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EXHIBIT 10.22
RESIDUALS FINANCING AGREEMENT
THIS RESIDUALS FINANCING AGREEMENT (the "Agreement") made and dated as
of the 4th day of September, 1998, by and among AAMES CAPITAL CORPORATION, a
California corporation (the "Company"); AAMES FINANCIAL CORPORATION, a Delaware
corporation and the sole shareholder of the Company (the "Parent"); and
NATIONSBANK, N.A., a national banking association (the "Lender").
RECITALS
A. The Company has requested the Lender to extend credit to the Company in
the form of a convertible revolving line of credit secured by certain assets of
the Company.
B. The Lender has agreed to provide such credit extension on the terms and
subject to the conditions set forth herein, including, without limitation, that
the Parent guaranty all obligations of the Company to the Lender relating
thereto.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Convertible Revolving Credit Facility.
1(a) Revolving Credit Limit. On the terms and subject to the
conditions set forth herein, the Lender agrees that it shall from time to time
to but not including the earlier to occur of the Conversion Date and the
Maturity Date (as such terms and capitalized terms not otherwise defined herein
are defined in Paragraph 11 below) make loans (the "Revolving Loans" or a
"Revolving Loan") to the Company in an amount not to exceed, in the aggregate at
any one time outstanding, the lesser of:
(1) The Revolving Credit Limit; and
(2) The Collateral Value of the Residuals Borrowing Base.
1(b) Payment of Revolving Loans. Subject to the conversion option
set forth in Paragraph 1(c) below, the prepayment requirements of Paragraph 3(f)
below and the interest rate conversion and continuation provisions of Paragraph
2(c) below, the Company shall pay the principal amount of each Revolving Loan on
the Maturity Date.
1(c) Conversion Option. In lieu of making a Required Principal
Prepayment pursuant to Paragraph 3(d)(2) below, the Company may, on a one time
basis and subject to the conditions set forth in Paragraph 5(b) below, elect to
convert the revolving credit facility provided pursuant to Paragraph 1(a) above
to a term facility by giving written notice of
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such election to the Lender (the "Term Out Option"). On the Conversion Date: (1)
the Revolving Credit Limit will be reduced to zero and no additional Revolving
Loans will be advanced, and (2) the principal balance of Revolving Loans
outstanding shall be converted into a term loan (the "Term Loan"), which Term
Loan shall payable in nine consecutive equal monthly installments, with the
first such installment payable on the Conversion Date and subsequent
installments due on the first Business Day of each calendar month thereafter.
2. Interest Rate and Yield-Related Provisions.
2(a) Election of Applicable Rate. The outstanding principal
balance of Revolving Loans and, following the Conversion Date, the Term Loan and
portions thereof, shall bear interest from the date disbursed to but not
including the date of payment calculated at a per annum rate equal to, at the
option of and as selected by the Company from time to time (subject to the
provisions of Paragraphs (2(c), 2(d) and 2(e) below), the Applicable Eurodollar
Rate for the applicable Interest Period or the daily average Applicable
Effective Fed Funds Rate during the applicable interest computation period, said
interest to be payable as provided more particularly in Paragraph 2(b) below;
provided, however, that each Revolving Loan and the Term Loan shall initially be
funded as Effective Fed Funds Rate Loans and, thereafter, shall be maintained,
at the election of the Company made from time to time as permitted herein, as
Effective Fed Funds Rate Loans and/or Eurodollar Loans or any combination
thereof.
2(b) Payment of Interest and Fees. The Lender shall deliver to
the Company an interest and fee billing for each month on or before the third
Business Day of the next succeeding month, which billing shall set forth monthly
interest accrued and payable on Loans and fees payable hereunder. On or before
the seventh Business Day following receipt of such billing statement, the
Company shall pay to the Lender the full amount of the interest and fee billing
set forth on such billing statement. In addition, the Company shall pay to the
Lender interest accruing on Eurodollar Loans on the last day of the applicable
Interest Period.
2(c) Conversion and Continuation.
(1) The Company may elect from time to time to convert Eurodollar
Loans to Effective Fed Funds Rate Loans by giving the Lender same day
notice of such election. Any conversion of Eurodollar Loans may only
be made on the last day of the applicable Interest Period. The Company
may elect from time to time to convert Effective Fed Funds Rate Loans
to Eurodollar Loans by giving the Lender at least three Eurodollar
Business Days' prior irrevocable notice of such election. All such
elections shall be evidenced by the delivery by the Company to the
Lender within the required time frame of a duly executed Loan And/Or
Interest Rate Election Request. No Effective Fed Funds Rate Loan shall
be converted into a Eurodollar Loan if an Event of Default or
Potential Default has occurred and is continuing on the date of the
conversion requested by the Company. All or any part of outstanding
Revolving Loans or, following the Conversion Date, the Term Loan may
be converted as provided herein; provided, however, that partial
conversions shall be in a principal amount of $5,000,000.00 or whole
multiples of $1,000,000.00 in excess thereof, and in the case of
conversions into Eurodollar Loans, after giving effect thereto the
aggregate of the then number of Eurodollar Loans of the Lender having
a different Interest Period does not exceed ten.
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(2) Any Eurodollar Loan may be continued as such upon the
expiration of the Interest Period with respect thereto by the Company
giving the Lender at least three Eurodollar Business Days' prior
irrevocable notice of such election as set forth on a duly executed
Loan And/Or Interest Rate Election Request; provided, however, that no
Eurodollar Loan may be continued as such when any Event of Default or
Potential Default has occurred and is continuing, but shall be
automatically converted to an Effective Fed Funds Rate Loan on the
last day of the then current Interest Period applicable thereto, and
the Lender shall notify the Company promptly that such automatic
conversion will occur. If the Company shall fail to give notice as
provided above, the Company shall be deemed to have elected to convert
the affected Eurodollar Loan to an Effective Fed Funds Rate Loan on
the last day of the relevant Interest Period.
2(d) Inability to Determine Rate. In the event that the Lender
shall have determined (which determination shall be conclusive and binding upon
the Company) that by reason of circumstances affecting the London interbank
eurodollar market adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for any Interest Period, the Lender shall forthwith give
facsimile notice of such determination, confirmed in writing, to the Company. If
such notice is given: (1) any Effective Fed Funds Rate Loan that was to have
been converted to a Eurodollar Loan shall be continued as an Effective Fed Funds
Rate Loan, and (2) any outstanding Eurodollar Loan shall be converted, on the
last day of the then current Interest Period with respect thereto, to an
Effective Fed Funds Rate Loan. Until such notice has been withdrawn by the
Lender, the Company shall not have the right to convert an Effective Fed Funds
Rate Loan to a Eurodollar Loan or to continue a Eurodollar Loan.
2(e) Illegality. Notwithstanding any other provisions herein, if
any law, regulation, treaty or directive, or any change therein or in the
interpretation or application thereof, shall make it unlawful for the Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement: (1) the
commitment of the Lender hereunder to make or to continue Eurodollar Loans or to
convert Effective Fed Funds Rate Loans to Eurodollar Loans shall forthwith be
canceled, and (2) all outstanding Eurodollar Loans, if any, shall be converted
automatically to Effective Fed Funds Rate Loans at the end of their respective
Interest Periods or within such earlier period as is required by law. In the
event of a conversion of any Eurodollar Loan prior to the end of its applicable
Interest Period as provided herein, the Company hereby agrees promptly to pay
the Lender, upon demand, the amounts required pursuant to Paragraph 2(h) below,
it being agreed and understood that such conversion shall constitute a
prepayment for all purposes hereof. The provisions hereof shall survive the
termination of this Agreement and payment of all other Obligations.
2(f) Requirements of Law; Increased Costs. In the event that any
applicable law, order, regulation, treaty or directive issued by any central
bank or other Governmental Authority, or in the governmental or judicial
interpretation or application thereof, or compliance by the Lender with any
request or directive (whether or not having the force of law) issued subsequent
to the date hereof by any central bank or other Governmental Authority:
(1) Does or shall subject the Lender to any tax of any kind
whatsoever with respect to this Agreement or any Loans made hereunder,
or change the basis of taxation of payments to the Lender of
principal, fee, interest or any other amount
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payable hereunder (except for a change in the rate of tax on the
overall net income of the Lender);
(2) Does or shall impose, modify or hold applicable any reserve,
capital requirement, special deposit, compulsory loan or similar
requirements against assets held by, or deposits or other liabilities
in or for the account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of the
Lender which are not otherwise included in the determination of the
Effective Fed Funds Rate or the Eurodollar Rate; or
(3) Does or shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender of
making, renewing or maintaining any Loan or to reduce any amount receivable in
respect thereof or to reduce the rate of return on the capital of the Lender or
any Person controlling the Lender, then, in any such case, the Company shall
promptly pay to the Lender, upon its written demand, any additional amounts
necessary to compensate the Lender for such additional cost or reduced amounts
receivable or rate of return as reasonably determined by the Lender with respect
to this Agreement or Loans made hereunder. If the Lender becomes entitled to
claim any additional amounts pursuant to this Paragraph 2(f), it shall promptly
notify the Company of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence containing the calculation thereof in reasonable detail submitted by
the Lender to the Company shall be conclusive in the absence of manifest error.
