CREDIT AGREEMENT
Exhibit 10.14
** Confidential Treatment Requested
THIS AGREEMENT is entered into as of June 30, 2003 by and between E-LOAN, INC., a Delaware corporation ("Borrower"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
Borrower has requested that Bank extend or continue credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein.
ARTICLE I
(a) Line of Credit. Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to but excluding June 30, 2004, not to exceed at any time the aggregate principal amount of Five Million Dollars ($5,000,000.00) ("Line of Credit"), the proceeds of which shall be used to finance Borrower's working capital requirements and for general corporate purposes. Borrower's obligation to repay advances under the Line of Credit shall be evidenced by a promissory note substantially in the form of Exhibit A attached hereto ("Line of Credit Note"), all terms of which are incorporated herein by this reference. For purposes of determining the amount of credit available hereunder, Borrower's corporate credit card program with Bank, currently in a maximum amount of $100,000.00, shall, up to the maximum credit limit thereof (the "Credit Card Limit"), be reserved under the Line of Credit and shall not be available for borrowing thereunder.
(b) Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank agrees from time to time during the term hereof to issue or cause an affiliate to issue standby letters of credit for the account of Borrower (each, a "Letter of Credit" and collectively, "Letters of Credit"); provided however, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed Five Million Dollars ($5,000,000.00) less the Credit Card Limit. Borrower hereby requests that the outstanding letter of credit, which is described on Schedule 1.1(b) hereto (the "Existing Letter of Credit"), be deemed for all purposes to be a Letter of Credit issued hereunder; provided, however, that nothing in this Section 2.3(b) shall extend the expiry date of the Existing Letter of Credit or waive or reduce any fees owing upon any renewal thereof. The form and substance of each Letter of Credit shall be subject to approval by Bank, in its reasonable discretion. Other than Letters of Credit that have be renewed in accordance with their terms for periods not to exceed one year, no Letter of Credit shall have an expiration date more than three hundred sixty-five (365) days beyond the maturity date of the Line of Credit. The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall not be available for borrowings thereunder. Each Letter of Credit shall be subject to the additional terms and conditions of the Bank's then standard form of letter of credit agreements, applications and any related documents required by Bank in connection with the issuance thereof. Each draft paid under a Letter of Credit, if not reimbursed by Borrower on the honor date thereof, shall be deemed an advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; provided however, that if advances under the Line of Credit are not available, for any reason, at the time any draft is paid, then Borrower shall immediately pay to Bank the full amount of such draft, together with interest thereon from the date such draft is paid to the date such amount is fully repaid by Borrower, at the rate of interest that would have been applicable to advances under the Line of Credit if the Line of Credit were available. In such event Borrower agrees that Bank, in its sole discretion, may debit any account maintained by Borrower with Bank for the amount of any such draft. Upon execution of this Agreement Bank shall release to Borrower the $750,000 certificate of deposit currently held by Bank in connection with Borrower's lease.
(c) Borrowing and Repayment. Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.
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SECTION 1.2. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit shall bear interest at the rate of interest set forth in the Line of Credit Note. The Credit Card Limit and the aggregate undrawn amount of all outstanding Letters of Credit shall not be included in the outstanding principal balance of the Line of Credit, but shall be included in determining the amount of credit available under the Line of Credit.
(b) Computation and Payment. Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be due and payable by Borrower monthly in arrears on the last day of each month, unless such day is not a Business Day (as defined in the Line of Credit Note) in which case such shall be payable on the next succeeding Business Day. When interest is determined in relation to the Prime Rate (as defined in the Line of Credit Note), each change in the rate of interest shall become effective on the date each Prime Rate change is announced within Bank.
