination of this Standby Agreement.
ARTICLE IV.
COVENANTS OF THE BORROWER
Section 4.01.Affirmative Covenants of the Borrower. The Borrower
covenants and agrees with the Lender as follows:
(a) the Borrower shall timely make any payment of interest or
principal or any other sum, which has become due whether by acceleration or
otherwise (including the failure to make a mandatory prepayment), under the
terms of this Standby Agreement and the Secured Note and under any other
document evidencing or securing indebtedness of the Borrower to the Lender or
any of its Affiliates;
(b) The Borrower shall on each Payment Date, as long as any
principal or interest amount is outstanding on the Loans, (i) make a prepayment
on the Loans to the extent of the funds available from the Aggregate Cashflow
for the immediately preceding Accrual Period in accordance with the provisions
of Sections 2.06(c) and 2.11 and (ii) deliver a completed certificate, executed
by the President of the Borrower which states the current assets to current
liabilities ratio of the Borrower under GAAP for such month;
(c) the Borrower will notify the Lender in writing of any of the
following within three Business Days after a responsible officer of the Borrower
learns of the occurrence thereof, but in no event later than ten Business Days
following the occurrence thereof, describing the same and, if applicable,
further notifying the Lender, within four Business
30
31
Days after learning of the occurrence thereof, of any remedial steps being taken
with respect thereto:
(i) the occurrence or likelihood of occurrence of an Event of
Default hereunder;
(ii) the institution of any litigation, arbitration
proceeding or governmental proceeding with the amount in contest being
greater than $200,000 in the aggregate;
(iii) the entry of any judgment or decree against the Borrower
if the aggregate amount of all judgments and decrees then outstanding
against the Borrower exceeds $50,000 after deducting (i) the amount with
respect to which the Borrower is insured and with respect to which the
insurer has assumed responsibility in writing, and (ii) the amount for
which the Borrower is otherwise indemnified if the terms of such
indemnification are reasonably satisfactory to the Lender; or
(iv) an event of default under any material agreement of the
Borrower if such event of default would materially and adversely affect
the condition (financial or otherwise) or the operation of the Borrower
or its assets or would materially and adversely affect the performance
of its obligations and duties hereunder;
(d) in the event of a filing against the Borrower of a petition
for liquidation, reorganization, arrangement or adjudication as a bankrupt or
similar relief under the bankruptcy, insolvency or similar Laws of the United
States or any state or territory thereof or of any foreign jurisdiction or there
shall be appointed a receiver, conservator, liquidator, assignee, custodian,
trustee, sequestrator or other similar official of the Borrower or any
substantial part of the property of either or the ordering of the winding-up or
liquidation of either party's affairs, dismissal of such filing, appointment or
order shall be secured within 30 days of such filing;
(e) the Borrower shall maintain Consolidated Tangible Equity at
an amount greater than (i) $1,000,000 from the date of execution of this Standby
Agreement through the calendar year ending on December 31, 1997, (ii) $1,500,000
31
32
during the calendar year ending on December 31, 1998, and (iii) $2,000,000 at
all times thereafter;
(f) less than 10% of (i) the aggregate outstanding principal
balance of all loans serviced by the Borrower or (ii) the aggregate outstanding
principal balance of any pool of mortgage loans originated and/or purchased by
the Borrower and subsequently securitized is contractually delinquent for 91 or
more days;
(g) (i) the Borrower shall, promptly upon preparation, but in no
event later than 60 days following the end of its first three fiscal quarters,
deliver to the Lender its unaudited company-prepared consolidated and
consolidating financial statements as of the end of such fiscal quarter,
prepared in accordance with GAAP consistently applied and certified by the chief
financial officer of the Borrower; (ii) the Borrower shall, promptly upon
preparation, but in no event later than 90 days following the end of its fourth
fiscal quarter, deliver to the Lender (A) its audited and certified consolidated
and consolidating financial statements, including the consolidated and
consolidating balance sheets of the Borrower and the related statements of
income and cash flows and stating in comparative form the figures for the
corresponding date and period in the previous fiscal year, all in reasonable
detail and prepared in accordance with GAAP consistently applied, as of the end
of the most recently ended fiscal year, (B) the annual report, furnished by a
firm of independent public accountants, of the examination, which has been
conducted in compliance with the Uniform Single Audit Program for Mortgage
Bankers, of the Borrower's servicing performance and (C) a certificate from the
accountants preparing the Borrower's audited financial statements stating that
in the course of preparing the audited financial statements nothing came to
their attention indicating that the Borrower was not in compliance with the
terms of this Standby Agreement; (iii) beginning with the audit and
certification for the fiscal year ended September 30, 1997, audits and
certifications shall each be prepared by a nationally recognized independent
accounting firm and reasonably acceptable to the Lender; (iv) in all cases,
consolidated and consolidating financial statements shall include, without
limitation, balance sheets, profit and loss statements and statements of cash
flows; and (v) notwithstanding anything in this Standby Agreement to the
contrary, if (A) the audited and certified financial statements described in the
immediately
32
33
preceding sentence are not delivered within 90 days, as the case may
be, (B) such financial statement delivery delay is through no fault of the
Borrower, and (C) the Borrower provides the Lender with a notice specifying the
reason for the delay and a date, within a reasonable time period (as determined
by the Lender), on which such financial statements will be delivered and they
are so delivered; then failure to deliver such financial statements within 90
days, as the case may be, shall not be deemed to be an Event of Default for
purposes of this Standby Agreement;
(h) the Borrower shall in writing, promptly upon a responsible
officer of the Borrower learning of any breach of any representation, warranty,
covenant or material obligation under this Standby Agreement, notify the Lender
thereof;
(i) as requested by the Lender by written notice from time to
time, the Borrower shall, promptly upon filing, deliver to the Lender such
requested copies of all public filings made by the Borrower with any
Governmental Authority or quasi-governmental body;
(j) the Borrower shall comply with all Laws, ordinances,
governmental rules and regulations to which the Borrower is subject, and obtain
and keep in force any and all licenses, permits, franchises, or other
governmental authorizations from, give all such notices promptly to, register,
enroll or file promptly all such agreements, instruments or documents required
by applicable Laws with, and promptly take all such other legally required
action with respect to, any Governmental Authority or regulatory authority,
agency or official, as is required under any provision of any applicable Law and
that it is necessary (i) for the continued operation of any of the Borrower's
activities or business or the performance by the Borrower of any of its
agreements or obligations under this Standby Agreement or (ii) to ensure the
continuing legality, validity, binding effect or enforceability of this Standby
Agreement or any of the obligations hereunder of the Borrower necessary to the
ownership of its properties or to the conduct of its businesses;
(k) the Borrower shall do all things necessary to remain duly
incorporated, validly existing and in good standing as a domestic corporation,
as to CMGFC, or a limited liability company as to CMLC in its jurisdiction of
33
34
incorporation and maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted, except where the failure
to maintain such authority would not have a material adverse effect on the
ability of the Borrower to conduct its business or to perform its obligations
under the Significant Documents in the reasonable judgment of the Lender;
(l) at all times during which this Standby Agreement is in
effect, the Borrower shall possess sufficient net capital and liquid assets to
satisfy its obligations as they become due in the normal course of business;
(m) upon five days prior written notice, the Borrower shall
permit the Lender or its accountants, attorneys or other agents access to all of
its books and records for inspection and copying, at the Lender's expense,
during normal business hours at all places where the Borrower conducts business.
During the term of this Standby Agreement, the Borrower shall furnish the Lender
such periodic, special or other reports or information, whether or not provided
for herein, as shall be necessary, reasonable and appropriate in respect of the
purposes of this Standby Agreement;
(n) the Borrower shall pay and discharge all taxes, assessments
and governmental charges upon it, its income and properties as and when such
taxes, assessments and charges are due and payable, except and to the extent
only that such taxes, assessments and charges are being actively contested in
good faith and by appropriate proceedings, the Borrower shall maintain adequate
reserves on its books therefor;
(o) the Borrower shall file all federal, state and local tax
returns and other reports that the Borrower is required by Law to file and
maintain adequate reserves for the payment of all taxes, assessments,
governmental charges, and levies imposed upon it, its income, or its profits, or
upon any property belonging to it;
(p) the Borrower shall maintain thereafter, at its own expense,
an errors and omissions policy of insurance and a blanket fidelity bond with
broad coverage on all officers, directors, employees and agents of the Borrower
or its Affiliates with (A) its current insurer, Fidelity Deposit of Maryland
(Policy Number MPP000245700), or (B) responsible companies with a rating of "A"
or better by Best. Any such
34
35
fidelity bond shall protect the Borrower and the Lender against losses,
including forgery, theft, embezzlement and fraud of such persons. The insurance
policy and the bond shall each show the Lender as an additional insured and
shall provide that the insurers or bonding company shall give the Lender thirty
(30) days written notice prior to any cancellation. This provision shall not
diminish or relieve the Borrower from its duties and obligations as set forth in
this Standby Agreement. The minimum coverage under (i) any such errors and
omissions policy of insurance shall be three hundred fifty thousand dollars
($350,000), or such greater coverage amount as FNMA or FHMLC may require for the
Borrower and (ii) any such fidelity bond shall be at least equal to three
hundred fifty thousand dollars ($350,000), or such greater coverage amount as
FNMA or FHMLC may require for the Borrower. The deductible amount on such errors
and omissions policy of insurance and such fidelity bond shall not exceed
$25,000, without the written consent of the Lender;
(q) the Borrower shall furnish to the Lender, periodically upon
request, good standing certificates and officer's certificates to assure the
Lender of the Borrower's continued authority to perform the Borrower's
obligations under this Standby Agreement;
(r) the Borrower shall at all times maintain the ratio of its
current assets to its current liabilities at 1.05 or greater (each as determined
by GAAP);
(s) the Borrower shall subordinate any other debt (the
"Subordinated Debt") to all Advances, either individually or collectively, so
long as any Advances are outstanding. The Borrower shall not make any payments
of principal with respect to any Subordinated Debt so long as any Advances are
outstanding;
(t) the Borrower shall prepare annual operating and capital
budgets for its operations, acceptable to the Lender, on at least yearly
intervals, or at such other times as the Lender may reasonably request, and the
Borrower shall promptly furnish copies of such budgets to the Lender;
(u) the Borrower shall take all actions reasonably requested by
the Lender, from time to time, as the Lender may request in order to perfect,
maintain or release any security interest of the Lender; and
35
36
(v) the Borrower shall take all actions necessary to merge CMLC
into CMGFC on or before January 31, 1997.
