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EXHIBIT 10.5
Execution Copy
As of December 17, 1996
CMG Funding Corp.
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Re: Exclusive Right to Purchase and Securitize Loans
and Investment Banking Services
Ladies and Gentlemen:
This letter (the "Investment Banking Services Agreement") hereby confirms that
each of CMG Funding Corp., ("CMG") and Continental Mortgage Group, L.C. and its
successors ("CMLC" which together with CMG are referred to herein as "CMGFC") in
consideration of (i) ContiTrade Services L.L.C. ("CTS") providing a mortgage
loan purchase and sale facility to CMG pursuant to the Purchase and Sale
Agreement dated as of December 17, 1996 (the "Purchase Agreement") among CMG,
CMLC and CTS, (ii) CTS providing a standby financing facility to CMG, CMLC
pursuant to the Standby and Working Capital Financing Agreement dated as of
December 17, 1996 (the "Standby Agreement") among CTS, CMGFC, CMLC and CMG
Funding Securities Corp., (iii) CTS providing subordinated debt financing (the
"Subordinated Debt") pursuant to the Subordinated Debt Agreement dated as of
December 17, 1996 (the "Subordinated Debt Agreement") between CMG and CTS, (iv)
ContiFinancial Corporation, a Delaware corporation ("CFC"), investing in CMG
through the purchase of its Class A preferred stock (the "Preferred Stock")
pursuant to the Preferred Stock Purchase Agreement, dated as of December 17,
1996, between CFC and CMG, and (v) the mutual promises and other valuable
consideration described herein (a) irrevocably appoints ContiFinancial Services
Corporation (the "Agent" or "CFS") as the exclusive agent of CMGFC with respect
to any securitization, financing, sale or transfer of loans, other than as
provided for in Section 3 hereof with respect to Alternate Sale Loans (as
hereinafter defined), by CMGFC or any special purpose corporation or trust
created for such purpose (the "Issuer") (CMGFC, the Issuer, any affiliate of
either, and any entity owned, controlled or created by either, collectively, the
"CMGFC Group"), or by any other member of CMGFC Group, of closed-end
non-conforming credit, fixed rate and adjustable rate mortgage loans and home
equity loans which satisfy the Securitization Program Mortgage Loan Underwriting
Guidelines of the Purchase Agreement (the "Loans") or any sale of asset-backed
securities representing an interest in the Loans, and any additional credit
enhancement ("Credit Enhancement") (as described below) in pass-through,
pay-through or any other format, either in single-tranche or multi-tranche
structures, such
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format to be determined by the Agent with CMGFC's consent, which shall not be
unreasonably withheld, (such asset-backed securities, the "Securities"), in a
series of one or more private placement(s) (whether under Rule 144A under the
Securities Act of 1933 or otherwise) or public offering(s) (each such placement
or offering of Securities constituting a "Securitization"), upon the terms and
conditions described below, (b) grants to CTS or an affiliate thereof, in
connection with any Securitization, (i) the option, to be exercised in CTS's
sole discretion, to purchase at fair market value certain Loans representing up
to (A) 75%, during and prior to 1997, (B) 50%, during 1998, and (C) 25%, during
1999 and thereafter, of the Loans intended to be securitized in such
Securitization (however, in individual transactions, the percentage so purchased
may vary by as much as 5% from the level specified for such year) or such
greater amount as agreed to by CMGFC and the Agent immediately prior to their
transfer for securitization and (ii) the right upon the exercise of such option
to deposit such purchased Loans into the Issuer effecting such Securitization
and to receive in consideration therefor the proportionate interest in any
residual interest ("Residual Interest") or interest only interests ("I/O
Interests") issued in such Securitization, and (c) grants to CTS or an affiliate
thereof the right to bid to provide certain investment banking services to
CMGFC. It is currently anticipated that CMGFC Group will sell or finance
substantially all Loans, subject to Section 3 herein, through Securitizations
for the term of this Investment Banking Services Agreement (as described in
Section 5 herein).
1. Loans. The Loans with regard to each respective Securitization
will: (a) have terms and conditions as set forth in the underwriting guidelines
annexed as Exhibits A and B to the Purchase Agreement or as jointly agreed from
time to time by CMGFC and CTS; (b) be secured by a mortgage in a related
mortgaged property; and (c) meet the underwriting criteria established for
securitization as specified in the Purchase Agreement and consistent with
marketplace securitization requirements or as otherwise jointly agreed.