The provisions hereof shall survive the termination of this Agreement and
payment of all other Obligations.
2(g) Funding. The Lender shall be entitled to fund all or any
portion of Loans held by it in any manner it may determine in its sole
discretion, including, without limitation, in the Grand Cayman inter-bank
market, the London inter-bank market and within the United States, but all
calculations and transactions hereunder in respect of Eurodollar Loans shall be
conducted as though the Lender actually funds all Eurodollar Loans through the
purchase in London of offshore dollar deposits in the amount of the relevant
Eurodollar Loan in maturities corresponding to the applicable Interest Period.
2(h) Prepayment Premium. In addition to all other payment
obligations hereunder, in the event: (1) any Eurodollar Loan is prepaid prior to
the last day of the applicable Interest Period, whether following a voluntary
prepayment, mandatory prepayment, application of proceeds from the sale of
Collateral or otherwise, or (2) the Company shall fail to continue or to make a
conversion to a Eurodollar Loan after the Company has given notice thereof as
provided in Paragraph 2(c) above, then the Company shall immediately pay to the
Lender an additional premium sum compensating the Lender for losses, costs and
expenses incurred by the Lender in connection with such prepayment. The Company
acknowledges that such losses, costs and expenses are difficult to quantify and
that, in the case of the prepayment of or failure to continue or convert to a
Eurodollar Loan, the following formula represents a fair and reasonable estimate
of such losses, costs and expenses:
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Amount [Applicable Eurodollar Rate ] Days Remaining
Being [Eurodollar Rate for such Incre- ] in Interest
Prepaid or [for Increment ment for Days ] x Period
Being x [Being Prepaid - Remaining in ] -------------
Not Converted [or Not Interest ] 360
or Continued [Converted Period ]
[or Continued (as quoted on the first
Eurodollar Business
Day following Lenders'
receipt of notice thereof)
For purposes of calculating the current Eurodollar Rate for the days remaining
in the Interest Period for both the increment being prepaid or not converted or
continued, said current Eurodollar Rate shall be an interest rate interpolated
between Eurodollar Rates quoted for standard calendar periods for subsequent
months' maturities in accordance with normal conventions.
2(i) Facility Fee. The Company shall pay to the Lender from the
Initial Funding Date to and including the earlier to occur of the Conversion
Date and the Maturity Date a non-usage fee, monthly, in arrears, and on the
Conversion Date or Maturity Date, as applicable, for such month (or portion
thereof), a non-usage fee in the amount set forth in a fee billing delivered by
the Lender to the Company, which non-usage fee shall equal: (1) the average
daily Revolving Credit Limit in effect during such month (or portion thereof),
minus the daily average outstanding amount of Revolving Loans during such month
(or portion thereof), multiplied by (2) the product of: (i) one fifth of one
percent (0.20%), and (ii) a fraction, the numerator of which is the number of
days in the applicable calculation period and the denominator of which is 360.
2(j) Post-Maturity Interest. Any Obligations not paid when due
(whether at stated maturity, upon acceleration or otherwise) shall bear interest
from the date due until paid in full at a per annum rate equal to three percent
(3%) above the Effective Fed Funds Rate.
2(k) Computations. All computations of interest and fees payable
hereunder shall be based upon a year of 360 days for the actual number of days
elapsed.
3. Miscellaneous Lending Provisions.
3(a) Use of Proceeds. The proceeds of Revolving Loans shall be
utilized by the Company for the purpose of acquiring and/or carrying Eligible
Residual Securities and for other working capital purposes. The proceeds of the
Term Loan shall be utilized by the Company solely for the purpose of repaying
the principal balance of Revolving Loans outstanding on the Conversion Date.
3(b) Request For Revolving Loans; Determination of Availability;
Making of Revolving Loans.
(1) On any Business Day that the Company desires to borrow a
Revolving Loan, it shall deliver a Loan And/Or Interest Rate Election
Request to the
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Lender no later than 9:30 a.m. (Los Angeles time) on such date. Only
one Loan And/Or Interest Rate Election Notice shall be submitted to
the Lender on any date.
(2) Upon receipt of a Loan And/Or Interest Rate Election Request,
the Lender shall make a Determination of Availability with respect to
any requested Revolving Loans. In the event the Lender shall have
determined that the Collateral Value of the Residuals Borrowing Base
is sufficient to support the requested borrowing, the Lender shall
make the amount of the requested Revolving Loan available by wiring
such amount in immediately available same day funds to the Funding
Account no later than 11:30 a.m. (Los Angeles time) on the date of
such request.
(3) Each request for a Revolving Loan shall be in the minimum
amount of $1,000,000.00.
(6) The Company may elect to convert or continue Effective Fed
Funds Rate Loans and/or Eurodollar Loans outstanding on any date
consistent with the timing requirements set forth in Paragraph 2(c)
above.
3(c) Evidence of Indebtedness. The obligation of the Company
to repay the Loans shall be evidenced by notations on the books and records of
the Lender. Such books and records shall be conclusive absent manifest error.
Any failure to record the advance of any Loan, the interest rate applicable
thereto or any other information regarding the Obligations, or any error in
doing so, shall not limit or otherwise affect the obligation of the Company with
respect to any of the Obligations. Upon the request of the Lender, the Company
shall promptly execute a promissory note or promissory notes in favor of the
Lender evidencing the Obligations.
3(d) Borrowing Base Conformity.
(1) In the event the Lender shall determine on any date that the
Collateral Value of the Residuals Borrowing Base is less than the sum
of the aggregate principal amount of Revolving Loans outstanding on
such date, the Lender may, in its sole discretion, elect to deliver to
the Company (which delivery may be by facsimile transmission) a
Collateral Valuation Report so demonstrating. Upon receipt of such a
Collateral Valuation Report, the Company shall, no later than thirty
(30) days thereafter and subject to the right of the Company to
exercise the Term-Out Option as provided in Paragraph 1(c) above, pay
to the Company an amount (a "Required Principal Prepayment") equal to
the amount by which the aggregate principal amount of Revolving Loans
outstanding on the date of payment by the Company exceeds the
Collateral Value of the Residuals Borrowing Base on the date of
payment by the Company.
(2) If, but only if, at such time as the Company shall be
required to prepay Revolving Loans under subparagraph (1) of this
Paragraph 3(d) there shall not have occurred and be continuing an
Event of Default or Potential Default, in lieu of making a Required
Principal Prepayment thereunder or exercising the Term-Out Option, the
Company may deliver to the Lender additional Eligible Residual
Securities with a Established Collateral Value such that the aggregate
principal balance of Revolving Loans outstanding does not exceed the
Collateral Value of the Residuals Borrowing Base, it
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being expressly acknowledged and agreed by the Company that such
additional Eligible Residual Securities must be delivered to the
Lender no later than ten Business Days prior to the date on which the
Required Principal Prepayment is due to permit a timely determination
as to eligibility to be made by the Lender.
(3) The Company may from time to time request the Lender to
release from the Lien in favor of the Lender under the Security
Agreement certain items of collateral, including Residual
Mortgage-Backed Securities, and the Lender shall promptly notify the
Company whether, in its sole and absolute discretion, the Lender will
agree to do so.
3(e) Nature and Place of Payments. All payments made on account
of the Obligations shall be made without setoff or counterclaim in lawful money
of the United States of America in immediately available same day funds, free
and clear of and without deduction for any taxes, fees or other charges of any
nature whatsoever imposed by any taxing authority and must be received by the
Lender at its office at 000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000 by 11:30 a.m. (Los
Angeles time) on the day of payment, it being expressly agreed and understood
that if a payment is received after 11:30 a.m. (Los Angeles time) by the Lender,
such payment will be considered to have been made on the next succeeding
Business Day and interest thereon shall be payable at the then applicable rate
during such extension. If any payment required to be made by the Company
hereunder becomes due and payable on a day other than a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and interest
thereon shall be payable at the then applicable rate during such extension.
3(f) Prepayments.
(1) The Company may prepay Effective Fed Funds Rate Loans in
whole or in part at any time and the Company may prepay Eurodollar
Loans in whole or in part upon three Business Days' notice to the
Lender.
(2) Revolving Loans are subject to mandatory prepayment pursuant
to Paragraph 3(d) above and, in addition, by application of proceeds
of the sale or other disposition of Collateral as provided in the
Security Agreement.
(3) The Term Loan is subject to mandatory prepayment in full no
later than the third day following the date upon which the Lender
delivers to the Company a Collateral Valuation Report demonstrating
that the outstanding principal balance of the Term Loan exceeds eighty
five percent (85%) of the Established Collateral Value of all Eligible
Residual Securities included in the Residuals Borrowing Base.