Section 4.02.Negative Covenants of the Borrower. The Borrower
covenants and agrees with the Lender as follows:
(a) the Borrower shall not (i) assign or attempt to assign this
Standby Agreement or any rights hereunder, without first obtaining the specific
written consent of the Lender, or (ii) grant any security interest, lien or
other encumbrance on any Collateral other than (A) to the Lender or any of its
Affiliates or (B) with respect to taxes and assessments related thereto which
are not yet due and payable, or which are being contested in good faith;
(b) the Borrower shall not commence a voluntary case under any
applicable bankruptcy, insolvency or other similar Law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such Law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Borrower, or of any substantial part of its property, and the
Borrower shall not make any general assignment for the benefit of creditors, or
fail generally to pay debts as such debts become due, and shall not take
corporate action in furtherance of any of the foregoing;
(c) the Borrower shall not amend its Certificate of Incorporation
or Bylaws, or sell, transfer, or issue any capital stock other than pursuant to
the exceptions listed in clauses (i) through (vi) of paragraph (a) of the
definition of "Change of Control", without the prior written consent of the
Lender;
(d) the Borrower shall not suffer any materially adverse change
in its financial condition, operations, business, properties or business plan,
or the existence of any other condition which, in the Lender's sole judgement,
constitutes an impairment of the Borrower's ability to perform its obligations
under any of the Significant Documents and which condition is not remedied
within ten days after written notice to the Borrower thereof or, if the
condition cannot be fully remedied within said ten days, substantial progress
(which shall be in the Lender's sole judgement) has not been
36
37
made within said ten days, or such other period as may be mutually agreed upon,
toward remedy of the condition;
(e) the Borrower shall not default under any term or provision of
any other agreement between (i) the Borrower and (ii) the Lender or any of its
Affiliates or any third parties, which default shall not have been cured within
an applicable cure period, if any, and which default has, or with the passage of
time will have, a material adverse effect on the Borrower or its business. For
the purposes of this subsection, both (x) a final judgement for the payment of
money in excess of $50,000 in the aggregate rendered against the Borrower and
remaining in force unpaid, unbonded, undismissed, undischarged and unstayed
after the expiration of the period which is the longer of ten days or the
payment plan for such judgement and (y) the failure to make any payment in
excess of $50,000 to a third party pursuant to the terms of any other agreement,
and such failure is not cured within any applicable cure period, shall be deemed
material;
(f) the Borrower shall not declare any dividends or redeem any
capital stock without the prior written consent of the Lender;
(g) there shall be no Change of Control, and the Borrower shall
not merge or consolidate with or into, any other entity without the prior
written consent of the Lender;
(h) except for mortgage loans acquired with the intent of sale
(either on a whole-loan or securitization basis) and securities issued pursuant
to securitizations of the Borrower-owned loans, the Borrower shall not purchase,
lease or otherwise acquire all or substantially all of the assets or properties
of, or acquire any capital stock, equity interest, debt or other securities of
any other entity without the prior written consent of the Lender, which consent
shall not be unreasonably withheld;
(i) the Borrower shall not (i) dissolve or terminate its
existence, (ii) enter into any joint venture or become a partner in any
partnership, (iii) transfer any assets to any Affiliate except as otherwise
expressly permitted or contemplated hereby, (iv) operate any portion of the
business of the Borrower under an assumed name or doing business as (v) modify
or amend the Stock Option Plan without the consent of
37
38
the Lender, or (vi) create any subsidiary without the prior written consent of
the Lender;
(j) except for making and purchasing of mortgage loans in the
ordinary course of business, the Borrower shall not (i) make or permit to exist
investments in or loans or advances to any other person, entity or Affiliate,
including without limitation, any shareholders of the Borrower, or (ii) sell or
transfer 5% or more of the assets of the Borrower, except with the prior written
consent of the Lender;
(k) the Borrower shall not guarantee, endorse or otherwise in any
way become or be responsible for any obligations of any other person, entity or
Affiliate, including without limitation, whether directly or indirectly by
agreement to purchase the indebtedness of any other person or through the
purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purposes of paying or discharging
any indebtedness or obligation of such other person or otherwise; provided,
however, that nothing contained herein shall prevent the Borrower from
indemnifying its officers, directors and agents pursuant to its bylaws and its
articles of incorporation;
(l) the Borrower shall not, in the aggregate, make or commit to
make capital expenditures in excess of $50,000, with respect to individual
expenditures, or in excess of $200,000 during any fiscal year without the prior
written consent of the Lender;
(m) the Borrower will not commit any act in violation of
applicable Laws, or regulations promulgated pursuant thereto that relate to the
Borrower or that materially and adversely affect the operations or financial
condition of the Borrower;
(n) commencing with January 1, 1997, with respect to any fiscal
year, the aggregate amount of Bonus Compensation (other than any reasonable
production bonus tied to direct production performance) paid to the Borrower's
employees, including officers of the Borrower, during such year shall not exceed
12?% for the Borrower's fiscal years ending September 30, 1997 and September 30,
1998 and 10% thereafter of the net income before taxes after accounting for the
expense related to
38
39
base salary compensation, excluding Fringe Benefits, for such year;
(o) in any year the aggregate base salary compensation, excluding
Fringe Benefits, for the Senior Officers shall not exceed the amount paid to
such Senior Officers in the previous year by more than 5%;
(p) the Borrower shall not pledge or transfer any of the Pledged
Shares other than to the Lender;
(q) during the term of this Standby Agreement, the Borrower shall
not engage in any business other than as a mortgage or consumer loan originator
or as a provider of ancillary services or products;
(r) the Borrower shall not enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate, except as the Lender may otherwise approve
through prior written notice;
(s) the Borrower shall not enter into any financing arrangement
with any entity other than the Lender or incur any debt to any Person other than
the Lender (other than debt which is fully subordinated to any Loan or payment
obligation hereunder), except as the Lender may otherwise approve through prior
written notice;
(t) the Borrower shall not, without the prior written consent of
the Lender, issue, distribute, sell or transfer, or allow the issuance,
distribution, sale or transfer by the Borrower or by any Affiliate of the
Borrower, including, without limitation, the Controlling Shareholders of the
Borrower's capital stock or securities other than (A) the sale of the Borrower's
capital stock to the Lender occurring upon the exercise of the Conversion
Privilege, (B) the sale of the Borrower's capital stock pursuant to a firm
commitment public offering, (C) the transfer of the Borrower's capital stock for
estate planning purposes or pursuant to a domestic relations settlement or
order, (D) the transfer of the Borrower's Common Stock pursuant to the Stock
Option Plan (for a price greater than or equal to the Share Fair Market Value),
(E) pursuant to a buy/sell agreement solely among the borrower's existing
shareholders or (F) the sale, transfer or issuance of no more than five (5%)
percent of the Borrower's
39
40
Common Stock (which percentage shall be determined on a cumulative basis
together with all other sales, transfers or issuances of the Borrower's Common
Stock under this clause (F) from the date of this Agreement) at a price at least
equal to Share Fair Market Value with the prior written consent of the Lender;
(u) the Borrower shall not exercise any voting rights including,
without limitation, any rights to a clean-up call or any other similar provision
under any Securitization without the prior written consent of the Lender; and
(v) the Borrower shall not originate title I home improvement
loans during any immediately preceding three consecutive calendar month period
such that such loans represent more than 49% of all loans which the Borrower
originated during such three calendar month period determined on the basis of
the initial principal balances of the loans.
Section 4.03. Affirmative Covenants of the Residualholder.
(a) The Residualholder shall pay and discharge all taxes,
assessments and governmental charges upon it, its income and properties as and
when such taxes, assessments and charges are due and payable, except and to the
extent only that such taxes, assessments and charges are being actively
contested in good faith and by appropriate proceedings, and the Borrower shall
maintain adequate reserves on its books therefor;
(b) The Borrower shall file all federal, state and local tax
returns and other reports that the Borrower is required by law to file and
maintain adequate reserves for the payment of all taxes, assessments,
governmental charges and levies imposed upon it, its income, or its profits, or
upon any property belonging to it.
Section 4.04. Negative Covenants of the Residualholder. The
Residualholder covenants and agrees with the Lender as follows:
(a) the Residualholder shall not grant any security interest,
lien or other encumbrance on any Collateral or Residual Interests other than to
the Lender or any of its Affiliates;
40
41
(b) the Residualholder shall not commence a voluntary case under
any applicable bankruptcy, insolvency or other similar Law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such Law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Residualholder, or of any substantial part of its property, and
the Residualholder shall not make any general assignment for the benefit of
creditors, or fail generally to pay debts as such debts become due, and shall
not take corporate action in furtherance of any of the foregoing;
(c) the Residualholder shall not amend its Certificate of
Incorporation or Bylaws, or issue any capital stock, without the prior written
consent of the Lender;
(d) the Residualholder shall not suffer any adverse change in its
financial condition (other than due to the change in market value of the
Residual Interests held by the Residualholder), operations, business, properties
or prospects, or the existence of any other condition which, in the Lender's
sole discretion, constitutes an impairment of the Residualholder's ability to
perform its obligations under any of the Significant Documents and which
condition is not remedied within ten days after written notice to the
Residualholder thereof or, if the condition cannot be fully remedied within said
ten days, substantial progress (which shall be in the Lender's reasonable
judgment) has not been made within said ten days, or such other period as may be
mutually agreed upon, toward remedy of the condition;
(e) the Residualholder shall not declare any dividends or redeem
any capital stock;
(f) there shall be no transfer of the assets of the
Residualholder other than in the ordinary course of business and no sale or
transfer of stock of the Residualholder, and the Residualholder shall not merge
or consolidate with or into, any other entity without the prior written consent
of the Lender;
(g) the Residualholder shall not (i) dissolve or terminate its
existence, (ii) enter into any joint venture or become a partner in any
partnership, (iii) transfer any assets to any Affiliate except as otherwise
expressly permitted or
41
42
contemplated hereby, or (iv) issue or distribute any securities or create any
subsidiary without the prior written consent of the Lender;
(h) except for purchasing Residual Interests or I/O Interests,
the Residualholder shall not make or permit to exist investments in or loans to
any other person, entity or Affiliate, including without limitation, any
shareholders of the Residualholder; and
(i) the Residualholder shall not guarantee, endorse or otherwise
in any way become or be responsible for any obligations of any other person,
entity or Affiliate, including without limitation, whether directly or
indirectly by agreement to purchase the indebtedness of any other person or
through the purchase of goods, supplies or services, or maintenance of working
capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purposes of paying or
discharging any indebtedness or obligation of such other person or otherwise;
provided, however, that nothing contained herein shall prevent the
Residualholder from indemnifying its officers, directors and agents pursuant to
its bylaws and its articles of incorporation.
ARTICLE V.
SECURITY AGREEMENT
Section 5.01. Grant of Security Interest. The Borrower and the
Residualholder (together "CMG") each hereby grants a security interest to the
Lender, in all of the CMG's right, title and interest in all assets, including
the following, whether now owned or hereafter acquired or existing (all of the
following in paragraphs (a)-(i), with respect to the Borrower the "Borrower
Collateral" and with respect to the Residualholder, the "Residualholder
Collateral"):
(a) all mortgage loans, home equity line of credit loans, and
other loans originated or purchased by the Borrower;
(b) all rights to service or subservice mortgage loans, home
equity line of credit loans, and other loans;
42
43
(c) all certificates, residual or otherwise, issued to CMG in
connection with any securitization, including, without limitation, any
securitization involving a REMIC;
(d) all securities held by the Borrower, including, without
limitation, the securities of any subsidiary of the Borrower, including
the Residualholder and all securities held by the Residualholder;
(e) all equipment in all of its forms, wherever located,
including, without limitation, all furniture, furnishings, fixtures,
office supplies and all other similar types of tangible personal
property and all parts thereof and all accessions thereto, together with
all parts, fittings, alterations, substitutions, additions, accessories,
replacements and accessions thereto (any and all such equipment, parts
and accessions being the "Equipment");
(f) all approvals, permits, licenses, franchises, certificates
that are, by their terms or pursuant to applicable Law, assignable
without the consent of the Governmental Authority or the counterparty
thereto, as the case may be;
(g) all contracts or agreements to which the Borrower is a party
or to which the Residualholder is a party;
(h) all general intangibles, including but not limited to,
goodwill and tax refunds;
(i) all bank accounts now or hereafter held by the Borrower or
the Residualholder and all funds in such accounts together with all
monies (other than monies used to pay taxes), proceeds or sums due or to
become due thereon or therefrom (all such bank accounts, the "Bank
Accounts"), and all documents or instruments (including, but not limited
to, passbooks, certificates of deposit and receipts necessary to be
presented to withdraw funds or investments held in the Bank Accounts
(the "Account Documents"); and
(j) all proceeds of any and all of the foregoing Borrower
Collateral or Residualholder Collateral (including, without limitation,
proceeds which constitute
43
44
property of the types described in any of the paragraphs of this Section
5.01 and, to the extent not otherwise included, all payments under
insurance (whether or not the Lender is the loss payee thereof), or any
indemnity, warranty or guaranty, payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Borrower Collateral or
Residualholder Collateral.