2. Securities. It is expected that each Securitization shall
consist of at least one class of Securities rated "A" (or the equivalent) or
higher by at least one nationally recognized rating agency ("Rating Agency")
acceptable to the Agent and CMGFC. The Agent will determine, with CMGFC's
consent, which shall not be unreasonably withheld, the form of Credit
Enhancement and pricing for the Securities, if any, as required by the Rating
Agency, which may consist of a financial guarantee or guarantees, subordination,
overcollateralization or other form of credit enhancement or some combination of
the foregoing.
3. Form of Delivery. The Securities may be issued as notes,
certificates or a combination thereof pursuant to a pooling and servicing
agreement, indenture, or other form of securitization agreement acceptable to
the Agent and CMGFC (together with related documents, the related "Agreement")
to be entered into between CMGFC, ContiMortgage Corporation ("CMC") as servicer
with respect to such transaction, the Issuer and a trustee (the "Trustee")
mutually acceptable to the Agent and CMGFC. The Issuer shall pay the ongoing
costs of the Trustee. CMGFC and CTS, where applicable, will convey the Loans to
the Issuer in exchange for the net proceeds of
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the Securities. The Securities may be issued in one or more classes,
representing various interests and rights of priority in payment as required by
the purchaser(s) of such Securities. In order to enhance the pool
characteristics for a group of Loans relating to a particular Securitization or
for other reasonable business purposes, it is currently contemplated that from
time to time a member of the CMGFC Group may sell Loans, without the need to
obtain the prior written approval of the Agent, through whole loan sales,
participation sales or by some other means that does not involve the
consummation of a Securitization or a financing of such Loans (as determined in
the reasonable discretion of the Agent) (the "Alternate Sale Loans"); provided
that during the period leading up to each Securitization, commencing on the date
of this Investment Banking Services Agreement, for the period leading up to the
first Securitization, or commencing on the date of closing of the immediately
preceding Securitization for all subsequent Securitizations, any member of the
CMGFC Group shall not sell an amount of Alternate Sale Loans which in the
aggregate is greater than (a) with respect to the initial transaction,
$5,000,000, and (b) with respect to all subsequent transaction, 10% of the
aggregate principal amount of Loans expected by the Agent to be included in the
next Securitization as indicated in a written notice provided by the Agent from
time to time; provided however, that CMGFC may sell a greater amount of
Alternate Sale Loans to the extent that Seller has fully utilized its (a)
purchase capacity under the Purchase Agreement and (b) borrowing capacity under
the Standby Agreement and all other facilities available to CMGFC to inventory
Loans and such additional sales are necessary to maintain liquidity for
continued operations. In addition, CTS shall have the right to purchase such
Alternate Sale Loans at a price which equals the highest bid received by the
CMGFC Group for such Alternate Sale Loans. It is currently anticipated that
CMGFC shall consummate Securitizations on a quarterly basis. CMGFC shall use its
best efforts to cause the CMGFC Group to effectuate Securitizations on such
schedule.
4. Servicing of the Loans. For a particular Securitization, the
Loans will be serviced by CMC in accordance with the terms and provisions of the
servicing agreement referred to in the Purchase Agreement with respect to Loans
to be securitized and, upon securitization, the related Agreement. CMC shall be
entitled to a servicing fee equal to 0.50% per annum on the unpaid balance of
the Loans related to such Securitization or under the Purchase Agreement. Such
servicing agreement and the related Agreement, as applicable, will, among other
things, (a) require that CMGFC make certain representations and warranties
concerning the quality and the underwriting of the Loans, (b) require that CMC
make certain representations and warranties concerning the servicing of the
Loans, and (c) to the extent such representations and warranties are breached
with respect to a particular Loan, will require that CMGFC or CMC repurchase
such Loan, as the case may be. If and when CMGFC is acceptable to the Rating
Agencies and the credit enhancers (if any) to act as the Servicer in particular
Securitizations, CMGFC may act as the Servicer in such future Securitizations,
and possess the rights and perform the obligations of the Servicer hereunder
with respect to such future Securitizations.