(4) Prepayments of principal of the Term Loan shall be applied to
installments due on the Term Loan in inverse order of maturity.
(5) The Company shall pay in connection with any prepayment
hereunder all interest accrued but unpaid on Loans to which such
prepayment is applied (including any prepayment premium that may be
due under Paragraph 2(h) above) concurrently with payment to the
Lender of any principal amounts.
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4. Security; Guaranty; Additional Documents.
4(a) Security Agreement. As collateral for the Obligations, on or
before the Initial Funding Date the Company shall execute and deliver to the
Lender: (1) a security agreement in the form of that attached hereto as Exhibit
A (as amended, extended and replaced from time to time, the "Security
Agreement") pursuant to which the Company shall grant to the Lender a first
priority perfected security interest in the Collateral, (2) such UCC-1 financing
statements as the Lender may request, and (3) such releases, consents,
subordination and/or intercreditor agreements as the Lender may require from any
other Person holding an interest, by way of security interest or otherwise, in
any of the Collateral.
4(b) Guaranty. As additional credit support for the Obligations,
on or before the Initial Funding Date the Parent shall execute and deliver to
the Lender a guaranty in the form of that attached hereto as Exhibit B (as
amended, extended and replaced from time to time, the "Guaranty")
4(c) Further Documents. Each of the Company and the Parent agrees
to execute and deliver and to cause to be executed and delivered to the Lender
from time to time such confirmatory or supplementary security agreements,
financing statements and other documents, instruments and agreements as the
Lender may reasonably request, which are in the Lender's judgment necessary or
desirable to obtain and maintain for the Lender the benefit of the Loan
Documents and the Collateral.
5. Conditions to Making of Loans.
5(a) First Revolving Loan. As conditions precedent to the
Lender's obligation to fund the first Revolving Loan hereunder:
(1) The Company and the Parent, as applicable, shall have
delivered or shall have had delivered to the Lender, in form and
substance satisfactory to the Lender and its counsel, each of the
following:
(i) A duly executed copy of this Agreement;
(ii) A duly executed copy of the Security Agreement;
(iii) A duly executed copy of the Guaranty;
(iv) Duly executed copies of all financing statements and
other documents, instruments and agreements, properly executed,
deemed necessary or appropriate by the Lender, in its reasonable
discretion, to create and/or continue in favor of the Lender a
first priority perfected security interest in and lien upon the
Collateral;
(v) Acknowledgment copies of all UCC-1 financing statements
filed with respect to the Collateral, accompanied by a search
report showing such financing statements as duly filed and
evidencing that the security interest of the Lender in the
Collateral is prior to all security interests of record;
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provided, however, that if the Lender, in its sole discretion,
elects to waive such condition precedent to the initial funding
hereunder, the Company shall cause such acknowledgment copies and
search reports to be delivered no later than the thirtieth day
following the initial funding date and failure of the Lender to
receive the same shall, at Lender's option, constitute an Event
of Default;
(vi) Certified copies of resolutions of the Board of
Directors of each of the Company and the Parent approving the
execution and delivery of the Loan Documents, the performance of
the Obligations and the consummation of the transactions
contemplated thereby;
(vii) A certificate of the Secretary or an Assistant
Secretary of each of the Company and the Parent certifying the
names and true signatures of the officers of the Company and the
Parent, as applicable, authorized to sign the Loan Documents;
(viii) An opinion of counsel for the Company and the Parent,
which counsel shall be satisfactory to the Lender, in
substantially the form of Exhibit C attached hereto and covering
such other matters as the Lender may reasonably request;
(ix) A copy of the Articles of Incorporation of the Company
and the Certificate of Incorporation of the Parent, certified by
the Secretaries of State of the State of California and the State
of Delaware, respectively, as of a recent date;
(x) A copy of the Bylaws of each of the Company and the
Parent, certified by the Secretary or an Assistant Secretary of
the Company and the Parent, as applicable, as of the date of this
Agreement as being accurate and complete;
(xi) Certificates of the Secretary of State of the State of
California and the State of Delaware certifying that each of the
Company and the Parent, respectively, are in good standing as of
a recent date;
(xii) A certificate of an executive officer of each of the
Company and the Parent in the form of that attached hereto as
Exhibit D dated as of the date of this Agreement;
(xiii) A certificate of a Responsible Financial Officer of
each of the Parent and the Company demonstrating in detail
satisfactory to the Lender the Parent's or the Company's
compliance, as applicable, with the financial covenants set forth
in Paragraphs 8(i), 8(j), 8(k) and 8(l) below at and as of July
31, 1998; and
(xiv) Evidence satisfactory to the Lender that the
execution, delivery and performance by the Company and the Parent
of the Loan Documents will not violate any term or provision of
the Warehousing Agreement,
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which evidence may include an amendment to the Warehousing
Agreement so providing.
(2) All acts and conditions precedent (including, without
limitation, the obtaining of any necessary regulatory approvals and
the making of any required filings, recordings or registrations)
required to be done and performed and to have happened prior to the
execution, delivery and performance of the Loan Documents and to
constitute the same legal, valid and binding obligations, enforceable
in accordance with their respective terms, shall have been done and
performed and shall have happened in due and strict compliance with
all applicable laws.
(3) All documentation, including, without limitation,
documentation for corporate and legal proceedings in connection with
the transactions contemplated by the Loan Documents, shall be
satisfactory in form and substance to the Lender and its counsel.
(4) All fees and expenses of Xxxxxxxx & Xxxxxxxx LLP payable by
the Company pursuant to Paragraph 7(g) below for which invoices have
been delivered to the Company prior to or on such date shall have been
paid.
5(b) Ongoing Loans. As conditions precedent to the Lender's
obligation or agreement to make any Revolving Loan hereunder, including the
first Revolving Loan, and to fund the Term Loan, and including the conversion of
any Loan from or into a Eurodollar Loan or the continuation of any Eurodollar
Loan after the end of the applicable Interest Period, at and as of the date of
the funding, conversion or continuation:
(1) There shall have been delivered to the Lender a Loan And/Or
Interest Rate Election Request therefor;
(2) The representations and warranties of the Company and the
Parent contained in the Loan Documents shall be accurate and complete
in all respects as if made on and as of the date of such funding,
conversion or continuance;
(3) There shall not have occurred an Event of Default or
Potential Default;
(4) In the case of the funding of each Revolving Loan, the Lender
shall have determined that upon the funding thereof the Company will
be in compliance with the limitation of Paragraph 1(a) above; and
(4) In the case of the funding of the Term Loan, the Lender shall
have determined that the original principal balance of the Term Loan
will not exceed eighty five percent (85%) of the Established
Collateral Value of all Eligible Residual Securities included in the
Residuals Borrowing Base.
By delivering a Loan And/Or Interest Rate Election Request to the Lender
hereunder, the Company shall be deemed to have represented and warranted the
accuracy and completeness of the statements set forth in subparagraphs (b)(2),
(b)(3) and, as applicable, (b)(3) and (b)(4) above.
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6. Representations and Warranties of the Company and the Parent.
As an inducement to the Lender to enter into this Agreement and to
make Loans as provided herein, each of the Company and the Parent severally
represents and warrants to the Lender that:
6(a) Financial Condition. The financial statements dated the
Statement Date and the Interim Date, copies of which have heretofore been
furnished to the Lender, are complete and correct and present fairly in
accordance with GAAP the financial condition of the Parent and its consolidated
Subsidiaries at such dates and the consolidated and consolidating results of
their operations and changes in financial position for the fiscal periods then
ended.
6(b) No Change. Since the Statement Date there has been no
material adverse change in the business, operations, assets or financial or
other condition of the Company, the Parent or the Parent and its consolidated
Subsidiaries taken as a whole.
6(c) Corporate Existence; Compliance with Law. Each of the
Company and Parent: (1) is duly organized, validly existing and in good standing
as a corporation under the laws of the States of California and Delaware,
respectively, and is qualified to do business in each jurisdiction where its
ownership of property or conduct of business requires such qualification and
where failure to qualify would have a material adverse effect on the Company,
the Parent or their respective property and/or business or on the ability of the
Company to pay or perform the Obligations or the Parent to pay or perform the
Guaranty, (2) has the corporate power and authority and the legal right to own
and operate its property and to conduct business in the manner in which it does
and proposes so to do, and (3) is in compliance with all Requirements of Law and
Contractual Obligations, the failure to comply with which could have a material
adverse effect on the business, operations, assets or financial or other
condition of the Company, the Parent or the Parent and its consolidated
Subsidiaries taken as a whole or on the Collateral.
6(d) Corporate Power; Authorization; Enforceable Obligations.
Each of the Company and the Parent has the corporate power and authority and the
legal right to execute, deliver and perform the Loan Documents to which it is a
party and to obtain extensions of credit hereunder, and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents, and the borrowing and other extensions of credit hereunder. The
Loan Documents have been duly executed and delivered on behalf of the Company
and the Parent, as applicable, and constitute legal, valid and binding
obligations of the Company and the Parent, as applicable, enforceable against
such Person in accordance with their respective terms, subject to the effect of
applicable bankruptcy and other similar laws affecting the rights of creditors
generally and the effect of equitable principles whether applied in an action at
law or a suit in equity.