Section 5.02. Security for the Borrower's Loans. Pursuant to this
Standby Agreement, the Borrower Collateral and the Residualholder Collateral
secures the prompt and complete payment when due of any Advances outstanding
under this Standby Agreement, payment obligations of the Borrower under this
Standby Agreement related thereto and the repayment of any amounts owing to the
Lender under the Purchase Agreement.
Section 5.03. Intention of Parties. This Standby Agreement is
intended by the parties hereto to constitute a security agreement within the
meaning of the New York UCC.
ARTICLE VI.
INDEMNIFICATION
Section 6.01. Indemnification by the Borrower. (a) If, in
connection with the matters that are the subject of this Standby Agreement, the
Lender becomes involved in any capacity in any action or legal proceeding
involving claims by any third party, the Borrower agrees to reimburse the
Lender, its Affiliates and their respective directors, officers, employees,
agents and controlling persons (each, an "Indemnified Party") promptly upon
request for all reasonable expenses (including the fees and disbursements of
legal counsel, the allocated costs of in-house counsel, and the cost of
investigation and preparation) as they are incurred, regardless of whether such
actions or proceedings are brought by the Borrower, its Affiliates or third
parties. The Borrower also agrees to indemnify and hold each Indemnified Party
harmless against all losses, claims, damages or liabilities of any kind, joint
or several, which such Indemnified Party may become subject to in connection
with, or relating to, or arising out of this Standby Agreement or the Secured
Notes, or any transactions contemplated hereby; provided, however, that the
Borrower shall not be liable under
44
45
the foregoing indemnity agreement in respect of any loss, claim, damage or
liability to the extent that a court having jurisdiction shall have determined
by a final judgment (not subject to further appeal) that such loss, claim,
damage or liability resulted primarily and directly from the willful misconduct
or gross negligence of such Indemnified Party.
(b) The agreements of the Borrower in this Article 6 shall be in
addition to any liabilities that the Borrower may otherwise have and shall apply
whether or not the Lender or any other Indemnified Party is a formal party to
any lawsuit, claim or other proceeding. Solely for purposes of enforcing such
agreements, the Borrower hereby consents to personal jurisdiction, service and
venue in any court in which any claim or proceeding which relates to the
services or matters that are the subject of this Standby Agreement is brought
against the Lender or other Indemnified Party.
Section 6.02. Indemnification by the Lender. If, in connection
with the matters that are the subject of the breach by the Lender of its
representation and warranty set forth in Section 3.03(a)(vi)(C) of this Standby
Agreement, the Borrower becomes involved in any capacity in any action or legal
proceeding involving claims by any third party, the Lender agrees to reimburse
the Borrower, its Subsidiaries and its Affiliates and their respective
directors, officers, employees, agents and controlling persons (each, a
"Borrower Indemnified Party") promptly upon request for all reasonable expenses
(including the fees and disbursements of legal counsel, the allocated costs of
in-house counsel, and the cost of investigation and preparation) as they are
incurred, regardless of whether such actions or proceedings are brought by the
Lender, its Affiliates or third parties. The Lender also agrees to indemnify and
hold each Borrower Indemnified Party harmless against all losses, claims,
damages or liabilities of any kind, joint or several, which such Borrower
Indemnified Party may become subject to in connection with, or relating to, or
arising out of the breach by the lender of its representation and warranty set
forth in Section 3.03(a)(vi)(C) of this Standby Agreement; provided, however,
that the Lender shall not be liable under the foregoing indemnity agreement in
respect of any loss, claim, damage or liability to the extent that a court
having jurisdiction shall have determined by a final judgment (not subject to
further appeal) that such loss, claim, damage or liability resulted
45
46
primarily and directly from the willful misconduct or gross negligence of such
Borrower Indemnified Party.
ARTICLE VII.
EVENTS OF DEFAULT
Section 7.01. Occurrence of an Event of Default. An "Event of
Default" shall occur:
(a) immediately upon the occurrence of a Monetary Default;
provided, however, that if the Borrower fails to pay the interest due on
any Payment Date, an "Event of Default" shall occur only if the Borrower
has not paid such interest within two Business Days following such
Payment Date;
(b) ten days after the occurrence of a Non-Monetary Default;
provided, however, that an "Event of Default" will not occur until ten
days after the occurrence of a Non-Monetary Default if the ability to
cure, and substantial effort towards curing, such Non-Monetary Default
can be demonstrated in writing satisfactory to the Lender in its sole
discretion; provided, further, that if it is not possible or practicable
within 20 Business Days to cure a Non-Monetary Default, an "Event of
Default" shall be deemed to have occurred immediately upon the
occurrence of such Non-Monetary Default;
(c) five days after the occurrence of an event of default or
material breach under (i) any of the Significant Documents other than
this Standby Agreement, (ii) any other material agreement, including,
but not limited to, any warehouse agreement, credit agreement or
financing agreement in which the Borrower is a party, (iii) the
Warehouse Agreement dated as of March 27, 1996 (the "RFC Warehouse
Agreement") between the Borrower and RFC ("RFC"), or any agreement which
replaces the RFC Agreement, whether with RFC or another lender; the
Warehouse Agreement dated as of August 20, 1996, (the "ContiMortgage
Warehouse Corporation Agreement") between CMLC and ContiMortgage
("ContiMortgage") or any agreement which replaces the ContiMortgage
Warehouse Agreement, whether with ContiMortgage or another lender; the
46
47
Warehouse Agreement dated as of April 9, 1996 (the "Pacific Warehouse
Agreement") between CMLC and Pacific South West Bank ("Pacific") or any
agreement which replaces Pacific or another lender or the Warehouse
Agreement dated as of May 30, 1996 (the "First Collateral Warehouse
Agreement") between CMLC and Associates Commercial Corporation doing
business as First Collateral Services ("First Collateral") or any
agreement which replaces the First Collateral Warehouse Agreement,
whether with First Collateral or another lender; provided, however, that
an "Event of Default" will not occur until ten days after the occurrence
of such event of default or material breach if the ability to cure, and
substantial effort towards curing, such event of default or material
breach can be demonstrated in writing satisfactory to the Lender in its
sole discretion; provided, further, that if it is not possible or
practicable within 20 Business Days to cure such event of default or
material breach, an "Event of Default" shall be deemed to have occurred
immediately upon the occurrence of such event of default or material
breach; or
(d) if (i) the Merger Agreement has not closed or (ii) all
of the Significant Documents have not been executed and closed by March
31, 1997.
Section 7.02. Effect of an Event of Default. Upon the
occurrence of an Event of Default:
(a) the Lender may declare the principal of each Secured
Note then outstanding, together with all interest accrued thereon and
any other amounts accruing under this Standby Agreement to be
immediately due and payable, and all such amounts shall become
immediately due and payable without presentation, demand or further
notice of any kind to the Borrower;
(b) the Lender shall have the right to obtain physical
possession of all files of the Borrower relating to the Collateral and
all documents relating to the Collateral which are then or may
thereafter come into the possession of the Borrower or any third party
acting for the Borrower and the Lender shall be entitled to specific
performance of all agreements of the Borrower contained in this Standby
Agreement; and
47
48
(c) the Lender shall have the right to collect and receive
all further payments made on the Collateral and, if any such payments
are received by the Borrower, the Borrower shall not commingle the
amounts received with other funds and shall promptly pay them over to
the Lender. The Lender shall have the right to dispose of the Collateral
as provided herein, or as provided in the other documents executed in
connection herewith, or in any commercially reasonable manner, or as
provided by Law. Once the Lender has been reimbursed for all principal
and interest on the Loan and any related expenses, any amounts remaining
shall be transferred to the Borrower.
ARTICLE VIII.
GENERAL PROVISIONS
Section 8.01. Cooperation, Confidentiality, Etc..
(a) Upon reasonable notice the Borrower shall furnish, and shall
use its best efforts to cause other relevant parties to furnish, the Lender with
all information and data reasonably requested by the Lender in connection with
its activities on the Borrower's behalf to carry out the terms of this Standby
Agreement, and shall provide the Lender reasonable access to the Borrower's
officers, directors, employees and professional advisers.
(b) The Borrower recognizes and confirms that the Lender in
acting pursuant to this Standby Agreement may use information in reports and
other information provided by others, including, without limitation, information
provided by the Borrower and the Residualholder, and that the Lender does not
assume responsibility for and may rely, without independent verification, on the
accuracy and completeness of any such reports and information. The Borrower
agrees that any advice or information rendered by the Lender in connection with
this Standby Agreement is for the confidential use of the Borrower only and,
except as otherwise required by Law, the Borrower will not, and will not permit
any third party to, disclose such advice or information to others or summarize
or refer to such advice or information or to the Lender's engagement hereunder
without, in each case, the Lender's prior written consent. The Lender agrees to
keep confidential any
48
49
information furnished to it by the Borrower which is clearly labelled as
proprietary to the Borrower, is not otherwise publicly available to the Lender
and the disclosure of which is not required by applicable Law or judicial or
administrative process.
(c) Neither the Lender nor the Borrower may place public
announcements or advertisements describing this or any part of this Standby
Agreement without the prior written consent of the other party.
Section 8.02. Waiver of Trial by Jury. Each party hereto
waives the right to trial by jury in any action, suit, proceeding or
counterclaim of any kind arising out of or related to this Standby Agreement. In
the event of litigation, this Standby Agreement may be filed as a written
consent to a trial by the court.
Section 8.03. Amendment; Waivers. This Standby Agreement may
be amended from time to time only by written agreement of the parties. No
failure on the part of the Lender to exercise, and no delay in exercising, any
right, power, or remedy under this Standby Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right under this
Standby Agreement preclude any other or further exercise thereof or the exercise
of any other right. No term or provision of this Standby Agreement may be waived
or modified unless such waiver or modification is in writing and signed by the
party against whom such waiver or modification is sought to be enforced.
Section 8.04. Taxes. All payments made by the Borrower to the
Lender on account of any Loan which are due hereunder shall be made free and
clear of, and without reduction by reason of, any taxes, levies, imposts,
deductions, charges or withholdings of any nature, including, without
limitation, any withholding taxes (but excluding any taxes imposed on the
overall net income of the Lender) and all liabilities with respect thereto (all
such taxes, levies, imposts, deductions, charges, withholding and liabilities
being hereinafter referred to as "Taxes"). If the Borrower shall be required by
Law to deduct any Taxes from or in respect of any sum payable hereunder or under
any Secured Note, the sum payable shall be increased as may be necessary so that
after making all required deductions (including as applicable to additional sums
payable under this subsection)
49
50
the Lender receives an amount equal to the sum it would have received had no
such deductions been made.
Section 8.05. Limited Liability. No recourse under any
Significant Documents shall be had against, and no personal liability shall
attach to, any officer, employee, director, affiliate or shareholder of any
party hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Significant Documents, it being expressly agreed and understood that each
Significant Document is solely a corporate obligation of each party hereto, and
that any and all personal liability, either at common law or in equity, or by
statute or constitution, of every such officer, employee, director, affiliate or
shareholder for breaches by any party hereto of any obligations under any
Significant Document is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Standby Agreement.
Section 8.06. Other Transactions. The Borrower acknowledges
that the Lender and its Affiliates compete, directly and indirectly in the
business in which the Borrower engages and proposes to engage; provided,
however, that the Lender shall not compete with respect to any transaction, the
terms of which are revealed to the Lender by the Borrower in connection with
seeking the services of the Lender and assuming that neither the Lender nor any
of its Affiliates has prior knowledge of such transaction. The Borrower
acknowledges that the Lender and its Affiliates have and will in the future have
business dealings with parties other than the Borrower, which parties compete,
directly or indirectly with the Borrower. Although the Lender and its Affiliates
may, in their normal course of business, acquire information about the
securitization market, particular transactions or such other parties, the Lender
shall have no obligation to disclose such information to the Borrower. The
Borrower acknowledges that the Lender and its Affiliates may engage in their
businesses and otherwise compete with the Borrower without regard to their
relationship to the Borrower hereunder.