5. Term. The term established hereby shall be in effect for the
period commencing on the date hereof and expiring upon the earlier to occur of
(a) the date five
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years after the date of this Agreement, (b) the date written notice of
termination is given by the Agent, at the sole discretion of the Agent in the
event that CMGFC is in material default under any of the Documents (as
hereinafter defined), or (c) the date written notice of termination is given by
CMGFC, at the sole discretion of CMGFC in the event that (i) CTS or CFS is in
material breach of its obligations under this Investment Banking Services
Agreement, the Purchase Agreement or the Standby Agreement such that such
material breach is the cause of the termination of such agreement or (ii) the
Agent has habitually failed to securitize pools of Loans (except where alternate
forms of disposition provide comparable execution) for a period in excess of a
year during such periods when similar sized pools of mortgage loans having
similar characteristics and quality have been readily securitized by others (the
"Termination Date").
6. Exclusive. The placement agency created hereby is (i)
irrevocable, being a power coupled with an interest, namely the extension of
credit by CTS, under the Standby Agreement and the Subordinated Debt Agreement
to CMGFC as partial consideration for the appointment of the Agent hereunder and
(ii) exclusive from the date hereof through the earlier of (A) the date CTS
terminates the Purchase Agreement or the Standby Agreement and such termination
materially and adversely interferes with the ability of CMGFC to continue its
business or (B) the Termination Date (the "Term of Exclusivity"), and CMGFC
shall cause each member of the CMGFC Group, except as permitted pursuant to
Section 3 with respect to Alternate Sale Loans, (a) not to employ any other
agent, broker or person for any securitization of Loans or the sale or placement
of any Securities or other interests in the Loans or secured thereby during the
term of this Investment Banking Services Agreement, except as determined to be
appropriate in the judgment of the Agent, (b) not to withdraw any Loans or
Securities from sale, (c) not to attempt to sell or otherwise finance any Loans
or Securities itself during the Term of Exclusivity, and (d) to refer to the
Agent all inquiries with respect to any purchase or financing of any Loans or
Securities. Further, during the Term of Exclusivity and for a period of 18
months thereafter, CMGFC shall cause each member of the CMGFC Group, not to (x)
directly or indirectly seek to sell any Loans or Securities, to any offeree,
subscriber, person or entity whose name is or was provided to the CMGFC Group by
the Agent pursuant to this Investment Banking Services Agreement, other than an
entity generally known in the industry as an investor in such products or known
to CMGFC prior to the date of this Investment Banking Services Agreement as an
investor in such products (y) use such names except in connection with this
Investment Banking Services Agreement or (z) disclose such names to any other
agent, broker or person, unless prior thereto the CMGFC Group has obtained the
written consent of the Agent.
7. Best Efforts. The Agent agrees to utilize its best efforts in
its ordinary course of business to obtain one or more purchasers of rated
Securities which are issued as applicable during the term of this Investment
Banking Services Agreement and upon the terms set forth herein.
8. Compensation. In the event a letter of intent, placement
agreement, purchase price letter, purchase agreement or any other written or
verbal agreement with respect to the Securitization of any Loans (other than
Alternate Sale
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Loans) or the sale of Securities issued in respect thereof is entered into
during the term of this Investment Banking Services Agreement (whether or not
through the efforts of the Agent), CMGFC shall pay compensation as required by
this Section 8 to the Agent simultaneously with the closing of the sale of the
Securities, the Securitization of the Loans, or interests therein,
notwithstanding that such closing may occur after the expiration of the term of
this Investment Banking Services Agreement. With respect to any Securitization
of a pool of Loans (other than Alternate Sale Loans) or the sale of Securities
issued in respect thereof, CMGFC shall pay to the Agent as compensation an
amount equal to the greater of (i) an amount equal to the product of (A) (x)
0.50%, with respect to privately placed Securitizations, or (y) 0.25%, with
respect to publicly offered Securitizations, and (B) the principal amount of
Securities issued in the Securitization of such pool of Loans, or (ii) the
Minimum Placement and Structuring Fee which equals $200,000.
9. Investment Banking Services. In those cases where CMGFC, in
its sole discretion, determines that it has a need for general investment
banking services, CMGFC shall give to CTS or an affiliate thereof the
opportunity to bid to provide to CMGFC such services, including, without
limitation, those services customarily provided by investment banking firms to
their clients in connection with mergers and acquisitions, capital markets
access and corporate finance, including, without limitation, the following:
(a) evaluation and recommendation or financial and
strategic alternatives;
(b) evaluation and recommendation of internal policies,
procedures and systems, in each case, relating to the
requirements of the securitization market;
(c) introduction of CMGFC to, and facilitation of CMGFC's
discussions with, guarantors, rating agencies, investors and
other third parties involved in the securitization market;
(d) advice concerning the strategy and tactics of
negotiations, and participation in such negotiations;
(e) advice on the timing, structure and pricing of a
transaction; and
(f) such additional investment banking services as from
time to time may be mutually agreed upon.