6(e) No Legal Bar. The execution, delivery and performance of the
Loan Documents, the borrowing and other extensions of credit hereunder and the
use of the proceeds thereof, will not violate any Requirement of Law or any
Contractual Obligation of the Company or the Parent or create or result in the
creation of any Lien (except the Lien created by the Security Agreement) on any
assets of the Company or the Parent.
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6(f) No Material Litigation. Except as disclosed on Exhibit E
hereto, no litigation, investigation or proceeding of or before any arbitrator,
court or Governmental Authority is pending (or, to the knowledge of the Company
or the Parent, threatened) by or against the Parent or any of its Subsidiaries
or against any of such parties' properties or revenues which is likely to be
adversely determined and which, if adversely determined, is likely to have a
material adverse effect on the business, operations, property or financial or
other condition of the Parent or any of its Subsidiaries or on the Collateral or
is likely to have a material adverse effect on the validity or enforceability of
any of the Loan Documents.
6(g) Taxes. The Parent and each of its Subsidiaries have filed or
caused to be filed all tax returns that are required to be filed and have paid
all taxes shown to be due and payable on said returns or on any assessments made
against them or any of their property other than taxes which are being contested
in good faith by appropriate proceedings and as to which the Parent or
applicable Subsidiary has established adequate reserves in conformity with GAAP.
6(h) Investment Company Act. Neither the Company nor the Parent
is an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
6(i) Subsidiaries. Attached hereto as Exhibit F is an accurate
and complete list of all presently existing Subsidiaries of the Parent, their
respective jurisdictions of incorporation and the percentage of their capital
stock owned by the Parent or other Subsidiaries. All of the issued and
outstanding shares of capital stock of such Subsidiaries have been duly
authorized and issued and are fully paid and non-assessable.
6(j) Federal Reserve Board Regulations. Neither the Parent nor
any of its Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
such terms under Regulation U. No part of the proceeds of any Loan made
hereunder nor the Letter of Credit will be used for "purchasing" or "carrying"
"margin stock" as so defined or for any purpose which violates, or which would
be inconsistent with, the provisions of the Regulations of the Board of
Governors of the Federal Reserve System.
6(k) ERISA. The Parent and each of its Subsidiaries are in
compliance in all respects with the requirements of ERISA and no Reportable
Event has occurred under any Plan maintained by the Parent or any of its
Subsidiaries which is likely to result in the termination of such Plan for
purposes of Title IV of ERISA.
6(l) Assets. The Parent and each of its Subsidiaries have good
and marketable title to all property and assets reflected in the financial
statements referred to in Paragraph 6(a) above, except property and assets sold
or otherwise disposed of in the ordinary course of business subsequent to the
respective dates thereof. Except as reflected in the financial statements
referred to in Paragraph 6(a) above or as permitted under Paragraph 8(a) below,
neither the Parent nor any of its Subsidiaries has outstanding Liens on any of
its properties or assets nor are there any security agreements to which the
Parent or any of its Subsidiaries is a party, or title retention agreements,
whether in the form of leases or otherwise, of any personal property.
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6(m) Securities Acts. Neither the Parent nor any of its
Subsidiaries has issued any unregistered securities in violation of the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the "Act"), or any other law, and is not violating any rule, regulation or
requirement under the Act or the Securities Exchange Act of 1934, as amended.
The Company is not required to qualify an indenture under the Trust Indenture
Act of 1939, as amended, in connection with its execution and delivery of the
Notes.
6(n) Consents, etc. No consent, approval or authorization of, or
registration, declaration or filing with, any Person is required on the part of
the Company or the Parent in connection with the execution and delivery of the
Loan Documents or the borrowing or any other extension of credit hereunder
(other than filings to perfect the Liens granted by the Company pursuant to the
Security Agreement) or the performance of or compliance with the terms,
provisions and conditions hereof or thereof.
7. Affirmative Covenants. Each of the Company and the Parent hereby
covenants and agrees with the Lender that, as long as any Obligations remain
unpaid (or longer as expressly provided in Paragraphs 7(g) and 7(j) below) or
the Lender has any obligation to make Loans hereunder, the Company and the
Parent shall:
7(a) Financial Statements. Furnish or cause to be furnished to
the Lender directly:
(1) Within: (i) ninety (90) days after the last day of each
fiscal year of the Parent, consolidated statements of income and
statements of cash flow of the Parent for such year and a consolidated
balance sheet of the Parent as of the end of such year presented
fairly in accordance with GAAP and accompanied by an unqualified
report of a firm of independent certified public accountants
reasonably acceptable to the Lender, and (ii) ninety (90) days after
the last day of each fiscal year end of the Company, statements of
income and statements of cash flow of the Company for such year and a
balance sheet of the Company as of the end of such year presented
fairly in accordance with GAAP and accompanied by an unqualified
report of a firm of independent certified public accountants
reasonably acceptable to the Lender;
(2) Within forty-five (45) days after the last day of each
calendar quarter, statements of income of the Company for such quarter
and a balance sheet of the Company as of the end of such quarter, and
statements of income and statements of cash flow of the Parent for
such quarter and a balance sheet of the Parent as of the end of such
quarter;
(3) Within thirty (30) days after the last day of each calendar
month, consolidated statements of income for such month and a
consolidated balance sheet as of the end of such month of the Parent
and its Subsidiaries;
(4) Concurrently with each delivery of the financial statements
referred to in subparagraphs (2) and (3) above, a certificate of a
Responsible Financial Officer of the Parent or the Company, as
applicable, in the form of that attached hereto as Exhibit G stating
that such financial statements are presented fairly in accordance with
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GAAP and demonstrating in detail satisfactory to the Lender the
Parent's or Company's, as applicable, compliance with the financial
covenants set forth in Paragraphs 8(i), 8(j), 8(k) and 8(l) below as
of and at the date of such financial statements;
(5) As soon as is available any written report pertaining to
material items in respect of the internal control matters of the
Parent submitted to the Parent by its independent accountants in
connection with each annual or interim special audit of the financial
condition of the Parent made by such independent public accountants;
and
(6) Copies of all proxy statements, financial statements, and
reports which the Parent sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements
under the Act which the Parent files with the Securities and Exchange
Commission or any Governmental Authority which may be substituted
therefor, or with any national securities exchange; provided, however,
that there shall not be required to be delivered hereunder such copies
for the Lender of prospectuses relating to future series of offerings
under registration statements filed under Rule 415 of the Act or other
items which the Lender has indicated in writing to the Parent from
time to time need not be delivered to the Lender.
7(b) Certificates; Reports; Other Information. Furnish or cause
to be furnished to the Lender for distribution to the Lender:
(1) Within forty-five (45) days after the last day of each
calendar quarter, management reports providing detailed information
regarding interest only strip and reserve account balances and related
cash receipt information, information relating to prepayment and
credit losses, REO inventory status and loss projections, and
assumptions regarding quarterly securitizations and gains on sales;
(2) At such times as are described on Schedule I attached hereto,
such reports and other information relating to the Collateral,
including, without limitation, Residual Mortgage-Backed Securities as
are described therein; and
(3) Promptly, such additional financial and other information,
including, without limitation, financial statements of the Company,
the Parent, any Subsidiary of the Company or the Parent or any
Approved Investor, and information regarding the Collateral as the
Lender may from time to time reasonably request.
7(c) Payment of Indebtedness. Pay, discharge or otherwise satisfy
at or before maturity or before it becomes delinquent, defaulted or accelerated,
as the case may be, all its Indebtedness (including taxes), except (1)
Indebtedness (other than the Obligations) in an aggregate amount not to exceed
$5,000,000.00, or (2) Indebtedness being contested in good faith and for which
provision is made to the satisfaction of the Lender for the payment thereof in
the event the Company or the Parent, as applicable, is found to be obligated to
pay such Indebtedness and which Indebtedness is thereupon promptly paid by the
Company or the Parent, as applicable.
7(d) Maintenance of Existence and Properties. Maintain its
corporate existence and obtain and maintain all rights, privileges, licenses,
approvals, franchises, properties
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and assets necessary or desirable in the normal conduct of its business and
comply with all Contractual Obligations and Requirements of Law.
7(e) Inspection of Property; Books and Records; Audits.
(1) Keep proper books of record and account in which full, true
and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and transactions in relation to its
business and activities; and
(2) Permit representatives of the Lender to: (i) visit and
inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may
reasonably be desired by the Lender, (ii) discuss the business,
operations, properties and financial and other condition of the Parent
and its Subsidiaries with officers and employees of such parties, and
with their independent certified public accountants, and (iii) conduct
periodic operational audits of the Company's business and/or
operations.