(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to one-quarter percent (0.25%) per annum (computed on the basis of a 360-day year, actual days elapsed) on the average daily unused amount in any fiscal quarter of the Line of Credit (including the undrawn amount of issued Letters of Credit reserved under the Line of Credit), which fee shall be calculated by Bank on a 360-day year, actual days elapsed and shall be due and payable by Borrower quarterly in arrears on the last day of each fiscal quarter, unless such day is not a Business Day (as defined in the Line of Credit Note) in which case such fee shall be payable on the next succeeding Business Day; provided, however, that no Unused Commitment Fee shall be charged if the average daily unused amount of the Line of Credit (including the undrawn amount of issued Letters of Credit reserved under the Line of Credit) during such fiscal quarter is $2,5000,000 or less. Notwithstanding the foregoing, Borrower may terminate this Line of Credit at any time without penalty (except as provided in Section 3(d) of the Line of Credit Note) by paying all outstanding advances and providing Bank with at least the (10) days prior written notice of termination of this Agreement.
(d) Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon the issuance of each Letter of Credit (other than the Existing Letter of Credit) equal to two percent (2.00%) per annum (computed on the basis of a 360- day year, actual days elapsed) of the face amount thereof, and (ii) fees upon the payment or negotiation of each draft under any Letter of Credit and fees upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank's standard fees and charges then in effect for such activity.
(e) Closing Fee. Borrower shall pay to Bank a fee (the "Closing Fee") in the amount of $5,000.00, which shall be nonrefundable, fully earned and due and payable on the Closing Date.
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(a) Grant. As security for all Indebtedness and other obligations of Borrower to Bank subject hereto, Borrower hereby grants to Bank security interests of first priority in all of Borrower's deposit accounts and securities accounts held at any time with Bank or any of Bank's affiliates (other than the Excluded Xxxxx Fargo Accounts defined below, collectively, the "Xxxxx Fargo Accounts"), including Borrower's Xxxxx Capital Management account, number [**] (the "Securities Account"), and all funds and other financial assets held therein from time to time. Notwithstanding the foregoing, but without limiting any statutory liens or rights of set-off or any other rights reserved or provided to Bank or any affiliate of Bank with respect to any Excluded Xxxxx Fargo Account under any control agreement or other agreement executed by Bank or such affiliate with any third party creditor of Borrower, Borrower's grant does not include any of the property or specific accounts subject to security interests granted to any creditor of Borrower and listed on Schedule 1.3(a) hereto (the "Excluded Xxxxx Fargo Accounts"), or any funds or financial assets held therein from time to time (other than amounts in excess of what is owing from time to time by Borrower to any such third party creditor).
(b) Execution of Documents; Costs and Expenses. All of the foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement.
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SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENTS; LIENS.
(a) Each of the financial statements of Borrower dated December 31, 2002 for the fiscal year ending on such date, and dated March 31, 2003 for the fiscal quarter ending on such date, true copies of which have been delivered by Borrower to Bank prior to the date hereof, (i) is complete and correct and presents fairly the financial condition of Borrower, (ii) discloses all liabilities of Borrower that are required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (iii) has been prepared in accordance with generally accepted accounting principles consistently applied. Since the date of such financial statement there has been no material adverse change in the financial condition of Borrower. Borrower, and each of its consolidated Subsidiaries, has good and marketable title to each of the assets and properties reflected on such financial statements (other than any such assets or properties disposed of in a transaction not prohibited by any of the provisions of Article V or any other Loan Document after the date of such financial statement), subject to no liens or encumbrances other than Permitted Liens (as defined below).