Except as expressly set forth in this Agreement, neither CTS nor
CFS shall be responsible for providing, nor does either make any representations
or commitments concerning financing (whether in the form of debt or equity or
any combination or derivative thereof) or for the underwriting or placement of
securities for CMGFC.
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10. Loan Purchase. During the Term of Exclusivity, in connection
with any Securitization, CTS or an affiliate thereof (the "Purchaser") shall
have the right to purchase from CMGFC, at CTS's sole option, an amount of Loans
(the "Purchased Loans") representing up to (A) 75%, during and prior to 1997,
(B) 50%, during 1998, and (C) 25%, during 1999 and thereafter, of the Loans, by
principal balance, intended to be securitized in such Securitization (however,
in individual transactions, the percentage so purchased may vary by as much as
5% from the level specified for such year), or such greater amount as agreed to
by CMGFC and the Agent, immediately prior to their transfer for such
Securitization. The Purchased Loans will be selected so as to be representative
in all respects to the Loans being securitized in such Securitization. The
Purchaser shall pay CMGFC an amount equal to the fair market value of the
Purchased Loans as the purchase price therefor. If CMGFC questions the
Purchaser's determination of the fair market value of the Purchased Loans, CMGFC
and the Purchaser will agree to reexamine such determination if CMGFC
demonstrates that such determination is materially different from the prices bid
by two or more separate unrelated third party investors who have extended
binding offers to purchase such Purchased Loans. The sale of the Purchased Loans
will be effected through a purchase agreement wherein CMGFC will provide the
Purchaser with (i) the same representations and warranties with respect to the
Purchased Loans as will be provided in the Securitization to the Issuer, with
respect to the Loans securitized thereunder, (ii) indemnification for any
liabilities resulting from the breach of such representations and warranties,
and (iii) the right to assign such representations and warranties and such right
to indemnification to any assignee of the Purchaser. The Purchaser shall have
the right (x) to deposit the Purchased Loans into the Issuer effecting such
Securitization, (y) to assign the rights described in clause (iii) above to the
Issuer in lieu of being required to separately provide such representations and
warranties and such indemnification and (z) to receive in consideration therefor
a fractional portion of the total amount of (A) the Residual Interest and the
I/O Interests issued in such Securitization, (B) the other Securities issued in
such Securitization which were not sold to the public or the underwriters or
privately placed with third persons, and (C) the net proceeds of such
Securitization equal to the ratio between the principal balance of the Purchased
Loans and the principal balance of all the Loans securitized in such
Securitization.
11. Information Disclosure. CMGFC agrees, from time to time with
respect to each Securitization, to make available to the Agent and any
prospective purchaser of Securities for their review, and for use in disclosure
materials in connection with such Securitization (the "Disclosure Materials")
all documents and records relating to the Loans, the underwriting, origination
and servicing practices and loan portfolio performance history of CMGFC and CMC,
and such other related information as the Agent may reasonably request from time
to time. Further, in connection with each Securitization, CMGFC agrees to review
the Disclosure Materials for accuracy and completeness and to notify the Agent
of any errors and omissions therein.
12. Cooperation. CMGFC agrees, and shall cause each member of the
CMGFC Group, to cooperate with prospective purchasers of Securities designated
by the Agent in the furnishing of information relating to the Loans or
Securities. CMGFC
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further agrees, and shall cause each member of the CMGFC Group, to execute and
deliver such instruments and take such actions as the Agent or any purchaser
may, from time to time, reasonably request in order to effectuate the sale of
Loans or Securities. CMGFC shall cause each member of the CMGFC Group to abide
by the terms of this Investment Banking Services Agreement as if it were a party
hereto.
13. Expenses. All reasonable costs and expenses in connection
with this agency, the issuance of the Securities, and the transfer of the Loans
to the Trustee, the Issuer, or any purchaser shall be paid by CMGFC and CTS
based on CMGFC's and CTS's pro rata portion or respective percentage ownership
interest in the Residual Interests of the related Securitization. Such costs and
expenses shall include among other things, costs and expenses related to the
fees and disbursements of the CMGFC Group's external counsel, the Trustee's
up-front fees (including the fees and disbursements of its external counsel),
the Agent's external counsel, CTS's external counsel (if any), external counsel
for any purchaser of the Securities and the fees of the CMGFC Group's external
accounting firm.