7(f) Notices. Promptly give written notice to the Lender directly
of:
(1) The occurrence of any Potential Default or Event of Default;
(2) Any litigation or proceeding affecting the Parent or any of
its Subsidiaries or the Collateral which could have a material adverse
effect on the Collateral or the business, operations, property, or
financial or other condition of the Parent or any of its Subsidiaries,
or could have a material adverse effect on the validity or
enforceability of any of the Loan Documents;
(3) A material adverse change in the business, operations,
property or financial or other condition of the Parent or any of its
Subsidiaries;
(4) Any change in the chief executive officer of the Company;
(5) The incurrence by the Company or the Parent of any obligation
in connection with any derivatives transaction outside of the normal
course of business of the Company or the Parent;
(6) Any event or anticipated event, including, without
limitation, the unavailability of pool insurance or other forms of
credit enhancement, which the Company or the Parent anticipates is
likely to adversely affect the timely planned issuance of any
Mortgage-Backed Security which would have been supported by Mortgage
Loans owned by the Company; and
(7) Receipt by the Company of written notice from any Person that
any pooling and servicing contract under which the Company acts as
servicer has been or may in the future be terminated as a result of
the occurrence of any event of default under such pooling and
servicing contract or otherwise "for cause" pursuant to the terms of
such pooling and servicing contract.
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7(g) Expenses. Pay all reasonable out-of-pocket costs and
expenses (including fees and disbursements of counsel) of the Lender incident to
the preparation, negotiation and administration of the Loan Documents and the
protection of the rights of the Lender under the Loan Documents and incident to
the enforcement of payment of the Obligations, whether by judicial proceedings
or otherwise, including, without limitation, in connection with bankruptcy,
insolvency, liquidation, reorganization, moratorium or other similar proceedings
involving the Company or a "workout" of the Obligations. The obligations of the
Company and the Parent under this Paragraph 7(g) shall be effective and
enforceable whether or not any Loan is advanced by the Lender hereunder and
shall survive payment of all other Obligations.
7(h) Loan Documents. Comply with and observe all terms and
conditions of the Loan Documents.
7(i) Insurance. Obtain and maintain insurance with responsible
companies in such amounts and against such risks as are usually carried by
corporations engaged in similar businesses similarly situated, including,
without limitation, errors and omissions coverage and fidelity coverage, and
furnish the Lender on request full information as to all such insurance.
7(j) Indemnification. Indemnify, defend and hold harmless the
Lender from and against any and all claims, obligations, penalties, actions,
suits, judgments, reasonable costs and disbursements, losses, liabilities and
damages (including, without limitation, reasonable attorneys' fees) of any kind
whatsoever (collectively and severally, "Claims") which may at any time be
imposed on, assessed against or incurred by Lender in any way relating to or
arising out of the Loan Documents or the transactions contemplated thereby or
any action reasonably taken or omitted to be taken by the Lender in connection
with the foregoing; provided, however, that neither the Company nor the Parent
shall be liable for any portion of any Claims arising out of or resulting from
the gross negligence or willful misconduct of the Lender. The Lender agrees that
it will promptly notify the Parent of any claim, action or suit asserted or
commenced against it and that the Parent may assume the defense thereof with
counsel reasonably satisfactory to the Lender at the Parent's sole expense, that
it will cooperate with the Parent on such defense, and that it will not settle
any such claim, action or suit without the consent of the Parent; provided,
however, that in the event the Lender is not reasonably satisfied with such
defense, the Lender may assume such defense with counsel satisfactory to the
Lender at the Parent's sole expense. The indemnification obligations of the
Company and the Parent under this Paragraph 7(j) shall survive termination of
this Agreement and payment in full of the Obligations.
8. Negative Covenants. Each of the Company and the Parent hereby
agrees that, as long as any Obligations remain unpaid or the Lender has any
obligation to make Loans hereunder, neither the Company nor the Parent shall,
nor shall the Company or the Parent permit any Subsidiary of the Company or the
Parent to, at any time, directly or indirectly:
8(a) Liens. Create, incur, assume or suffer to exist, any Lien
upon the Collateral except as contemplated by the Security Agreement or create,
incur, assume or suffer to exist any Lien upon any of its other property and
assets (including servicing rights) except:
(1) Liens or charges for current taxes, assessments or other
governmental charges which are not delinquent or which remain payable
without penalty,
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or the validity of which are contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof,
provided the Company or the Parent, as applicable, shall have set
aside on its books and shall maintain adequate reserves for the
payment of same in conformity with GAAP;
(2) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of
attachments or for stay of execution, or to secure the performance of
bids, tenders, contracts (other than for the payment of borrowed
money), leases or for purposes of like general nature in the ordinary
course of the Company's or the Parent's business;
(3) Purchase money security interests for property hereafter
acquired, conditional sale agreements, or other title retention
agreements, with respect to property hereafter acquired; provided,
however, that no such security interest or agreement shall affect any
servicing rights or extend to any property other than the property
acquired; and
(4) Liens securing Permitted Secured Debt.
8(b) Indebtedness. Create, incur, assume or suffer to exist, or
otherwise become or be liable in respect of, any Indebtedness except:
(1) The Obligations;
(2) Indebtedness reflected in the financial statements referred
to in Paragraph 6(a) above;
(3) Trade debt incurred in the ordinary course of business;
(4) Indebtedness secured by Liens permitted under Paragraph 8(a)
above;
(5) Capitalized Lease Obligations in an aggregate amount not to
exceed at any one time outstanding $10,000,000.00;
(6) Unsecured Indebtedness consisting of direct borrowings from
independent third parties incurred in the ordinary course of business,
including Indebtedness incurred pursuant to public debt offerings; and
(7) Permitted Secured Debt and Permitted Guaranties.
8(c) Consolidation and Merger. Liquidate or dissolve, or enter
into any consolidation, merger, partnership, joint venture, syndicate or other
combination unless: (1) the Company and the Parent remain as separate surviving
corporations following any such consolidation, merger, partnership, joint
venture, syndicate or other combination by either the Company or the Parent,
respectively, (2) the fair market value of the total assets of the other Person
party to such consolidation, merger, partnership, joint venture, syndicate or
other combination when combined with the fair market value of the total assets
acquired through any
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other consolidation, merger, partnership, joint venture syndicate or other
combination after the date hereof, does not exceed twenty percent (20%) of the
total assets of the Parent (determined in accordance with GAAP on a consolidated
basis) immediately prior to the proposed effective date of such consolidation,
merger, partnership, joint venture, syndicate or other combination, and (3) no
Potential Default or Event of Default exists immediately prior to, or will occur
as a result of, such consolidation, merger, partnership, joint venture,
syndicate or other combination.
8(d) Acquisitions. Purchase or acquire or incur liability for the
purchase or acquisition of any or all of the assets or business of any Person if
the fair market value of assets being acquired when combined with the fair
market value of all assets similarly acquired after the April 10, 1998, exceeds
twenty percent (20%) of total assets of the Parent (determined in accordance
with GAAP on a consolidated basis) immediately prior to the proposed effective
date of such acquisition.
8(e) Payment of Dividends. Declare or pay any dividends upon any
shares of the Parent's stock now or hereafter outstanding, except dividends
payable in the capital stock of the Parent, or make any distribution of assets
to its stockholders as such, whether in cash, property or securities if upon the
payment thereof there would exist an Event of Default or Potential Default.
8(f) Purchase or Retirement of Stock. In the case of the Parent,
from and after the date of this Agreement, acquire, purchase, redeem or retire
any shares of its capital stock now or hereafter outstanding; provided, however,
that as long as both before and following the consummation of such acquisition,
purchase, redemption or retirement there does not exist an Event of Default or
Potential Default, the Parent may enter into such transactions in an aggregate
fair market dollar amount not to exceed $5,000,000.00.
8(g) Investments; Advances. Make or commit to make any advance,
loan or extension of credit (other than Mortgage Loans and reimbursable
servicing advances made in the ordinary course of the Company's or such
Subsidiary's business) or capital contribution to, or purchase any stock, bonds,
notes, debentures or other securities of, or make any other investment in, any
Person if such investment, advance or commitment to advance, when combined with
all other such investments, advances and commitments to advance, exceeds twenty
percent (20%) of the total equity of the Parent (determined in accordance with
GAAP on a consolidated basis) immediately prior to the proposed effective date
of such investment, advance or commitment to advance.
8(h) Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of any of its assets (other than obsolete or worn out property), whether
now owned or hereafter acquired, other than in the ordinary course of business
and at fair market value.
8(i) Leverage. Permit at the last day of any calendar month the
Leverage Ratio of the Parent and its consolidated Subsidiaries to exceed
5.00:1.00.