Section 8.07. Opinion of Counsel to the Borrower. Upon the
execution of this Standby Agreement, the Borrower shall deliver to the Lender a
legal opinion from their special counsel in the form attached hereto as Exhibit
C, together
50
51
with such other certificates and documents as the Lender shall require.
Section 8.08. Costs and Expenses. (a) The Lender and the
Borrower will each be solely responsible for and bear all of their own
respective expenses (other than the expenses of legal counsel), including,
without limitation, accountants and other advisers, incurred at any time in
connection with pursuing or consummating the Significant Documents and the
transactions contemplated thereby. In addition, the Borrower shall be solely
responsible for (i) all accountant fees incurred in connection with the review
of the Borrower's June 30, 1996 financial statements and (ii) any fees incurred
by an independent contract underwriter.
(b) The Borrower will be responsible for and bear 50% of all the
fees and expenses of legal counsel for the Lender in connection with the
preparation, negotiation, and execution of the Significant Documents and the
transactions contemplated thereby; however the Borrower shall not bear more than
$75,000 under this clause (b). The Lender will be responsible for and bear all
the remaining fees and expenses of legal counsel for Lender in connection with
the preparation, negotiation, and execution of the Significant Documents and the
transactions contemplated thereby.
(c) The Lender will be responsible for and bear 50% of all the
fees and expenses of legal counsel for the Borrower in connection with the
preparation, negotiation, and execution of the Significant Documents and the
transactions contemplated thereby; however the Lender shall not bear more than
$35,000 under this clause (c). The Borrower will be responsible for and bear all
the remaining fees and expenses of legal counsel for the Borrower in connection
with the preparation, negotiation, and execution of the Significant Documents
and the transactions contemplated thereby.
ARTICLE IX.
CONSTRUCTION
Section 9.01. Entire Agreement. This Standby Agreement, together
with the Significant Documents, including the Exhibits and the Schedules
thereto, contains the entire agreement of the parties with respect to the
subject matters
51
52
hereto, and supersedes all prior agreements between them, whether oral or
written, of any nature whatsoever with respect to the subject matter hereof.
Section 9.02. Severability Clause. Any part or provision of this
Standby Agreement that is prohibited or that is held to be void or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof. Any part or provision of
this Standby Agreement that is prohibited or unenforceable or is held to be void
or unenforceable in any jurisdiction shall be ineffective, as to such
jurisdiction, to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable Law, the parties hereto waive any provision of Law that prohibits
or renders void or unenforceable any provision hereof. If the invalidity of any
part or provision of this Standby Agreement shall deprive any party of the
economic benefit intended to be conferred by this Standby Agreement, the parties
shall negotiate, in good-faith, to develop a structure, the economic effect of
which is as close as possible to the economic effect of this Standby Agreement,
without regard to such invalidity.
Section 9.03. Counterparts. This Standby Agreement may be
executed simultaneously in any number of counterparts. Each counterpart shall be
deemed to be an original, and all such counterparts shall constitute one and the
same instrument.
Section 9.04. Governing Law; Standby Agreement Constitutes
Security Agreement; Consent To Forum; Immunities. This Standby Agreement has
been negotiated, executed and delivered at and shall be deemed to have been made
in New York, New York. This Standby Agreement shall be governed by and construed
in accordance with the Laws of the State of New York, without giving effect to
the conflict of laws rules therein, and shall constitute a security agreement
within the meaning of the New York UCC. The parties hereto hereby consent and
agree that the Supreme Court of New York County, New York or, at the Lender's
option, the United States District Court for the Southern District of New York,
shall have exclusive jurisdiction to hear and determine any claims or disputes
between the parties hereto pertaining to this
52
53
Standby Agreement or to any matter arising out of or related to this Standby
Agreement. The parties hereto expressly submit and consent in advance to such
jurisdiction in any action or suit commenced in any such court, and hereby waive
any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens and hereby consent to the granting for
such legal or equitable relief as is deemed appropriate by such court. Each
party hereto irrevocably consents to the service of process by registered or
certified mail, postage prepaid, to it at its address given pursuant to Section
10.01 hereof. Nothing in this Standby Agreement shall be deemed or operate to
affect the right of the Lender to serve legal process in any other manner
permitted by Law, or to preclude the enforcement by the Lender of any judgement
or order obtained in such forum or the taking of any action under this Standby
Agreement to enforce same in any other appropriate forum or jurisdiction.
To the extent that the Borrower has or may hereafter acquire any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgement, attachment in aid of
execution, execution or otherwise) with respect to the Borrower or the
Borrower's property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this Standby Agreement.
Section 9.05. No Agency; No Partnership; No Joint Venture.
Neither the Lender nor the Borrower is the agent or representative of the other,
and nothing in this Standby Agreement shall be construed to make either the
Lender or the Borrower liable to any third party for services performed by such
third party or for debts or claims accruing to such third party against either
the Lender or the Borrower. It is the parties' intention that this Standby
Agreement creates a debtor/creditor relationship for all purposes and nothing
contained herein nor the acts of the parties hereto shall be construed to create
a partnership, agency or joint venture between the Lender and the Borrower.
Section 9.06. Judicial Interpretation. Should any provision of
this Standby Agreement or any of the other Significant Documents require
judicial interpretation, it is agreed that a court interpreting or construing
the same shall not apply a presumption that the terms hereof shall be more
strictly construed against any Person by reason of the rule of
53
54
construction that a document is to be construed more strictly against the Person
who itself or through its agent prepared the same, it being agreed that all the
parties hereto have participated in the preparation of this Standby Agreement.
Section 9.07. Recitals. The recitals of this Standby Agreement
are not intended to constitute substantive provisions hereof.
Section 9.08. Rules of Interpretation. Except as otherwise
expressly provided in this Standby Agreement, the following rules shall apply
hereto:
(a) the singular includes the plural and the plural includes the
singular;
(b) "or" is not exclusive and "include" and "including" are not
limiting;
(c) a reference to any agreement or other contract includes
permitted supplements, amendments and other modifications;
(d) a reference to a law (or Law) includes any amendment or
modification of such law (or Law) and the rules or regulations issued
thereunder;
(e) a reference to a Person includes its permitted successors and
assigns in the applicable capacity;
(f) a reference in this Standby Agreement to an Article, Section,
clause, recital or Exhibit is to the Article, Section, clause, recital
or Exhibit of this Standby Agreement unless otherwise expressly
provided;
(g) words such as "hereunder", "hereto", "hereof", and "herein"
and other words of like import shall, unless the context clearly
indicates to the contrary, refer to the whole of this Standby Agreement
and not to any particular Article, Section or clause hereof;
(h) all obligations under this Standby Agreement are continuing
obligations throughout the term of this Standby Agreement;
54
55
(i) any right in this Standby Agreement may be exercised at any
time and from time to time;
(j) the headings of the Articles and Sections are for convenience
and shall not affect the meaning of this Standby Agreement; and
(k) time is of the essence in performing all obligations.
Section 9.09. Good Faith. The Borrower and the Lender shall
implement the terms and provisions of this Standby Agreement in good faith in
accordance with applicable Law.
ARTICLE X.
MISCELLANEOUS
Section 10.01. Notices. All demands, notices, requests for
consent and other communications hereunder shall be in writing and personally
delivered, mailed by certified mail, return receipt requested, and telecopied,
and shall be deemed to have been duly given upon receipt;
if to the Borrower:
CMG Funding Corp.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx Xxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
Continental Mortgage Group, L.C.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx Xxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
with a copy to:
Xxxxxxxxxxx X. Xxxxxx, Esq.
Xxxxxxx, Xxxxxx & Xxxxx
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 0000
55
56
Xxxxxx, Xxxxxxxxxx 00000
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
if to the Residualholder:
CMG Funding Securities Corp.
000 Xxxxx Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attention: Xxxx Xxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
if to the Lender:
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Counsel
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
with a copy to:
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
or, as to any party, at such other address or telecopy number as shall be
designated by such party in a written notice to each other party.
Section 10.02. Further Agreements. The Borrower and the Lender
each agree to execute and deliver to the other such additional documents,
instruments or agreements as may be necessary or appropriate to effectuate the
purposes of this Standby Agreement.
Section 10.03. Third-Party Rights; Assignment. This Standby
Agreement is for the exclusive benefit of the parties hereto and their
respective successors and assigns and shall not be deemed to give any legal or
equitable right to any other Person. The Borrower may neither assign its rights
nor
56
57
delegate its obligations under this Standby Agreement without the prior written
consent of the Lender. The Lender may assign its rights and/or delegate its
obligations under this Standby Agreement to an Affiliate without the consent of
the Borrower.
Section 10.04. Advice from Independent Counsel. The parties
hereto understand that this Standby Agreement and each of the other Significant
Documents to which either of them is a party are legally binding agreements that
may affect such party's rights. Each party represents to the other that it has
received legal advice from counsel of its choice regarding the meaning and legal
significance of this Standby Agreement and each of the other Significant
Documents to which it is a party and that it is satisfied with its legal counsel
and the advice received from it.
Section 10.05. Summary Judgment. The Borrower hereby acknowledges
and agrees that any enforcement action relating to this Standby Agreement or any
Secured Note may be brought by motion for summary judgment in lieu of a
complaint pursuant to Section 3213 of the New York Civil Practice Law and Rules.
Section 10.06. Reproduction of Documents. This Standby Agreement
and all documents relating thereto, including, without limitation, (a) consents,
waivers and modifications which may hereafter be executed, (b) documents
received by any party at the closing, and (c) financial statements, certificates
and other information previously or hereafter furnished, may be reproduced by
any photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
Section 10.07. Right of Set-Off. Upon the occurrence of any event
or circumstance which requires the Borrower to make a payment hereunder, the
Lender is hereby authorized then or at any time or times thereafter, without
notice to the Borrower (any such notice being expressly waived
57
58
by the Borrower), to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Lender to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
hereunder, irrespective of whether or not the Lender shall have made any demand
hereunder. The Lender agrees promptly to notify the Borrower 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. The
rights of the Lender under this Section 10.07 are in addition to other rights
and remedies which the Lender may have.
[Remainder of Page Intentionally Left Blank]
58
59
IN WITNESS WHEREOF, each of the parties has caused its duly
authorized representative to set his hand as of the date first above written.
CMG FUNDING CORP.
By:
Name:
Title:
CONTINENTAL MORTGAGE GROUP, L.C.
By:
---------------------------------------
Name:
Title:
CONTITRADE SERVICES L.L.C.
By:
---------------------------------------
Name:
Title: Authorized Signatory
By:
---------------------------------------
Name:
Title: Authorized Signatory
CMG FUNDING SECURITIES CORP.
By:
---------------------------------------
Name:
Title: Authorized Signatory
60
[Signature Page to Standby and Working Capital
Financing Agreement]
60
61
EXHIBIT A-1
SECURED NOTE
$10,000,000
December 17, 1996
FOR VALUE RECEIVED, the undersigned, CMG FUNDING CORP., a
Delaware corporation and CONTINENTAL MORTGAGE GROUP, L.C. a Utah limited
liability company, each having their address at 0000 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxx Xxxx Xxxx, Xxxx (collectively, the "Borrower"), promises to pay to the
order of CONTITRADE SERVICES L.L.C., a Delaware limited liability company, whose
address is 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Lender") on or before
the Advance Maturity Date (as defined herein), in lawful money of the United
States of America, (a)(i) $10,000,000 or (ii) if less the principal sums set
forth on the Schedule of Advances attached hereto plus (b) interest at the times
and in the amounts and manner as provided in the Standby Agreement.