14. Purchaser's Ability to Perform. Neither CTS nor CFS shall
make, nor shall either entity be deemed to have made, any representation or
warranty in respect of any purchaser's ability or capacity to perform any
contractual obligations to CMGFC or to purchase any Securities or Loans, other
than CTS's or CFS's own ability and capacity to fulfill their respective
obligations as contemplated in this Investment Banking Services Agreement.
15. CMGFC's Representation. CMGFC hereby represents and warrants
as of the date of this Investment Banking Services Agreement and shall represent
and warrant as of dates designated from time to time by the Agent with respect
to each Securitization that (a) the CMGFC Group has not, directly or indirectly
(except through the Agent), sold or offered, or attempted or offered to dispose
of or solicited any offer to buy, or otherwise approached or negotiated in
respect of, any Securities, and (b) the Disclosure Materials used in connection
with such Securitization, or the information provided by CMGFC to any
prospective purchaser of Securities, do not include any untrue statement of a
material fact or do not omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. As used herein the
terms "offer" and "sales" have the meanings specified in Section 2(3) of the
Securities Act of 1933, as amended.
16. Indemnity. CMGFC will indemnify and hold harmless CFS, CTS
and any affiliates thereof and their respective officers, directors, members,
employees and affiliates (the "Indemnified Parties") against any losses, claims,
damages or liabilities to which the Indemnified Parties may become subject in
connection with any matter related to or arising out of this Investment Banking
Services Agreement; provided, however, there shall be excluded from such
indemnification any such loss, claim, damage or liability which results from the
gross negligence or willful misconduct of the Indemnified Parties in performing
the services which they are to render pursuant hereto. Such
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indemnity shall include, but not be limited to, any claims made against the
Indemnified Parties respecting (a) the accuracy or completeness of the materials
or information provided by CMGFC to any Indemnified Party or a purchaser or
prospective purchaser of Loans or Securities placed by CTS or (b) any action, or
failure to act, by any Indemnified Party undertaken at CMGFC's written request
or with CMGFC's written consent. In the event any Indemnified Party intends to
seek indemnification by CMGFC hereunder, it will, as soon as practicable, advise
CMGFC of the circumstances giving rise to CMGFC's obligation hereunder.
17. Amendment and Termination. Except as specifically provided
for herein, neither CMGFC nor the Agent shall have the right to amend, modify or
terminate this Investment Banking Services Agreement or the Term of Exclusivity
without the written consent of the other party hereto; provided that CMGFC's and
the CMGFC Group's obligations under (i) Sections 8, 11, 12, 13, 14, 15, 16, 19,
20 and 21 hereof shall survive any termination of this Investment Banking
Services Agreement and (ii) Sections 6 and 10 hereof shall survive any
termination of this Investment Banking Services Agreement unless terminated
pursuant to the terms of Section 5(c).
18. Documentation. As a condition to the obligations of CTS and
CFS under this Investment Banking Services Agreement, CTS and CFS shall execute
documentation establishing the Purchase Agreement and each of the other
Significant Documents as defined therein (the "Documents"). In addition, with
respect to any Loans or Securities placed by CTS or an affiliate thereof, the
Agreement and any related purchase agreement(s) and other customary documents,
instruments, certificates and opinions of counsel shall be executed and
delivered by the appropriate parties. Such customary items shall include, but
not be limited to, (a) opinions from the CMGFC Group's external counsel, which
counsel and opinions shall be acceptable to CTS and CFS, regarding (i) the true
sale of the Loans from CMGFC to the Issuer and (ii) the non-consolidation of the
Issuer into CMGFC's estate upon a bankruptcy of CMGFC and (b) a letter from the
CMGFC Group's external accounting firm (such firm to be reasonably acceptable to
the Agent) (i) verifying the accuracy of any portfolio performance information
and statistical stratifications and analyses of the Loans used in Disclosure
Materials and marketing the Loans or Securities to prospective purchasers and
(ii) describing the agreed-upon-procedures performed by such accounting firm on
a statistical sample of Loans involved in a Securitization.