8(j) Minimum Net Worth. Permit at the last day of any calendar
quarter:
(1) The Parent's consolidated net worth, determined in accordance
with GAAP, to be less than the sum of: (i) the greater of (A) ninety
percent (90%) of net
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worth, determined in accordance with GAAP, as of the last day of the
fiscal quarter ended December 31, 1997, or (B) $265,000,000.00, plus
(ii) seventy-five percent (75%) of net income (if positive),
determined in accordance with GAAP, during each calendar quarter after
December 31, 1997, plus (iii) seventy-five percent (75%) of
contributions to equity of the Parent made at any time after December
31, 1997, or
(2) The Company's net worth, determined in accordance with GAAP
to be less than the sum of: (i) the greater of (A) seventy percent
(70%) of net worth, determined in accordance with GAAP, as of the last
day of the fiscal quarter ended December 31, 1997, or (B)
$45,000,000.00, plus (ii) seventy-five percent (75%) of net income (if
positive), determined in accordance with GAAP, during each calendar
quarter after December 31, 1997, plus (iii) seventy-five percent (75%)
of contributions to equity of the Company made at any time after
December 31, 1997.
8(k) Minimum Profitability. Permit at the end of any calendar
quarter the Parent's consolidated net income, determined in accordance with
GAAP, for such calendar quarter and the immediately preceding calendar quarter,
taken together, to be less than $1.00.
8(l) Non-Warehouse Debt. Permit at the end of any calendar
quarter the Non-Warehouse Debt Ratio of the Parent and its consolidated
Subsidiaries to exceed 1.25:1.00.
8(m) Modification of Policies and Procedures. Make any material
change in (1) its underwriting policies and procedures which would, due to
reduced standards of creditworthiness for potential obligors on Mortgage Loans
or reduced standards of approval for real property securing a Mortgage Loan,
result in the expansion of the pool of potential obligors on Mortgage Loans
originated or purchased by the Company or such Subsidiary, or (2) its hedging
policies relating to Mortgage Loans, as such are in effect on the Initial
Funding Date; provided, however, that upon the written request of the Company,
any Subsidiary or the Parent to change such policies and procedures, the
requested change shall automatically be deemed to be approved fifteen (15)
Business Days following the date the Lender receives such request unless during
such fifteen (15) day period the Company is given a written rejection of the
requested change in policies and procedures from the Lender stating the basis of
such rejection.
8(n) Subsidiaries. Create or permit the creation of any
Subsidiary not in existence as of the Initial Funding Date; provided, however,
that upon the written request by the Company or the Parent to create a new
Subsidiary (which request shall include an explanation of the business reason
for creation of such Subsidiary), the request shall automatically be deemed to
be approved fifteen (15) Business Days following the date the Lender receives
such request unless during such fifteen (15) day period the Company is given a
written rejection of the request to create a new Subsidiary from the Lender
stating the basis of such rejection.
8(o) Transactions with Affiliates. Purchase, acquire or lease any
property from, or sell, transfer or lease any property to, lend or advance any
money to, borrow any money from, guarantee any obligation of, acquire any stock,
obligations or securities of, or enter into any management or similar fee
arrangement with, any Affiliate, other than on an arms-length basis upon terms
and conditions comparable to those that could be reached with a third party.
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9. Events of Default. Upon the occurrence of any of the following
events (an "Event of Default"):
9(a) The Company shall fail to pay any Obligation on the date
when due (or, with respect to monthly interest and fees due pursuant to
Paragraph 2(b) above, within two (2) Business Days of the date when due); or
9(b) Any representation or warranty made or deemed made by the
Company or the Parent in any Loan Document or in connection with any Loan
Document shall be inaccurate or incomplete in any respect on or as of the date
made or deemed made; or
9(c) The Company or the Parent shall fail to maintain its
corporate existence or shall default in the observance or performance of any
covenant or agreement contained in Paragraph 8 above or in the Security
Agreement; or
9(d) The Company or the Parent shall fail to observe or perform
any other term or provision contained in the Loan Documents to which it is a
party and such failure shall continue for thirty (30) days; or
9(e) The Parent or any of its Subsidiaries shall default in any
payment of principal of or interest on any Indebtedness (other than the
Obligations and the "Obligations" under, and as that term is defined in the
Warehousing Agreement) in an aggregate amount in excess of $5,000,000.00 or any
other event shall occur, the effect of which other event is to permit such
Indebtedness to be declared or otherwise to become due prior to its stated
maturity or there shall occur an "Event of Default" under (and as that term is
defined in) the Warehousing Agreement; or
9(f) (1) The Parent or any of its Subsidiaries shall commence any
case, proceeding or other action (i) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or
(ii) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or the Parent
or any of its Subsidiaries shall make a general assignment for the benefit of
its creditors; or (2) there shall be commenced against the Parent or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (1) above which (i) results in the entry of an order for relief or any
such adjudication or appointment, or (ii) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (3) there shall be commenced
against the Parent or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or substantially all of its assets which results in
the entry of an order for any such relief which shall not have been vacated,
discharged, stayed, satisfied or bonded pending appeal within sixty (60) days
from the entry thereof; or (4) the Parent or any of its Subsidiaries shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in (other than in connection with a final settlement), any of the
acts set forth in clauses (1), (2) or (3) above; or (5) the Parent or any of its
Subsidiaries shall generally
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not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
9(g) (1) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (2) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or nor waived, shall exist with respect to any Plan, (3) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Lender, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, and, in the case of
a Reportable Event, the continuance of such Reportable Event unremedied for ten
days after notice of such Reportable Event pursuant to Section 4043(a), (c) or
(d) of ERISA is given or the continuance of such proceedings for ten days after
commencement thereof, as the case may be, (4) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (5) any withdrawal liability to a
Multiemployer Plan shall be incurred by the Parent or any of its Subsidiaries or
(6) any other event or condition shall occur or exist; and in each case in
clauses (1) through (6) above, such event or condition, together with all other
such events or conditions, if any, is likely to subject the Parent or any of its
Subsidiaries to any tax, penalty or other liabilities in the aggregate material
in relation to the business, operations, property or financial or other
condition of the Parent or any of its Subsidiaries; or
9(h) One or more judgments or decrees shall be entered against
the Company or any of its Subsidiaries in an aggregate amount in excess of
$2,000,000.00, and all such judgments or decrees shall not have been vacated,
discharged, stayed, satisfied or bonded pending appeal within sixty (60) days
from the entry thereof; or
9(i) The Parent shall fail to observe or perform any covenant or
agreement contained in the Guaranty or shall attempt to rescind or revoke the
Guaranty, with respect to future transactions or otherwise; or
9(j) The Parent shall cease to own one hundred percent (100%) of
the outstanding capital stock of the Company; or
9(k) Any Person shall acquire more than twenty-five percent (25%)
of the voting common stock of the Parent; or the majority of the directors of
the Parent shall consist of directors who were not recommended or elected by the
Parent's Board of Directors;
THEN,
(1) Automatically upon the occurrence of an Event of Default
under Paragraph 9(f) above,
(2) At the option of the Lender upon the occurrence of any other
Event of Default,
the Lender's obligation to make Loans hereunder shall terminate and/or the
principal balance of outstanding Loans and interest accrued but unpaid thereon
and all other Obligations shall become immediately due and payable, without
demand upon or presentment to the Company, which are expressly waived by the
Company.
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10. Miscellaneous Provisions.
10(a) No Assignment. Neither the Company nor the Parent may
assign its rights or obligations under this Agreement or the other Loan
Documents without the prior written consent of the Lender. Any purported
assignment in violation of this Paragraph 10(a) shall automatically be deemed
null and void. Subject to the foregoing, all provisions contained in this
Agreement and the other Loan Documents or any document or agreement referred to
herein or relating hereto shall inure to the benefit of the Lender, its
successors and assigns, and shall be binding upon the Company, the Parent and
their respective successors and assigns.
10(b) Amendment. Neither this Agreement nor any other Loan
Document may be amended or terms or provisions hereof or thereof waived unless
such amendment or waiver is in writing and signed by the Lender, the Company and
the Parent.
10(c) Cumulative Rights; No Waiver. The rights, powers and
remedies of the Lender hereunder and under the other Loan Documents are
cumulative and in addition to all rights, power and remedies provided under any
and all agreements among the Company, the Parent and the Lender relating hereto
and thereto, at law, in equity or otherwise. Any delay or failure by the Lender
to exercise any right, power or remedy shall not constitute a waiver thereof by
the Lender, and no single or partial exercise by the Lender of any right, power
or remedy shall preclude any other or further exercise thereof or any exercise
of any other rights, powers or remedies.
10(d) Entire Agreement. This Agreement and the other Loan
Documents and the documents and agreements referred to herein embody the entire
agreement and understanding between the parties hereto and supersede all prior
agreements and understandings relating to the subject matter hereof and thereof.
10(e) Survival. All representations, warranties, covenants and
agreements contained in this Agreement and the other Loan Documents on the part
of the Company and the Parent shall survive the termination of this Agreement
and shall be effective until the Obligations are paid and performed in full or
longer as expressly provided herein.
10(f) Notices. All notices given by any party to the others to be
given under the Loan Documents shall be in writing (including facsimile
transmission) unless otherwise provided for herein, delivered personally or by
depositing the same in the United States mail, registered, with postage prepaid,
addressed to the party at the address set forth on Schedule II attached hereto.