MAXIMUM RATE OF INTEREST: It is intended that the rate of
interest hereon shall never exceed the maximum rate, if any, which may be
legally charged on this Loan evidenced by this Secured Note ("Maximum Rate"),
and if the provisions for interest contained in this Secured Note would result
in a rate higher than the Maximum Rate, interest shall nevertheless be limited
to the Maximum Rate and any amounts which may be paid toward interest in excess
of the Maximum Rate shall be applied to the reduction of principal, or, at the
option of the Lender, returned to the Borrower.
DUE DATE: All indebtedness evidenced hereby not paid before the
Advance Maturity Date shall be due and payable on the Advance Maturity Date.
PLACE OF PAYMENT: All payments hereon shall be made, and all
notices to the Lender required or authorized hereby shall be given, at the
office of the Lender at the address designated in the heading of this Secured
Note, or to such other place as the Lender may from time to time direct by
written notice to the Borrower.
A-1-1
62
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable hereunder
are payable by wire transfer in immediately available funds to the account
number specified by the Lender, in lawful money of the United States. Payments
remitted by the Borrower via wire transfer initiated after 2:00 p.m. New York
City shall be deemed to be received on the next business day. The Borrower
agrees to pay all costs of collection when incurred, including, without limiting
the generality of the foregoing, reasonable attorneys' fees through appellate
proceedings and allocated cost of in-house counsel, and to perform and comply
with each of the covenants, conditions, provisions and agreements contained in
every instrument now evidencing or securing said indebtedness. If any suit or
action be instituted to enforce this Secured Note, the Borrower promises to pay,
in addition to the cost and disbursements otherwise allowed by Law, such sums as
the court may adjudge reasonable attorneys' fees in such suit or action.
SECURITY: This Secured Note is issued pursuant to that certain
Standby and Working Capital Financing Agreement, dated as of December 17, 1996
(the "Standby Agreement") among the Lender, the Residualholder and the Borrower,
and is secured by a pledge of the Collateral described therein. Notwithstanding
the pledge of the Collateral, Borrower hereby acknowledges, admits and agrees
that Borrower's obligations under this Secured Note are recourse obligations of
the Borrower to which the Borrower pledges its full faith and credit. Any
capitalized term used herein and not otherwise defined herein shall have the
meaning for such term set forth in the Standby Agreement.
DEFAULTS: Upon the happening of an Event of Default (as defined
in the Standby Agreement), the Lender shall have all rights and remedies set
forth in the Standby Agreement.
The failure to exercise any of the rights and remedies set forth
in the Standby Agreement shall not constitute a waiver of the right to exercise
the same or any other option at any subsequent time in respect of the same event
or any other event. The acceptance by the Lender of any payment hereunder which
is less than payment in full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the
foregoing rights and remedies at that time or at any subsequent time or nullify
any prior exercise of any such
A-1-2
63
rights and remedies without the express consent of Lender, except as and to the
extent otherwise provided by Law.
WAIVERS: The Borrower waives diligence, presentment, protest and
demand and also notice of protest, demand, dishonor and nonpayment of this
Secured Note, and expressly agrees that this Secured Note, or any payment
hereunder, may be extended from time to time, and consent to the acceptance of
further Collateral, the release of any Collateral for this Secured Note, the
release of any party primarily or secondarily liable hereon, and that it will
not be necessary for the Lender, in order to enforce payment of this Secured
Note, to first institute or exhaust Lender's remedies against the Borrower or
any other party liable hereon or against any collateral for this Secured Note.
None of the foregoing shall affect the liability of the Borrower and any
indorsers or guarantors hereof. No extension of time for the payment of this
Secured Note, or any installment hereof, made by agreement by the Lender with
any person now or hereafter liable for the payment of this Secured Note, shall
affect the liability under this Secured Note of the Borrower, even if the
Borrower is not a party to such agreement; provided, however, the Lender and the
Borrower, by written agreement between them, may affect the liability of the
Borrower.
TERMINOLOGY: Any reference herein to the Lender shall be deemed
to include and apply to every subsequent holder of this Secured Note. Words of
masculine or neuter import shall be read as if written in the neuter or
masculine or feminine when appropriate.
SUMMARY JUDGEMENT: The Borrower hereby acknowledges and agrees
that any enforcement action relating to this Secured Note or any Secured Note
may be brought by motion for summary judgment in lieu of a complaint pursuant to
Section 3213 of the New York Civil Practice Law and Rules.
STANDBY AGREEMENT: Reference is made to the Standby Agreement for
provisions as to payments, collateral and acceleration.
THIS SECURED NOTE IS GOVERNED BY THE PROVISIONS OF THE STANDBY AGREEMENT WHICH
IS INCORPORATED HEREIN BY REFERENCE, AND IN THE EVENT ANY TERMS OF THIS SECURED
NOTE ARE INCONSISTENT WITH THE TERMS OF THE STANDBY AGREEMENT, THE TERMS OF THE
STANDBY AGREEMENT SHALL GOVERN THIS SECURED NOTE. NOTWITHSTANDING THE
A-1-3
64
FOREGOING SENTENCE, NO REFERENCE HEREIN TO THE STANDBY AGREEMENT AND NO
PROVISION OF THIS SECURED NOTE OR OF THE STANDBY AGREEMENT SHALL ALTER OR IMPAIR
THE OBLIGATION OF THE BORROWER, WHICH IS ABSOLUTE AND UNCONDITIONAL, TO PAY THE
PRINCIPAL OF AND INTEREST ON THIS SECURED NOTE AT THE RESPECTIVE TIMES AND AT
THE RATES HEREIN PRESCRIBED.
APPLICABLE LAW: This Secured Note has been negotiated, executed
and delivered at and shall be deemed to have been made in New York, New York.
This Secured Note shall be governed by and construed in accordance with the Laws
of the State of New York, without giving effect to the conflict of laws rules
therein. The parties hereto hereby consent and agree that the Supreme Court of
New York County, New York or, at the Lender's option, the United States District
Court for the Southern District of New York, shall have exclusive jurisdiction
to hear and determine any claims or disputes between the parties hereto
pertaining to this Secured Note or to any matter arising out of or related to
this Secured Note. The parties hereto expressly submit and consent in advance to
such jurisdiction in any action or suit commenced in any such court, and hereby
waive any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens and hereby consent to the granting for
such legal or equitable relief as is deemed appropriate by such court. Each
party hereto irrevocably consents to the service of process by registered or
certified mail, postage prepaid, to it at its address given pursuant to Section
10.01 of the Standby Agreement. Nothing in this Secured Note shall be deemed or
operate to affect the right of the Lender to serve legal process in any other
manner permitted by Law, or to preclude the enforcement by the Lender of any
judgement or order obtained in such forum or the taking of any action under this
Secured Note to enforce same in any other appropriate forum or jurisdiction.
To the extent that the Borrower has or may hereafter acquire any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgement, attachment in aid of
execution, execution or otherwise) with respect to the Borrower or the
Borrower's property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this Secured Note.
A-1-4
65
Each party hereto waives the right to trial by jury in any
action, suit, proceeding or counterclaim of any kind arising out of or related
to this Secured Note. In the event of litigation, this Secured Note may be filed
as a written consent to a trial by the court.
CMG FUNDING CORP.
By:
---------------------------------
Name:
Title: President
CONTINENTAL MORTGAGE GROUP, L.C.
By:
---------------------------------
Name:
Title: President
A-1-5
66
Schedule of Advances
Interest
Date Amount Rate
---- ------ ----
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Borrower
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Borrower
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Borrower
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Borrower
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Borrower
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Borrower
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Borrower
A-1-6
67
__________________ $_________________ LIBOR + 5.00%
acknowledged by the __________________
Xxxxxxxx
X-0-0
00
XXXXXXX X-0
SECURED NOTE
$2,000,000 December 17, 1996
FOR VALUE RECEIVED, the undersigned, CMG FUNDING CORP., a
Delaware corporation and CONTINENTAL MORTGAGE GROUP, L.C., A Utah limited
liability company, each having their address at 0000 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxx Xxxx Xxxx, Xxxx (collectively, the "Borrower"), promises to pay to the
order of CONTITRADE SERVICES L.L.C., a Delaware limited liability company, whose
address is 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Lender") on or before
the Advance Maturity Date (as defined herein), in lawful money of the United
States of America, (a)(i) $2,000,000 or (ii) if less, the principal sums set
forth on the Schedule of Advances attached hereto plus (b) interest at the times
and in the amounts and manner as provided in the Standby Agreement.
MAXIMUM RATE OF INTEREST: It is intended that the rate of
interest hereon shall never exceed the maximum rate, if any, which may be
legally charged on this Loan evidenced by this Secured Note ("Maximum Rate"),
and if the provisions for interest contained in this Secured Note would result
in a rate higher than the Maximum Rate, interest shall nevertheless be limited
to the Maximum Rate and any amounts which may be paid toward interest in excess
of the Maximum Rate shall be applied to the reduction of principal, or, at the
option of the Lender, returned to the Borrower.
DUE DATE: All indebtedness evidenced hereby not paid before the
Working Capital Advance Maturity Date shall be due and payable on the Working
Capital Advance Maturity Date.
PLACE OF PAYMENT: All payments hereon shall be made, and all
notices to the Lender required or authorized hereby shall be given, at the
office of the Lender at the address designated in the heading of this Secured
Note, or to such other place as the Lender may from time to time direct by
written notice to the Borrower.
A-2-1
69
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable hereunder
are payable by wire transfer in immediately available funds to the account
number specified by the Lender, in lawful money of the United States. Payments
remitted by the Borrower via wire transfer initiated after 2:00 p.m. New York
City shall be deemed to be received on the next business day. The Borrower
agrees to pay all costs of collection when incurred, including, without limiting
the generality of the foregoing, reasonable attorneys' fees through appellate
proceedings and allocated cost of in-house counsel, and to perform and comply
with each of the covenants, conditions, provisions and agreements contained in
every instrument now evidencing or securing said indebtedness. If any suit or
action be instituted to enforce this Secured Note, the Borrower promises to pay,
in addition to the cost and disbursements otherwise allowed by Law, such sums as
the court may adjudge reasonable attorneys' fees in such suit or action.
SECURITY: This Secured Note is issued pursuant to that certain
Standby and Working Capital Financing Agreement, dated as of December 17, 1996
(the "Standby Agreement") among the Lender, the Residualholder and the Borrower,
and is secured by a pledge of the Collateral described therein. Notwithstanding
the pledge of the Collateral, Borrower hereby acknowledges, admits and agrees
that Borrower's obligations under this Secured Note are recourse obligations of
the Borrower to which the Borrower pledges its full faith and credit. Any
capitalized term used herein and not otherwise defined herein shall have the
meaning for such term set forth in the Standby Agreement.
DEFAULTS: Upon the happening of an Event of Default (as defined
in the Standby Agreement), the Lender shall have all rights and remedies set
forth in the Standby Agreement.
The failure to exercise any of the rights and remedies set forth
in the Standby Agreement shall not constitute a waiver of the right to exercise
the same or any other option at any subsequent time in respect of the same event
or any other event. The acceptance by the Lender of any payment hereunder which
is less than payment in full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the
foregoing rights and remedies at that time or at any subsequent time or nullify
any prior exercise of any such rights and remedies without the express consent
of Lender, except as and to the extent otherwise provided by Law.
A-2-2
70
WAIVERS: The Borrower waives diligence, presentment, protest and
demand and also notice of protest, demand, dishonor and nonpayment of this
Secured Note, and expressly agrees that this Secured Note, or any payment
hereunder, may be extended from time to time, and consent to the acceptance of
further Collateral, the release of any Collateral for this Secured Note, the
release of any party primarily or secondarily liable hereon, and that it will
not be necessary for the Lender, in order to enforce payment of this Secured
Note, to first institute or exhaust Lender's remedies against the Borrower or
any other party liable hereon or against any collateral for this Secured Note.