(b) Since the date of the financial statement referred to in clause (a), Borrower has not mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except as follows (collectively, "Permitted Liens"): (i) liens in favor of Bank or as otherwise permitted by Bank in writing, including liens on the Excluded Xxxxx Fargo Accounts and funds and other financial assets held therein granted by Borrower in favor of any other secured creditor of Borrower;; (ii) liens existing on the date of this Agreement and listed on Schedule 2.5; (iii) liens for taxes, assessments, levies or other governmental charges not yet delinquent or being contested in good faith and by appropriate proceedings for which adequate reserves are being maintained; (iv) carriers', warehousemen's, materialmen's and mechanics' and other similar liens imposed by law arising in the ordinary course of business which are not delinquent or which are being contested in good faith and by appropriate proceedings for which adequate reserves are being maintained; (v) liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, employment insurance and other types of social security legislation and other liens to secure the performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) incurred in the ordinary course of business, whether pursuant to statutory requirements, common law or consensual arrangements so long as no such liens attach to any of the Collateral if any obligation secured thereby is delinquent and so long as no foreclosure, sale or similar proceedings have been commenced with respect to any such lien; (vi) liens (including in respect of capital lease obligations) upon any property acquired or held by Borrower to secure the purchase price of such property or Indebtedness incurred solely for the purpose of financing the acquisition of such property, so long as (A) such lien extends only to the property acquired or financed and proceeds (including insurance proceeds) thereof (B) such lien attaches to such property concurrently with or within ninety (90) days after the acquisition thereof, and (C) the principal amount of the Indebtedness secured thereby does not exceed 100% of the cost of such property (vii) nonexclusive licenses and sublicenses granted to others in the ordinary course of business that do not interfere in any material respect with the conduct of Borrower's business or result in any material diminution in the value of any Collateral; (viii) liens securing judgments, decrees or attachments in circumstances not constituting an Event of Default, but excluding any lien in respect of any such judgment, decree or attachment that remains undischarged for a period of more than thirty (30) days during which execution is not stayed; (ix) liens in favor of customs and review authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods; and (x) in the case of clauses (ii), (vi) and (vii) above, any renewals, extensions or replacements thereof, provided that the property covered thereby is not increased or expanded and any renewal, extension or replacement of the obligations secured or benefited thereby is permitted by Section 5.2 and does not increase the amount secured thereby.
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No liens or encumbrances, including any Permitted Liens other than in favor of Bank, encumber any of the Xxxxx Fargo Accounts, including the Securities Account, or any of the funds or other financial assets held therein or the proceeds thereof.
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SECTION 2.13. SOLVENCY. Each of Borrower and Borrower and its consolidated Subsidiaries is solvent.
ARTICLE III
(a) Approval of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and each promissory note or other instrument required hereby;
(ii) Security Agreement: Securities Account;
(iii) Securities Account Control Agreement-WF Affiliate Intermediary;
(iv) Corporate Resolution: Borrowing; Pledge of Assets;
(v) Certificate of Incumbency;
(vi) prior to the issuance by Bank of any Letter of Credit, Borrower shall deliver to Bank a duly executed letter of credit agreement and such related documents as Bank shall reasonably require; and
(vii) such other documents as Bank may require under any other Section of this Agreement.
(c) Insurance. Borrower shall have delivered to Bank evidence of insurance coverage on all Borrower's property, in such form, substance, amounts, and covering such risks and issued by such companies as are customary in lines of business similar to that of Borrower.
(d) Fees and Expenses. Borrower shall have paid or reimbursed to Bank all fees and expenses due on the Closing Date, including the Closing Fee required pursuant to Section 1.2(e) and all amounts then due under Section 7.3.
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(a) Compliance. The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents which may be required in connection with such extension of credit.
(c) Financial Condition. There shall have been no material adverse change, as determined by Bank, in the financial condition or business of Borrower, nor any material decline, as reasonably determined by Bank, in the market value of any material portion of the collateral required hereunder or a substantial or material portion of the assets of Borrower. Without limiting the foregoing, Bank shall have no obligation to make any extension of credit under this Agreement, including without limitation to issue any Letter of Credit, if as of the date of such extension Borrower has not timely delivered the certification most recently due as required pursuant to Section 4.3(d) certifying compliance with Section 5.6 hereof.