Any party may change the address to which notices are to be sent by notice of
such change to each other party given as provided herein. Such notices shall be
effective on the date received or, if mailed, on the third Business Day
following the date mailed.
10(g) Governing Law. This Agreement and the other Loan Documents
shall be governed by and construed in accordance with the laws of the State of
California without giving effect to choice of law rules.
10(h) Counterparts. This Agreement and the other Loan Documents
may be executed in any number of counterparts, all of which together shall
constitute one agreement.
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10(i) Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES ITS
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE
PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER
AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS PARAGRAPH 10(i) AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH
SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10(j) Limitation on Interest. The Lender, the Company, the Parent
and the other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In furtherance
thereof, such Persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by applicable law from time
to time.
11. Definitions. For purposes of this Agreement, the terms set forth
below shall have the following meanings:
"Act" shall have the meaning given such term in Paragraph 6(m) above.
"Adjusted Net Worth" shall mean on a consolidated basis for the Parent
at any date an amount equal to: (a) Net Worth (as defined under GAAP), minus (b)
goodwill, plus (c) Subordinated Debt so long as there does not exist an Event of
Default with respect to such Subordinated Debt.
"Affiliate" shall mean, as to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with, such Person. "Control" as used herein means the power to direct the
management and policies of such Person.
"Agreement" shall mean this Agreement, as the same may be amended,
extended or replaced from time to time.
"Applicable Effective Fed Funds Rate" shall mean on any day the
Effective Fed Funds Rate on such day plus 1.75.
"Applicable Eurodollar Rate" shall mean, with respect to any
Eurodollar Loan for the Interest Period applicable to such Eurodollar Loan, the
rate per annum (rounded upward, if
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necessary, to the next higher 1/32 of one percent) calculated as of the first
day of such Interest Period in accordance with the following formula:
Applicable Eurodollar Rate = ER + 1.75
1-ERP
where
ER = Eurodollar Rate
ERP = Eurodollar Reserve Percentage
"Approved Securities Offering" shall mean an offering of securities by
the Company for which the following statements are true, unless otherwise waived
in writing by the Lender:
(a) The Company has filed and made effective a registration
statement with the Securities and Exchange Commission covering the sale of the
proposed securities, or the sale of the proposed securities is made pursuant to
an effective shelf registration with the Securities and Exchange Commission; and
(b) The Company obtained all permits, exemptions, and licenses
necessary to effect the offering.
"Average Total Liabilities" shall mean for any calendar month the sum
of (a) average consolidated funded Indebtedness of the Parent for such month,
plus (b) all other consolidated liabilities of the Parent, determined in
accordance with GAAP, as of the last day of such month; provided, however, that
for purposes of this definition of "Average Total Liabilities," the terms
"Indebtedness" and "liabilities" shall in no event include any Subordinated Debt
so long as there does not exist a default with respect to such Subordinated
Debt.
"Book-Entry MBS" shall mean a Residual Mortgage-Backed Security (a)
which is not represented by an instrument, and (b) the ownership and transfer of
which is entered upon books maintained for such purpose by a depository."
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in Los Angeles, California or Dallas, Texas are authorized or
obligated to close their regular banking business.
"Capitalized Lease Obligations" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Collateral" shall mean, collectively and severally, the personal
property collateral described as such in the Security Agreement.
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"Collateral Valuation Report" shall mean a report prepared by the
Lender and delivered to the Company from time to time setting forth the current
Established Collateral Value attributed by the Lender to Eligible Residual
Securities.
"Collateral Value of the Residuals Borrowing Base" shall mean at any
date sixty five percent (65%) of the aggregate Established Collateral Value of
Eligible Residual Securities included in the Residuals Borrowing Base at such
date.
"Commonly Controlled Entity" of a Person shall mean a Person, whether
or not incorporated, which is under common control with such Person within the
meaning of Section 410(c) of the Internal Revenue Code.
"Contractual Obligation" as to any Person shall mean any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Conversion Date" shall mean the date, to be mutually agreed by the
Lender and the Company but not in any event to be later than the thirtieth day
following the receipt by the Company of a notice to make a Required Principal
Prepayment, as of which the Company has exercised the Term-Out Option and the
funding of the Term Loan occurs.
"Determination of Availability" shall mean a determination made by the
Lender upon receipt by the Lender of a request for a Revolving Loan hereunder
that upon the funding of such Revolving Loan the Company will be in compliance
with the requirements of Paragraph 1(a) above.
"Effective Fed Funds Rate" shall mean for any day, the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York or, if such rate is not so published for
any day that is a Business Day, the average of quotations for such day on such
transactions received by the Lender from three Federal Funds brokers of
recognized standing selected by the Lender.
"Effective Fed Funds Rate Loans" shall mean Revolving Loans and
portions of the Term Loan as such time as they are made or being maintained at a
rate of interest based on the Effective Fed Funds Rate.
"Eligible Residual Security" shall mean a Residual Mortgage-Backed
Security owned by the Company with respect to which the following statements
shall be accurate and complete (and the Company by permitting said Residual
Mortgage-Backed Security to be included in any computation of the Collateral
Value of the Residuals Borrowing Base shall be deemed to so represent and
warrant to the Lender at and as of the date of such computation):
(a) Said Residual Mortgage-Backed Security is a binding and valid
obligation of the obligor thereon, in full force and effect and enforceable in
accordance with its terms;
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(b) Said Residual Mortgage-Backed Security was issued in
connection with an Approved Securities Offering;
(c) Said Residual Mortgage-Backed Security is free of any default
and from any rescission, cancellation or avoidance, and all right thereof,
whether by operation of law or otherwise;
(d) Said Residual Mortgage-Backed Security has either been
deposited with and is held by the Lender, properly endorsed in blank for
transfer or, if said Residual Mortgage-Backed Security is a Book-Entry MBS, said
Residual Mortgage-Backed Security is the subject of a Perfected Assignment;
(e) At all times said Residual Mortgage-Backed Security will be
free and clear of all liens, encumbrances, charges, rights and interests of any
kind, except in favor of the Lender and the Lender has a first priority,
perfected security interest therein;
(f) The Company has delivered to the Lender no later than ten
Business Days prior to the date said Residual Mortgage-Backed Security is
proposed to be included in the calculation of the Collateral Value of the
Residuals Borrowing Base such information regarding the Residual Mortgage-Backed
Security as the Lender deems necessary or desirable in connection with a
determination of the Established Collateral Value thereof; and
(g) The Lender, in its sole discretion, has not declared said
Residual Mortgage-Backed Security, for whatever reason, to be ineligible for
inclusion in the Residuals Borrowing Base. Without limiting the generality of
this subparagraph (g), it is expressly acknowledged and agreed by the Company
that in the event the Lender agrees to accept the Residual Mortgage-Backed
Security issued to the Company in connection with its 1998B securitization
transaction as an "Eligible Residual Security" hereunder at the time of the
funding of the initial Revolving Loan, such Residual Mortgage-Backed Security
will automatically become ineligible on the thirtieth day following such funding
date, it being anticipated that the Company will pledge to the Lender in
substitution therefor the Residual Mortgage-Backed Security to be issued to the
Company in connection with its securitization transaction to be closed on or
before that date.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be supplemented or amended.
"Established Collateral Value" shall mean at any date with respect to
any Eligible Residual Security, the borrowing base value of such Eligible
Residual Security as determined by the Lender using such methodologies and
parameters as may be established by the Lender from time to time in its sole
discretion, as such "Established Collateral Value" set forth in the most recent
Collateral Valuation Report delivered by the Lender to the Company.
"Eurodollar Business Day" shall mean a Business Day upon which
commercial banks in London, England are open for domestic and international
business.
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"Eurodollar Loans" shall mean Revolving Loans and portions of the Term
Loan at such time as they are made and/or being maintained at a rate of interest
based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan for
the Interest Period applicable to such Eurodollar Loan, the arithmetic average
as determined by the Lender of the rates at which deposits in immediately
available U.S. dollars in an amount equal to the amount of such Eurodollar Loan
having a maturity approximately equal to such Interest Period are offered to
four (4) reference banks to be selected by the Lender in the London interbank
market, at approximately 11:00 a.m. (London time) two Eurodollar Business Days
prior to the first day of such Interest Period.
"Eurodollar Reserve Percentage" shall mean with respect to an Interest
Period for a Eurodollar Loan, the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves and taking into
account any transitional adjustments) which is imposed under Regulation D on
eurocurrency liabilities.
"Event of Default" shall have the meaning given such term in Paragraph
9 above.
"Funding Account" shall mean Account No. 0499-18969 maintained in the
Company's name alone with Sanwa Bank California.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" shall have the meaning given such term in Paragraph 4(b)
above.