None of the foregoing shall affect the liability of the Borrower and any
indorsers or guarantors hereof. No extension of time for the payment of this
Secured Note, or any installment hereof, made by agreement by the Lender with
any person now or hereafter liable for the payment of this Secured Note, shall
affect the liability under this Secured Note of the Borrower, even if the
Borrower is not a party to such agreement; provided, however, the Lender and the
Borrower, by written agreement between them, may affect the liability of the
Borrower.
TERMINOLOGY: Any reference herein to the Lender shall be deemed
to include and apply to every subsequent holder of this Secured Note. Words of
masculine or neuter import shall be read as if written in the neuter or
masculine or feminine when appropriate.
SUMMARY JUDGEMENT: The Borrower hereby acknowledges and agrees
that any enforcement action relating to this Secured Note or any Secured Note
may be brought by motion for summary judgment in lieu of a complaint pursuant to
Section 3213 of the New York Civil Practice Law and Rules.
STANDBY AGREEMENT: Reference is made to the Standby Agreement for
provisions as to payments, collateral and acceleration.
THIS SECURED NOTE IS GOVERNED BY THE PROVISIONS OF THE STANDBY AGREEMENT WHICH
IS INCORPORATED HEREIN BY REFERENCE, AND IN THE EVENT ANY TERMS OF THIS SECURED
NOTE ARE INCONSISTENT WITH THE TERMS OF THE STANDBY AGREEMENT, THE TERMS OF THE
STANDBY AGREEMENT SHALL GOVERN THIS SECURED NOTE. NOTWITHSTANDING THE FOREGOING
SENTENCE, NO REFERENCE HEREIN TO THE STANDBY AGREEMENT AND NO PROVISION OF THIS
SECURED NOTE OR OF THE STANDBY AGREEMENT SHALL ALTER OR IMPAIR THE OBLIGATION OF
THE BORROWER, WHICH IS ABSOLUTE AND UNCONDITIONAL, TO PAY THE PRINCIPAL OF AND
INTEREST ON THIS
A-2-3
71
SECURED NOTE AT THE RESPECTIVE TIMES AND AT THE RATES HEREIN PRESCRIBED.
APPLICABLE LAW: This Secured Note has been negotiated, executed
and delivered at and shall be deemed to have been made in New York, New York.
This Secured Note shall be governed by and construed in accordance with the Laws
of the State of New York, without giving effect to the conflict of laws rules
therein. The parties hereto hereby consent and agree that the Supreme Court of
New York County, New York or, at the Lender's option, the United States District
Court for the Southern District of New York, shall have exclusive jurisdiction
to hear and determine any claims or disputes between the parties hereto
pertaining to this Secured Note or to any matter arising out of or related to
this Secured Note. The parties hereto expressly submit and consent in advance to
such jurisdiction in any action or suit commenced in any such court, and hereby
waive any objection which it may have based upon lack of personal jurisdiction,
improper venue or forum non conveniens and hereby consent to the granting for
such legal or equitable relief as is deemed appropriate by such court. Each
party hereto irrevocably consents to the service of process by registered or
certified mail, postage prepaid, to it at its address given pursuant to Section
10.01 of the Standby Agreement. Nothing in this Secured Note shall be deemed or
operate to affect the right of the Lender to serve legal process in any other
manner permitted by Law, or to preclude the enforcement by the Lender of any
judgement or order obtained in such forum or the taking of any action under this
Secured Note to enforce same in any other appropriate forum or jurisdiction.
To the extent that the Borrower has or may hereafter acquire any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgement, attachment in aid of
execution, execution or otherwise) with respect to the Borrower or the
Borrower's property, the Borrower hereby irrevocably waives such immunity in
respect of its obligations under this Secured Note.
Each party hereto waives the right to trial by jury in any
action, suit, proceeding or counterclaim of any kind arising out of or related
to this Secured Note. In the event of litigation, this Secured Note may be filed
as a written consent to a trial by the court.
CMG FUNDING CORP.
A-2-4
72
By:
---------------------------------
Name:
Title: President
CONTINENTAL MORTGAGE, L.C.
By:
---------------------------------
Name:
Title: President
A-2-5
73
Schedule of Advances
Interest
Date Amount Rate
---- ------ ----
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
A-2-6
74
__________________ $_________________ LIBOR + 4.50%
acknowledged by
the Borrower __________________
X-0-0
00
XXXXXXX X
FINANCING VALUE SCHEDULE
76
EXHIBIT C
FORM OF BORROWER'S COUNSEL OPINION
December 17, 1996
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Standby and Working Capital Financing Agreement
Gentlemen:
I am General Counsel to CMG FUNDING CORP. and CONTINENTAL
MORTGAGE GROUP, L.C. (collectively, the "Borrower"). In my capacity as General
Counsel to Borrower, I have served as counsel to Borrower, and I have examined
an executed copy of the Standby and Working Capital Financing Agreement, among
the Borrower, CMG Funding Securities Corp. and you, dated as of December 17,
1996 (the "Standby Agreement").
Capitalized terms used herein, but not defined, shall have the
meanings assigned to them in the Standby Agreement.
I have further examined original, photostatic or certified copies
of all such corporate records of Borrower, and such certificates of public
officials, certificates of corporate officers, and other documents, and such
questions of law, as I have deemed relevant and necessary as a basis for the
opinions hereinafter expressed. In making my examinations and rendering the
opinions herein expressed, I have made the following assumptions:
(1) The parties to the Standby Agreement (other than Borrower)
have the power to enter into and perform all of their
obligations thereunder;
(2) The due authorization, execution and delivery of the
Standby Agreement by the parties thereto (other than
Borrower), and the validity and
C-1
77
binding effect on the parties thereto (other than
Borrower) of the Standby Agreement;
(3) The genuineness of all signatures;
(4) The authenticity of all documents submitted to me as
originals and the conformity to originals of all documents
submitted to me as copies.
The opinions expressed in numbered paragraph 2 below with respect
to the enforceability of the Standby Agreement are subject to the following
additional qualifications:
(a) The effect of bankruptcy, insolvency, reorganization,
moratorium, receivership, or other similar laws of general
applicability relating to or affecting creditors' rights
generally; and
(b) The application of general principles of equity,
including, but not limited to, the right to specific
performance (regardless of whether enforceability is
considered in a proceeding in equity or at law).
Based upon the foregoing and subject to the last paragraph
hereof, I am of the opinion that:
(1) Borrower has been duly organized and is validly existing
as a corporation in good standing under the laws of the
state of Delaware and is qualified to do business in each
state necessary to enable it to perform its obligations
under the Standby Agreement. Borrower has the requisite
power and authority to execute and deliver, engage in the
transactions contemplated by, and perform and observe the
conditions of, the Standby Agreement.
(2) The Standby Agreement has been duly and validly
authorized, executed and delivered by Borrower, all
requisite corporate action has been taken with respect
thereto, and the Standby Agreement constitutes valid,
legal and binding agreement of Borrower enforceable
against Borrower in accordance with its terms.
C-2
78
(3) The execution, delivery or performance by Borrower of the
Standby Agreement does not conflict or will not conflict
with or result in a breach of, or does not constitute or
will not constitute a default under (i) any term or
provision of the certificate of incorporation or bylaws of
Borrower; (ii) any term or provision of any agreement,
contract, instrument or indenture, to which Borrower is a
party or is bound; or (iii) any order, judgment, writ,
injunction or decree of any court or governmental agency
or body or other tribunal having jurisdiction over
Borrower.
(4) No consent, approval, authorization or order of,
registration or filing with, or notice to, any court,
governmental agency or body or other tribunal is required
for the execution, delivery and performance by Borrower of
the Standby Agreement or the consummation of any other
transaction contemplated by the Standby Agreement, except
such which have been obtained.
(5) There are no actions, proceedings or investigations
pending or, to my knowledge, threatened against Borrower
before any court, governmental agency or body or other
tribunal asserting the invalidity of the Standby Agreement
which would materially and adversely affect the
performance by Borrower of its obligations under, or the
validity or enforceability of, the Standby Agreement.
This Opinion is furnished solely for the benefit of the addressee
hereof. It may not be relied upon by or distributed to any other person or for
any other purpose without my prior written consent.
Very truly yours,
C-3
79
EXHIBIT D
SECURITIZABLE MORTGAGE LOAN UNDERWRITING GUIDELINES
80
EXHIBIT E-1
FORM OF COLLATERALIZED ADVANCE REQUEST
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxx
Pursuant to the Standby and Working Capital Financing Agreement,
dated as of December 17, 1996 among ContiTrade Services L.L.C. (the "Lender"),
CMG Funding Securities Corp. and the undersigned (as amended from time to time,
the "Standby Agreement"), the undersigned hereby gives notice of its election to
borrow from the Lender a Collateralized Advance and in connection therewith,
sets forth below the following information and other information in the attached
schedule(s) (each capitalized term used herein shall have the meaning specified
therefor in the Standby Agreement):
1. The Residual Interests and/or I/O Interests to be pledged as
collateral are listed on the attached schedule(s).
2. The Funding Date of this Collateralized Advance shall be
________, 199_.
3. The amount of this Collateralized Advance shall be
$_____________.
81
The undersigned hereby certifies that each of the conditions
precedent to a Collateralized Advance listed in Sections 2.01, 2.02 and 2.03 of
the Standby Agreement are true and correct on the date hereof and shall be true
and correct on the date of the Collateralized Advance requested herein, before
and after giving effect thereto.
CMG FUNDING CORP.
By:
----------------------------------------------
Name:
Title:
Date: _____________, 199_
CONTINENTAL MORTGAGE GROUP, L.C.
By:
----------------------------------------------
Name:
Title:
Date: _____________
ACKNOWLEDGED:
CONTITRADE SERVICES L.L.C.
By:
--------------------------------
Name:
Title: Authorized Signatory
Date:
By:
--------------------------------
Name:
Title: Authorized Signatory
Date:
82
EXHIBIT E-2
FORM OF WORKING CAPITAL ADVANCE REQUEST
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxx
Pursuant to the Standby and Working Capital Financing Agreement,
dated as of December 17, 1996 among ContiTrade Services L.L.C. (the "Lender"),
CMG Funding Securities Corp. and the undersigned (as amended from time to time,
the "Standby Agreement"), the undersigned hereby gives notice of its election to
borrow from the Lender a Working Capital Advance and in connection therewith,
sets forth below the following information and other information in the attached
schedule(s) (each capitalized term used herein shall have the meaning specified
therefor in the Standby Agreement):
1. The Funding Date of this Working Capital Advance shall be
________, 199_.
2. The amount of this Working Capital Advance shall be
$_____________.
83
The undersigned hereby certifies that each of the conditions
precedent to a Working Capital Advance listed in Sections 2.01, 2.02 and 2.04 of
the Standby Agreement are true and correct on the date hereof and shall be true
and correct on the date of the Working Capital Advance requested herein, before
and after giving effect thereto.
CMG FUNDING CORP.
By:
----------------------------------------------
Name:
Title:
Date: _____________, 199_
CONTINENTAL MORTGAGE GROUP, L.C.
By:
----------------------------------------------
Name:
Title:
Date: _____________, 199_
ACKNOWLEDGED:
CONTITRADE SERVICES L.L.C.
By:
-----------------------------
Name:
Title: Authorized Signatory
Date:
By:
----------------------------
Name:
Title: Authorized Signatory
Date:
84
EXHIBIT F
STOCK OPTION PLAN
85
Schedule I
PERMISSIBLE USES OF PROCEEDS FROM ADVANCES
The proceeds from Advances drawn under the Standby Agreement
shall be used (i) to support the working capital needs of the Borrower, (ii) to
provide liquidity for the day-to-day business operations of the Borrower,
including, without limitation, services, supplies, utilities and postal
expenses, (iii) to provide financing for capital expenditures by the Borrower as
set forth in the annual budget of the Borrower as approved from time to time by
the Lender, or as otherwise permitted hereunder, and (iv) to provide for the
fees, costs and expenses of Securitizations conducted pursuant to the Investment
Banking Services Agreement.