ARTICLE IV
Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing:
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(a) not later than 120 days after and as of the end of each fiscal year, an audited financial statement of Borrower, prepared by a certified public accountant acceptable to Bank,
(b) not later than 30 days after and as of the end of each month, a financial statement of Borrower, prepared by Borrower, to include balance sheet and income statement;
(c) promptly upon their becoming available, copies of all registration statements and regular periodic or special reports that Borrower may make to, or file with, the Securities and Exchange Commission or any national securities exchange, including
(i) Form 10K, due within 120 days after and as of the of each fiscal year,
(ii) Form 10Q, due within 45 days after and as of the of each fiscal quarter, and
(iii) Form 8K, as and when filed;
(d) not later than 20 days after and as of the end of each month, a liquidity statement of Borrower, prepared by Borrower and certified by a senior financial officer of Borrower to be true and accurate, showing in such detail as Bank may reasonably request evidence of maintenance of the Minimum Liquidity Amount and the Minimum Xxxxx Fargo Liquidity Amount;
(e) contemporaneously with each annual, quarterly and monthly financial statements of Borrower required hereby, a certificate of the president or chief financial officer of Borrower (i) that the financial statements delivered pursuant thereto are accurate, (ii) that there exists no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default and (iii) that Borrower is in compliance with the applicable covenants set forth in Sections 5.6, 5.7 and 5.8 hereof, together with such calculations regarding such compliance therewith as Bank may reasonably request.
(f) from time to time such other information as Bank may reasonably request.
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ARTICLE V
Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not, without Bank's prior written consent:
SECTION 5.6 LIQUIDITY. Permit:
(a) at any time the balance of Borrower's unrestricted cash or cash equivalents less the principal amount of all advances outstanding under the Line of Credit (which excludes the Credit Card Limit and undrawn amounts of all outstanding Letters of Credit) to be less than Fifteen Million Dollars ($15,000,000) (the "Minimum Liquidity Amount"); provided, however, that in determining the Minimum Liquidity Amount, up to Two Million Five Hundred Thousand Dollars ($2,500,000) of restricted cash or cash equivalents may be included; or
(b) as at the end of any calendar month, the balance of amounts held in the Xxxxx Fargo Accounts (including the Securities Account) to be less than $5,000,000 in the aggregate (the "Minimum Xxxxx Fargo Liquidity Amount"); or
permit or suffer to exist any liens or encumbrances with respect to any cash or cash equivalents of Borrower other than (a) liens in favor of Bank,(b) liens attaching to up to Two Million Five Hundred Thousand Dollars ($2,500,000) of the Minimum Liquidity Amount and liens attaching to cash and cash equivalents in excess of the Minimum Liquidity Amount so long as such liens do not attached to any of the Xxxxx Fargo Accounts or funds or other financial assets held therein
SECTION 5.7 TANGIBLE NET WORTH. Permit its Tangible Net Worth at any time to be less than Forty Million Dollars ($40,000,000). "Tangible Net Worth" means total stockholder's equity of the Company and its consolidated subsidiaries plus Indebtedness subordinated in right of payment and priority to Indebtedness for borrowed money of Borrower (including Indebtedness owing to Bank hereunder) in writing on terms reasonably acceptable to Bank ("Subordinated Debt") minus the net book value of all assets of Borrower and its consolidated subsidiaries that would be treated as intangibles under generally accepted accounting principles.
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SECTION 5.11 TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including without limitation any purchase, sale, lease or exchange of property or the rendering of any service, with any of it's affiliates or Subsidiaries, unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of Borrower's business and (c) upon fair and reasonable terms no less favorable to the Borrower than it would obtain in an arm's-length transaction with a Person which was not an affiliate or Subsidiary.
SECTION 5.12 CONDUCT OF BUSINESS.
(a) Engage, or permit any of its Subsidiaries to engage, in any business other than the respective businesses engaged in by Borrower and its Subsidiaries on the Closing Date and such other lines of business for which Bank has given its prior written consent;
(b) operate Borrower's business, or permit any Subsidiary to operate its business, in a manner that would reasonably be expected to lead to a material adverse effect on the condition (financial or otherwise), business, assets or operations of Borrower or Borrower and its Subsidiaries on a consolidated basis; nor
(c) change Borrower's name, or permit its state of organization to be located in any jurisdiction other than the State of Delaware, in either case without providing Bank with written notice thereof at least thirty (30) Business Days prior to any such change and promptly taking such steps as may be required in connection with any such change to maintain the perfection of any and all security interests granted to Bank.