"Indebtedness" of any Person shall mean all items of indebtedness
which, in accordance with GAAP and practices, would be included in determining
liabilities as shown on the liability side of a statement of condition of such
Person as of the date as of which indebtedness is to be determined, including,
without limitation, all obligations for money borrowed and Capitalized Lease
Obligations, and shall also include all indebtedness and liabilities of others
assumed or guaranteed by such Person or in respect of which such Person is
secondarily or contingently liable (other than by endorsement of instruments in
the course of collection) whether by reason of any agreement to acquire such
indebtedness or to supply or advance sums or otherwise.
"Initial Funding Date" shall mean the date on which the initial Loan
or Loans requested by the Company hereunder are funded by the Lender pursuant to
the terms hereof.
"Interest Period" shall mean, with respect to any Eurodollar Loan, the
period commencing on the date advanced and ending two weeks or one, two or three
months thereafter, as designated by the Company in the related Loan And/Or
Interest Rate Election Request; provided, however, that (a) any Interest Period
which would otherwise end on a day which is not a
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Eurodollar Business Day shall be extended to the next succeeding Eurodollar
Business Day unless by such extension it would fall in another calendar month,
in which case such Interest Period shall end on the immediately preceding
Eurodollar Business Day; (b) any Interest Period applicable to a Eurodollar Loan
which begins on a day for which there is no numerically corresponding day in the
calendar month during which such Interest Period is to end shall, subject to the
provisions of clause (a) above, end on the last day of such calendar month; and
(c) no such Interest Period shall extend beyond the regularly scheduled Maturity
Date.
"Interim Date" shall mean March 31, 1998.
"Leverage Ratio" shall mean at any date the ratio at the last day of
the immediately preceding calendar month of Average Total Liabilities to
Adjusted Net Worth.
"Lien" shall mean any security interest, mortgage, pledge, lien, claim
on property, charge or encumbrance (including any conditional sale or other
title retention agreement), any lease in the nature thereof, and the filing of
or agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction.
"Loan Documents" shall mean this Agreement, the Security Agreement,
the Notes, the Guaranty and each other document, instrument or agreement
executed by the Company in connection herewith or therewith, as any of the same
may be amended, extended or replaced from time to time.
"Loan And/Or Interest Rate Election Request" shall mean a written
request in the form of Exhibit H attached hereto.
"Loans" shall mean, collectively and severally, the Revolving Loans
and the Term Loan, as applicable.
"Maturity Date" shall mean the earlier of: (a) September 3, 1999, as
such date may be extended from time to time in writing by the Lender, in its
sole discretion, and (b) the date the Lender terminates its obligation to make
further Loans hereunder pursuant to Paragraph 9 above.
"Mortgage-Backed Security" shall mean any security (including, without
limitation, a participation certificate) that represents an interest in a pool
of mortgages, deeds of trusts or other instruments creating a Lien on real
property which is improved by a completed single family dwelling (one-to-four
family units) or a unit in a condominium or planned unit development.
"Mortgage Loan" shall mean a residential real estate secured loan
(including 1-4 family unit, condominium and planned unit development).
"Multiemployer Plan" as to any Person shall mean a Plan of such Person
which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Non-Warehouse Debt Ratio" shall mean, with respect to the Parent and
its Subsidiaries on a consolidated basis, on any date the ratio at the last day
of the immediately preceding calendar quarter of consolidated funded
Indebtedness (including Subordinated Debt), minus one hundred percent (100%) of
the value, according to the Parent's balance sheet at such
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date, of all Mortgage Loans held for sale, minus eighty percent (80%) of the
dollar amount of all accounts receivable shown on the Parent's balance sheet at
such date (but excluding all accounts receivable as to which any Affiliate or
any Subsidiary of the Parent is the account party), to consolidated net worth
(as defined under GAAP).
"Obligations" shall mean any and all debts, obligations and
liabilities of the Company to the Lender (whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with others,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later increased,
created or incurred), arising out of or related to the Loan Documents.
"Parent" shall have the meaning given such term in the introductory
paragraph of this Agreement.
"Perfected Assignment" shall mean, as to any Book-Entry MBS, that the
Residual Mortgage-Backed Security has been transferred to the Lender or any
entity designated by the Lender so that the Lender or such entity may maintain
such Residual Mortgage-Backed Security as depository in one of its book-entry
accounts with a Federal Reserve Bank or the Mortgage Backed Securities Clearing
Corporation Depository System and a pledge to the Lender has been registered
with the Lender or such entity or the Company has taken such other action as the
Lender may request to protect, maintain or perfect the Lender's first priority
perfected security interest in such Book-Entry MBS.
"Permitted Guaranties" shall mean those guaranties executed by the
Company and the Parent covering Indebtedness of Affiliates which Indebtedness is
included in the calculation of Average Total Liabilities for purposes of
computing the Leverage Ratio pursuant to Paragraph 10(i) above.
"Permitted Secured Debt" shall mean that Indebtedness described as
"Permitted Secured Debt" on Exhibit I attached hereto.
"Person" shall mean any corporation, natural person, firm, joint
venture, partnership, limited liability company, trust, unincorporated
organization or Governmental Authority.
"Plan" shall mean, as to any Person, any pension plan that is covered
by Title IV of ERISA and in respect of which such Person or a Commonly
Controlled Entity of such Person is an "employer" as defined in Section 3(5) of
ERISA.
"Potential Default" shall mean an event which but for the lapse of
time or the giving of notice, or both, would constitute an Event of Default.
"Proceeds" shall mean whatever is receivable or received when
Collateral or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System from time to time in effect and shall include any
successor or other regulation of
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said Board of Governors relating to reserve requirements applicable to member
banks of the Federal Reserve System.
"Regulation U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System (12 C.F.R. Section 221), as the same may from time to
time be amended, supplemented or superseded.
"Reportable Event" shall mean a reportable event as defined in Title
IV of ERISA, except actions of general applicability by the Secretary of Labor
under Section 110 of ERISA.
"Required Principal Prepayment" shall have the meaning given such term
in Paragraph 3(d)(2) above.
"Requirements of Law" shall mean, as to any Person, the Articles or
Certificate of Incorporation and ByLaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitrator or a determination of a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Residual Mortgage-Backed Security" shall mean any security which
represents a subordinate or residual interest in a pool of mortgages, deeds of
trust or other instruments creating a lien on one-to-four unit residential
properties improved by a completed single family residence, which security was
issued in an Approved Securities Offering.
"Residuals Borrowing Base" shall mean at any date all Eligible
Residual Securities in which the Lender holds for the benefit of the Lender a
first priority perfected security interest at such date.
"Responsible Financial Officer" shall mean as to any Person the chief
financial officer, senior vice president-finance, vice president-finance or
assistant vice president-finance of such Person, with any Person executing and
delivering any certificate hereunder on behalf of the Company or the Parent
which is required to be executed and delivered by a "Responsible Financial
Officer" being acknowledged by the Company and the Parent as being a Person
actively involved with and knowledgeable with respect to all financial matters
affecting the Company and the Parent, as applicable.
"Revolving Credit Limit" shall mean $50,000,000.00, as such amount may
be increased or decreased by mutual agreement of the Lender and the Company.
"Security Agreement" shall have the meaning given such term in
Paragraph 4(a) above.
"Single Employer Plan" shall mean as to any Person any Plan of such
Person which is not a Multiemployer Plan.
"Statement Date" shall mean December 31, 1997.
"Subordinated Debt" shall mean Indebtedness expressly subordinated to
the Obligations in the manner and to the extent required by the Lender pursuant
to written subordination agreements satisfactory in form and substance to the
Lender.
"Subsidiary" shall mean, with respect to any Person, any corporation
more than fifty percent (50%) of the stock of which having by the terms thereof
ordinary voting power to
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elect the board of directors, managers or trustees of such corporation shall, at
the time as of which any determination is being made, be owned by such Person,
either directly or through Subsidiaries of such Person (irrespective of whether
or not at such time stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency); provided, however, that in no event shall the term "Subsidiary" as
it relates to the Company include any special purpose entity formed solely for
the purpose of issuing Mortgage-Backed Securities supported by Mortgage Loans
originated or acquired by the Company and transferred to such special purpose
entity in support of such Mortgage-Backed Securities.
"Term-Out Option" shall have the meaning given such term in Paragraph
1(c) above.
"Warehousing Agreement" shall mean that certain Second Amended and
Restated Mortgage Loan Warehousing Agreement dated as of April 10, 1998 by and
among the Company, the Parent, the lenders party thereto and NationsBank of
Texas, N.A., as Administrative Agent for the lenders, as the same may be
amended, extended and replaced from time to time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
AAMES CAPITAL CORPORATION,
a California corporation
By /s/ XXXXX X. XXXXX
--------------------------------
Name Xxxxx X. Xxxxx
Title EVP-Finance & CFO
AAMES FINANCIAL CORPORATION,
a Delaware corporation
By /s/ XXXXX X. XXXXX
--------------------------------
Name Xxxxx X. Xxxxx
Title EVP-Finance & CFO
NATIONSBANK, N.A., as the Lender
By /s/ XXXXXXX XXXXXX
--------------------------------
Name Xxxxxxx Xxxxxx
Title Senior Vice President
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