86
Execution Copy
STANDBY AND WORKING CAPITAL FINANCING AGREEMENT
among
CONTITRADE SERVICES L.L.C.,
as the Lender,
and
CMG FUNDING CORP.
and
CONTINENTAL MORTGAGE GROUP, L.C.
as the Borrower,
and
CMG FUNDING SECURITIES CORP.
as the Residualholder
87
Dated as of December 17, 1996
88
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS............................................. 1
ARTICLE II. STANDBY AND WORKING CAPITAL FACILITY.................... 12
Section 2.01. General Advance Requirements........................... 12
Section 2.02. Advance Conditions Precedent........................... 13
Section 2.03. Collateralized Advance Requirements.................... 14
Section 2.04. Working Capital Advance Requirements................... 14
Section 2.05. Interest Payments...................................... 15
Section 2.06. Collateralized Advance Principal Payments.............. 15
Section 2.08. Collateral............................................. 16
Section 2.09. Information............................................ 17
Section 2.10. Collateral Valuation................................... 18
Section 2.11. Application of Payments................................ 18
ARTICLE III. REPRESENTATIONS AND WARRANTIES.......................... 19
Section 3.01. Representations and Warranties of the Borrower......... 19
Section 3.02. Representations and Warranties of the Residualholder... 22
Section 3.03. Representations and Warranties of the Lender........... 25
ARTICLE IV. COVENANTS OF THE BORROWER............................... 26
Section 4.01. Affirmative Covenants of the Borrower.................. 26
Section 4.02. Negative Covenants of the Borrower..................... 31
Section 4.03. Affirmative Covenants of the Residualholder............ 35
Section 4.04. Negative Covenants of the Residualholder............... 35
ARTICLE V. SECURITY AGREEMENT...................................... 37
Section 5.01. Grant of Security Interest............................. 37
Section 5.02. Security for the Borrower's Loans...................... 38
Section 5.03. Intention of Parties................................... 38
i
89
Page
ARTICLE VI. INDEMNIFICATION......................................... 38
Section 6.01. Indemnification by the Borrower........................ 38
Section 6.02. Indemnification by the Lender.......................... 39
ARTICLE VII. EVENTS OF DEFAULT....................................... 40
Section 7.01. Occurrence of an Event of Default...................... 40
Section 7.02. Effect of an Event of Default.......................... 41
ARTICLE VIII. GENERAL PROVISIONS...................................... 42
Section 8.01. Cooperation, Confidentiality, Etc...................... 42
Section 8.02. Waiver of Trial by Jury................................ 42
Section 8.03. Amendment; Waivers..................................... 42
Section 8.04. Taxes.................................................. 43
Section 8.05. Limited Liability...................................... 43
Section 8.06. Other Transactions..................................... 43
Section 8.07. Opinion of Counsel to the Borrower..................... 44
Section 8.08. Costs and Expenses..................................... 44
ARTICLE IX. CONSTRUCTION............................................ 45
Section 9.01. Entire Agreement....................................... 45
Section 9.02. Severability Clause.................................... 45
Section 9.03. Counterparts........................................... 45
Section 9.04. Governing Law; Standby Agreement Constitutes Security
Agreement; Consent To Forum; Immunities................ 45
Section 9.05. No Agency; No Partnership; No Joint Venture............ 46
Section 9.06. Judicial Interpretation................................ 46
Section 9.07. Recitals............................................... 47
Section 9.08. Rules of Interpretation................................ 47
Section 9.09. Good Faith............................................. 47
ARTICLE X. MISCELLANEOUS........................................... 48
Section 10.01. Notices................................................ 48
Section 10.02. Further Agreements..................................... 49
Section 10.03. Third-Party Rights; Assignment......................... 49
Section 10.04. Advice from Independent Counsel........................ 49
Section 10.05. Summary Judgment....................................... 49
Section 10.06. Reproduction of Documents.............................. 50
Section 10.07. Right of Set-Off....................................... 50
ii
90
EXHIBITS
Exhibit A-1 - Secured Note (Collateralized Advances)
Exhibit A-2 - Secured Note (Working Capital Advances)
Exhibit B - Financing Value Schedule
Exhibit C - Form of Borrower's Counsel Opinion
Exhibit D - Securitizable Mortgage Loan Underwriting Guidelines
Exhibit E-1 - Form of Collateralized Advance Request
Exhibit E-2 - Form of Working Capital Advance Request
Exhibit F - Stock Option Plan
SCHEDULES
Schedule I - Permissible Uses of Proceeds from Advances
iii
91
Execution Copy
AMENDMENT 1 TO
STANDBY AND WORKING CAPITAL FINANCING AGREEMENT
This Amendment 1, dated October 24, 1997 (the "Amendment"), to
the Standby and Working Capital Financing Agreement (the "Standby Agreement"),
dated December 17, 1996, among CMG Funding Corp., and Continental Mortgage
Group, L.C. (now succeeded by CMG Funding Corp.), as Borrowers, ContiTrade
Services L.L.C. as Lender, and CMG Funding Securities Corp. as Residualholder.
WHEREAS, the parties hereto have entered into the Standby
Agreement, as well as a series of other agreements designated as Significant
Documents in the Standby Agreement; and
WHEREAS, the parties hereto now wish to amend the certain
provisions in the Standby Agreement.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 10.02 of the
Standby Agreement, to amend the Standby Agreement and restate certain provisions
thereof as follows:
1. Defined Terms. Capitalized terms used herein without
definition have the meanings ascribed to them in the Standby Agreement.
2. Maximum Collateralized Advance Aggregate Amount. The
definition of "Maximum Collateralized Advance Aggregate Amount" as set forth in
Article 1 of the Standby Agreement is replaced in its entirety with "'Maximum
Collateralized Advance Aggregate Amount' means $0."
3. Maximum Working Capital Advance Aggregate Amount. The
definition of "Maximum Working Capital Advance Aggregate Amount" as set forth in
Article 1 of the Standby Agreement is replaced in its entirety with "Maximum
Working Capital Advance Aggregate Amount" means $4,000,000.
4. Section 2.04(c) of the Agreement. Section 2.04(c) of the
Standby Agreement is hereby deleted in its entirety and replaced with
"[RESERVED]".
5. Exhibit A-1 of the Agreement. The Amounts twice specified as
"$10,000,000" in the Form of the Secured Note appended to the Standby Agreement
as Exhibit A-1, is hereby changed to "$0" in each instance.
6. Secured Note Cancellation. The Secured Note in the form of
Exhibit A-1, executed pursuant to Section 2.02(a) of the Standby Agreement is
hereby cancelled.
92
7. Exhibit A-2 of the Agreement. The Amount twice specified as
"$2,000,000" in the Form of the Secured Note appended to the Standby Agreement
as Exhibit A-2, is hereby changed to "$4,000,000", in each instance.
8. Re-issuance of Secured Note. The Secured Note in the form of
Exhibit A-2, executed pursuant to Section 2.02(a) of the Standby Agreement is
hereby cancelled and replaced with an amended Secured Note in the amount of $
4,000,000.
9. Consequences of Failing to Terminate the Working Capital
Facility. In the event that (a) the outstanding balance on the Secured Note with
respect to the working capital facility under the Standby Agreement has not been
paid down to a level of $2,000,000 or less by February 28, 1998, or (b) CMG
Funding Corp. has not taken, by February 28, 1998, all actions to amend such
working capital facility and the Standby Agreement so that the Maximum Working
Capital Advance Aggregate Amount is thereafter no more than $2,000,000, Xxxx X.
Xxx, on behalf of CMG Funding Corp. agrees, pursuant to the Letter Agreement
dated as of October 24, 1997, between Xxxx X. Xxx as shareholder of CMG Funding
Corp. and ContiTrade Services L.L.C., (the "New Letter Agreement") to transfer
to ContiFinancial Corporation an amount of Class A Preferred Stock of CMG
Funding Corp. representing 10% of the outstanding equity of CMG Funding Corp. on
a fully diluted basis as consideration for the continued availability for use of
such facility at the expanded capacity level by CMG Funding Corp., as well as
the receipt by each of CMG Funding Corp. and Xxxx X. Xxx of $ 1 from ContiTrade
Services L.L.C. as additional consideration. The payment of the Class A
Preferred Stock shall not reduce in any manner the obligation of CMG Funding
Corp. to repay all its outstanding obligations under the related Secured Note.
10. Consequences of Breaching the New Letter Agreement. In the
event that Xxxx X. Xxx fails to perform his obligation under the New Letter
Agreement, CMG Funding Corp. hereby agrees that it shall issue such shares of
Class A Preferred Stock as required by the New Letter Agreement, and such
additional shares to put ContiFinancial Corporation in the same economic
position it would have been in had Xxxx X. Xxx honored his obligation under the
New Letter Agreement.
11. Termination upon REIT Election or Stock or Unit Issuance. In
the event that CMG Funding Corp. proposes to (i) elect REIT status; (ii) issue
any additional amounts of its stock by private placement; or (iii) issue Units
consisting in part of such stock, on or prior to the earlier of such REIT
election or issuance of such Stock or Units, CMG Funding Corp. shall have (a)
paid off in full the outstanding balance of the Secured Note with respect to the
working capital facility under the Standby Agreement, as well as paid all
interest accrued theron, and (b) taken all action necessary to terminate such
working capital facility and the Standby Agreement.
12. Effectiveness. This Amendment, even after due execution by
the parties hereto, will not become effective until each of Amendment 1 to the
Purchase and Sale Agreement, the New Letter Agreement, Amendment 1 to the
Registration Rights Agreement, dated October 24, 1997, and the amended Secured
Note, pursuant to Paragraph 8 hereof, have also been duly executed and delivered
by the parties thereto.
2
93
13. Governing Law. This Amendment shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to its rules regarding conflict of laws.
3
94
IN WITNESS WHEREOF, the parties have executed this Amendment 1 to
the Standby and Working Capital Financing Agreement as of the day and year first
above written.
CMG Funding Corp.
As Borrower
By:
--------------------------
Name: Xxxx X. Xxx
Title:
ContiTrade Services, L.L.C.
As Lender
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
CMG Funding Securities Corp.
As Residualholder
By:
--------------------------
Name:
Title:
4
95
Execution Copy
AMENDMENT 2 TO
STANDBY AND WORKING CAPITAL FINANCING AGREEMENT
This Amendment 2, dated as of November 18, 1997 (this
"Amendment"), to the Standby and Working Capital Financing Agreement as amended
(the "Standby Agreement"), dated as of December 17, 1996, among CMG Funding
Corp., ("CMG") and Continental Mortgage Group, L.C. (now succeeded by CMG
Funding Corp.), as Borrowers, ContiTrade Services L.L.C. ("CTS") as Lender, and
CMG Funding Securities Corp. as Residualholder.
WHEREAS, the parties hereto have entered into the Standby
Agreement, as well as a series of other agreements designated as Significant
Documents in the Standby Agreement;
WHEREAS, the parties hereto have entered into Amendment 1 to the
Standby Agreement dated as of October 24, 1997 ("Amendment 1"); and
WHEREAS, the parties hereto now wish to further amend the certain
provisions in the Standby Agreement.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 10.02 of the
Standby Agreement, to further amend the Standby Agreement and restate certain
provisions thereof as follows:
1. Defined Terms. Capitalized terms used herein without
definition have the meanings ascribed to them in the Standby Agreement.
2. Amended Definition of "Working Capital Advance Termination
Date" The definition of "Working Capital Advance Termination Date" in the
Standby Agreement is hereby replaced in its entirety with the following:
"Working Capital Advance Termination Date" means the earlier to
occur of (a) the later to occur of (i) the first anniversary of the date of this
Standby Agreement, or (ii) the second anniversary of the date of this Standby
Agreement following the Lender's most recent notice of renewal of the working
capital component of this Standby Agreement pursuant to Section 2.12 hereof, if
any, or (b) August 1, 1998.'