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SECTION 5.13 CAPITAL EXPENDITURES. Make any capital expenditures or other investments in fixed assets in any fiscal year in excess of an aggregate of $5,000,000.
SECTION 5.14 OPERATING LEASES. Incur any Indebtedness or other liabilities or obligations in respect of any operating lease in any fiscal year in excess of an aggregate of $5,000,000 due in such fiscal year other than Indebtedness or other liabilities or obligations arising under the operating leases set forth on Schedule 5.14.
ARTICLE VI
SECTION 6.1. The occurrence of any of the following shall constitute an "Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal or interest, or to pay within 10 days of the due date thereof any fees or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by or on behalf of Borrower under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made, or any default in the performance of or compliance with Borrower's obligations and covenants under Article 5 of this Agreement.
(c) Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those referred to in subsections (a) and (b) above), and with respect to any such default which by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any material contract or instrument (other than any of the Loan Documents) pursuant to which Borrower has incurred any debt or other liability to any Person, including Bank.
(e) The filing of a notice of judgment lien in excess of $200,000 against Borrower; or the recording of any abstract of judgment against Borrower in excess of $200,000 in any county in which Borrower has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against any Collateral or against any material portion of the assets of Borrower; or the entry of a judgment against Borrower that is not discharged, satisfied, vacated or stayed pending appeal within 30 days.
(f) Borrower shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or all or any material portion of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time ("Bankruptcy Code"), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against it which continues undismissed for 60 days, or Borrower shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.
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(g) There shall exist or occur any event or condition which Bank in good faith believes impairs, or is substantially likely to impair, either the Collateral value of the Securities Account or the prospect of payment or performance by Borrower of its obligations under any of the Loan Documents.
(h) The dissolution or liquidation of Borrower; or Borrower or its directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of Borrower.
(i) Any of the credit facilities described as "Warehouse Lines" on Schedule 5.2 hereto shall have expired or been terminated without renewal or replacement, or the maximum committed amounts thereunder (including drawn and undrawn amounts) shall be reduced to an amount in the aggregate less than 50% of the aggregate committed amounts available thereunder as of the Closing Date, without the prior written consent of Bank, which shall not be unreasonably withheld.
(j) Any qualifying special purpose entity ("QSPE") created or formed by Borrower to facilitate the securitization of real or personal property secured loans or receivables shall cease to be a qualifying special purpose entity pursuant to Financial Account Standards No. 140 (or any successor standard), or Borrower shall consolidate the assets and liabilities of the QSPE in its financial statements, or generally accepted accounting principles shall require the consolidation of the assets and liabilities of the QSPE with the assets and liabilities of Borrower on its financial statements, or Borrower shall become obligated with respect to any material portion of the liabilities of QSPE.
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ARTICLE VII
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.
BORROWER: E-LOAN, INC.
0000 Xxxxxx Xxxx
Xxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attn: Treasurer
With a copy addressed to "Attention: General Counsel" at the same address.
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
Santa Xxxxx Regional Commercial Banking Xxxxxx
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No: (000) 000-0000
Reference: E-Loan
or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.
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SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
(a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.
(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.
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(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.
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(f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding.
(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.
(h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns Indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all Indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such Indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.
(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.
** Confidential Treatment Requested
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E-LOAN, INC., a Delaware corporation |
XXXXX FARGO BANK, NATIONAL ASSOCIATION |
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By: /s/_______________________
By: /s/ ________________________ |
By: /s/_________________________ |
INDEX OF DEFINED TERMS
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PAGE |
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AAA |
15 |
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Line of Credit Note |
1 |
Exhibits and schedules have been omitted in accordance with Item 601 of Regulation S-K, and will be provided upon request.