3. Amended Definition of "Interest Rate" The definition of
"Interest Rate" in the Standby Agreement is hereby replaced in its entirety with
the following:
"Interest Rate" means (a) with respect to any Collateralized
Advance and any Accrual Period, LIBOR on the related LIBOR Reset Date plus
5.00%; and (b) with respect to any Working Capital Advance and any Accrual
Period, (i) prior to
96
March 1, 1998, LIBOR on the related LIBOR Reset Date plus 4.50%; and (ii) on or
after March 1, 1998, LIBOR on the related LIBOR Reset Date plus 8.50%.'
4. Amendment to Section 9 of Amendment 1. The parties hereto
agree that Section 9 of Amendment 1 is hereby revoked in its entirety and shall
be without any force or effect whatsoever.
5. Amendment to Section 10 of Amendment 1. The parties hereto
agree that Section 10 of Amendment 1 is hereby revoked in its entirety and shall
be without any force or effect whatsoever.
6. Effectiveness. This Agreement, even after due execution by the
parties hereto, will not become effective until (i) each of the Conversion
Letter Agreement dated as of November 18, 1997 by and between CTS and CMG (the
"Conversion Letter Agreement"), the Termination Letter dated as of November 18,
1997, by and between CTS and Xxxx Xxx as Shareholder of CMG, Amendment 2 to the
Registration Rights Agreement dated as of November 18, 1997, by and between CMG
and CTS, Amendment 1 to the Investment Banking Services Agreement dated November
18, 1997 by and among CTS, CMG and ContiFinancial Services Corporation, and
Warrant No. 1 issued by CMG to CTS and dated as of November 18, 1997, have each
also been duly executed and delivered by the parties thereto, and (ii) the
546,883 shares of Common Stock have been conveyed to CTS pursuant to Paragraph 2
of the Conversion Letter Agreement.
7. Governing Law. This Amendment shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to its rules regarding conflict of laws.
2
97
IN WITNESS WHEREOF, the parties have executed this Amendment 1 to
the Standby and Working Capital Financing Agreement as of the day and year first
above written.
CMG Funding Corp.
As Borrower
By:
--------------------------
Name: Xxxx X. Xxx
Title:
ContiTrade Services, L.L.C.
As Lender
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
CMG Funding Securities Corp.
As Residualholder
By:
--------------------------
Name:
Title:
3
98
AMENDMENT 3 TO
STANDBY AND WORKING CAPITAL FINANCING AGREEMENT
This Amendment 3, dated as of December 31, 1997 (this
"Amendment"), to the Standby and Working Capital Financing Agreement as amended
(the "Standby Agreement"), dated as of December 17, 1996, among CMG Funding
Corp., ("CMG") and Continental Mortgage Group, L.C. (now succeeded by CMG
Funding Corp.), as Borrowers, ContiTrade Services L.L.C. ("CTS") as Lender, and
CMG Funding Securities Corp. as Residualholder.
WHEREAS, the parties hereto have entered into the Standby
Agreement, as well as a series of other agreements designated as Significant
Documents in the Standby Agreement;
WHEREAS, the parties hereto have entered into Amendment 1 to the
Standby Agreement dated as of October 24, 1997 ("Amendment 1") and Amendment 2
to the Standby Agreement dated as of November 18, 1997 ("Amendment 2"); and
WHEREAS, the parties hereto now wish to further amend the certain
provisions in the Standby Agreement.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 10.02 of the
Standby Agreement, to further amend the Standby Agreement and restate certain
provisions thereof as follows:
1. Defined Terms. Capitalized terms used herein without
definition have the meanings ascribed to them in the Standby Agreement.
2. Amended Definition of "Working Capital Advance Termination
Date" The definition of "Working Capital Advance Termination Date" in
the Standby Agreement is hereby replaced in its entirety with the
following:
"Working Capital Advance Termination Date" means January 1, 1999.
3. Maximum Working Capital Advance Aggregate Amount. The
definition of "Maximum Working Capital Advance Aggregate Amount" as set
99
forth in Article 1 of the Standby Agreement is replaced in its entirety
with "Maximum Working Capital Advance Aggregate Amount" means
$2,000,000.
4. There is hereby added to Article II of the Standby Agreement a
new Section, Section 2.11, "Conversion Privilege", to read in its
entirety as follows:
Section 2.11. Conversion Privilege. The Lender with respect to
the Working Capital Loan, or any portion thereof, shall have the following
Conversion Privileges hereunder:
(a) Each $4.87115 of the Working Capital Loan shall be
convertible to one (1) share of Class A Preferred Stock at the option of the
Lender, at any time after the related Funding Date at the principal office of
the Borrower (or such other office or agency of the Borrower as the Borrower may
designate), in effect on the date notice of such request is received by the
Borrower. It is the intention of the parties, that as of the Closing Date
(without giving effect to any common stock issuances pursuant to clauses (iv) or
(vi) of the definition of "Change of Control") upon the full exercise of the
Conversion Privilege with respect to the Working Capital Loan that the Lender
would thereupon possess 10% of the combined voting rights of all the issued and
outstanding shares of Capital Stock of the Borrower (on a fully diluted basis)
solely with respect to the conversion of the Working Capital Loan.
(b) In the event that the Borrower at any time or from time to
time after the Lender exercises its Conversion Privilege hereunder but prior to
the issuance of the related Preferred Stock shall declare or pay, without
consideration, any dividend on the Capital Stock payable in Capital Stock or in
any right to acquire Capital Stock for nominal consideration, or shall effect a
subdivision of the outstanding shares of Capital Stock into a greater number of
shares of Capital Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Capital Stock or in any right to acquire Capital
Stock), or in the event the outstanding shares of Capital Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Capital Stock, then the Borrower shall pay to the Lender a dividend
payable in such Capital Stock in an amount of shares equal to the additional
number of shares of such Capital Stock necessary to restore the percentage
ownership interest of the Lender by virtue of the conversion of the Loan, or any
portion thereof, to that upon exercise of such rights to acquire Preferred
Stock.
(c) If the Preferred Stock issuable upon conversion of the
Working Capital Loan, or any portion thereof, shall be changed into the same or
a different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than a subdivision
or combination of shares provided for in Section 2.11(b) above) or a merger,
consolidation or other corporate reorganization which shall not be in connection
with a plan of liquidation, dissolution or winding up of the Borrower then the
Working Capital Loan, or any portion thereof, shall be convertible
2
100
into, in lieu of the number of shares of Preferred Stock which the Lender would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of shares of Preferred Stock that
would have been subject to receipt by the Lender upon conversion of the Working
Capital Loan, or any portion thereof, immediately before that change.
(d) The Borrower shall pay any and all issue and other taxes that
may be payable in respect of any issue or delivery of shares of Preferred Stock
on conversion of the Working Capital Loan, or any portion thereof, pursuant
hereto.
(e) The Borrower shall at all times reserve and keep out of its
authorized but unissued shares of Preferred Stock, solely for the purpose of
effecting the conversion of the Working Capital Loan, such number of its shares
of Preferred Stock as shall from time to time be sufficient to effect the
conversion of up to $2,000,000 of the Working Capital Loan; and if at any time
the number of authorized but unissued shares of Preferred Stock shall not be
sufficient to effect such conversion, the Borrower will take such corporate
action as may, in the opinion of its counsel, be necessary to increase the
number of shares of its authorized but unissued shares of Preferred Stock to
such number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in all reasonable efforts to obtain the requisite
shareholder approval of any necessary amendment to the Certificate of
Incorporation.
(f) No fractional shares shall be issued upon the conversion of
the Working Capital Loan, or any portion thereof.
(g) In the event that:
(i) the Borrower shall propose at any time:
(A) to declare any dividend or distribution upon its
Capital Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(B) to offer for subscription pro rata to the holders of
any class or series of its Capital Stock any additional shares of Capital Stock
of any class or series or other rights;
(C) to effect any reclassification or recapitalization
of its Capital Stock outstanding involving a change in the Capital Stock; or
(D) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property,
assets or business, or to liquidate, dissolve or wind up;
3
101
then,
(ii) in connection with such event, the Borrower shall
send to the Lender:
(A) at least ten (10) days' prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Capital
Stock shall be entitled thereto) or for determining rights to vote in respect of
the matters referred to in clause (i)(C) or (D) above; and
(B) in the case of the matters referred to in (C) and
(D) above, at least twenty (20) days' prior written notice of the date when the
same shall take place (and specifying the date on which the holders of Capital
Stock shall be entitled to exchange their Capital Stock for securities, cash or
other property deliverable upon the occurrence of such event or such earlier
date, if any, on which a record shall be taken of the holders of Capital Stock
who shall be entitled to exchange their Capital Stock); and
(iii) if, prior to the date on which the Borrower receives the
proceeds of the REIT Issuance (as defined in Amendment 2 to The Investment
Banking Services Agreement) the Borrower proposes to issue Capital Stock, and
such issuance would not give rise to the Lender's anti-dilution rights under
Section 2.11 (b) or (c), then with respect to such issuance the Lender shall
have a right of first refusal for a period, commencing with the Lender's receipt
of written notice from the Borrower of such issuance, and continuing for fifteen
days thereafter, to purchase such Capital Stock, on the same terms and at the
same purchase price paid, or to be paid, by the other purchasers, so as to
maintain the Lender's interest as described in the last sentence of Section
2.11(a) hereof.
(h) Upon 60 days prior written notice to the Lender of a proposed
assignment, the rights of the Lender set forth in this Section 2.11 are freely
assignable by the Lender and its assigns and will travel with the Working
Capital Loan and the related Preferred Stock, respectively.
(i) The Borrower shall pay to the Lender any accrued and unpaid
interest on the Working Capital Loan through the date of conversion upon the
exercise of the Conversion Privileges.
5. Exhibit A-2 of the Agreement. The Amount twice specified as
$4,000,000" in the Form of the Secured Note appended to the Standby
Agreement as Exhibit A-2, as amended, is hereby changed to $2,000,000",
in each instance.
6. Re-issuance of Secured Note. The Secured Note in the form of
Exhibit A-2, executed pursuant to Section 2.02(a) of the Standby
Agreement is hereby cancelled and replaced with an amended Secured Note
in the amount of $2,000,000.
4
102
7. Effectiveness. This Agreement, even after due execution by the
parties hereto, will not become effective until (i) each of the
Conversion Letter Agreement No. 2 dated as of December 31, 1997 by and
between CTS and CMG (the "Conversion Letter Agreement No. 2"), Amendment
3 to the Registration Rights Agreement dated as of December 31, 1997, by
and between CMG and CTS, Amendment 2 to the Investment Banking Services
Agreement dated December 31, 1997 by and among CTS, CMG and
ContiFinancial Services Corporation, Amendment 2 to the Purchase and
Sale Agreement dated as of December 31, 1997, among CMG and CTS, Warrant
No. 2 issued by CMG to CTS and dated as of December 31, 1997 has been
exchanged for Warrant No. 1 held by CTS, and Warrant No. 3 issued by CMG
to CFC, as designee of CTS, and dated as of December 31, 1997, have each
also been duly executed and delivered by the parties thereto, and (ii)
the 410,581 shares of Class A Preferred Stock shares have been conveyed
to CTS pursuant to Paragraph 2 of the Conversion Letter Agreement No. 2.
8. Governing Law. This Amendment shall be governed by and construed
in accordance with the Laws of the State of New York, without regard to
its rules regarding conflict of laws.
5
103
IN WITNESS WHEREOF, the parties have executed this Amendment 3 to
the Standby and Working Capital Financing Agreement as of the day and year first
above written.
CMG Funding Corp.
As Borrower
By:
--------------------------------
Name: Xxxx X. Xxx
Title:
ContiTrade Services, L.L.C.
As Lender
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
CMG Funding Securities Corp.
As Residualholder
By:
--------------------------------
Name:
Title:
6