19. Contribution. If the indemnification provided for in Section
16 is unavailable or insufficient to hold harmless an Indemnified Party, then
CMGFC shall contribute to the amount paid or payable by such Indemnified Party
as a result of the losses, claims, damages or liabilities referred to in Section
16 (a) in such proportion as is appropriate to reflect the relative benefits
received by CMGFC and the CMGFC Group on the one hand and the Agent and CTS on
the other, from the offering of the Securities or (b) if the allocation provided
by clause (a) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (a)
above but also the relative fault of CMGFC and the CMGFC Group on the one hand
and the Agent and CTS on the other, in connection with the statements or
omissions
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which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations.
20. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF TRIAL BY
JURY. THIS INVESTMENT BANKING SERVICES AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS RULES APPLIED IN THE STATE OF NEW YORK. WITH RESPECT TO ANY
CLAIM ARISING OUT OF THIS INVESTMENT BANKING SERVICES AGREEMENT (A) EACH PARTY
IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND (B) EACH PARTY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY HAVE AT
ANY TIME TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING HERETO BROUGHT IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM THAT
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY WAIVES THE RIGHT TO OBJECT,
WITH RESPECT TO SUCH CLAIM, SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. TO THE EXTENT
PERMITTED BY APPLICABLE LAW, CFS, CTS AND CMGFC EACH IRREVOCABLY WAIVES ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR IN CONNECTION WITH THIS INVESTMENT BANKING SERVICES AGREEMENT OR ANY MATTER
ARISING HEREUNDER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, CMGFC SHALL CAUSE
EACH MEMBER OF THE CMGFC GROUP TO IRREVOCABLY WAIVE THROUGH A SIGNED WRITTEN
INSTRUMENT ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS INVESTMENT BANKING SERVICES AGREEMENT
OR ANY MATTER ARISING HEREUNDER AND SHALL PROMPTLY DELIVER TO THE AGENT SUCH
WRITTEN WAIVERS.
21. Representation by Counsel. CMGFC hereby acknowledges to CFS
and CTS that it has been represented by counsel of its choice during the course
of the negotiation of this Investment Banking Services Agreement and the
Documents.
[Remainder of Page Intentionally Left Blank]
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If you agree to the foregoing terms and conditions, please so
indicate by executing the acknowledgment on the enclosed copy of this Investment
Banking Services Agreement and returning it to us.
Very truly yours,
CONTIFINANCIAL SERVICES CORPORATION
By:
------------------------------------------
Name:
Title: Authorized Signatory
By:
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Name:
Title: Authorized Signatory
CONTITRADE SERVICES L.L.C.
By:
------------------------------------------
Name:
Title: Authorized Signatory
By:
------------------------------------------
Name:
Title: Authorized Signatory
Accepted and agreed by:
CMG FUNDING CORP.
By:
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Name: Xxxx Xxx
Title: President
CONTINENTAL MORTGAGE GROUP, L.C.
By:
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Name: Xxxx Xxx
Title: President
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[Signature Page to Investment Banking Services Agreement]
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Execution Copy
AMENDMENT 1 TO LETTER AGREEMENT
REFERRED TO AS THE INVESTMENT BANKING SERVICES AGREEMENT
This Amendment 1, dated as of November 18, 1997 (the
"Amendment"), to the Letter Agreement (the "Investment Banking Services
Agreement"), dated as of December 17, 1996, among CMG Funding Corp., ("CMGFC")
and Continental Mortgage Group, L.C. (now succeeded by CMG Funding Corp.),
ContiTrade Services L.L.C., ("CTS") and ContiFinancial Services Corporation.
WHEREAS, the parties hereto have entered into the Investment
Banking Services Agreement, as well as a series of other agreements designated
as Documents in the Letter Agreement; and
WHEREAS, the parties hereto now wish to amend the certain
provisions in the Investment Banking Services Agreement.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 17 of the
Investment Banking Services Agreement, to amend the Investment Banking Services
Agreement and restate certain provisions thereof as follows:
1. Defined Terms. Capitalized terms used herein without
definition have the meanings ascribed to them in the Investment Banking Services
Agreement.
2. Initial Paragraph. The initial paragraph of the Investment
Banking Services Agreement is amended as follows:
(a) through the replacement of the phrase "the option," in
clause (b)(i) thereof with the phrase "the option, prior to the
REIT Issuance (as defined herein, as amended),";
(b) through the inclusion of a new clause (c) immediately
after clause (b) thereof, as follows: (c) grants to CTS or an
affiliate thereof the option, on or after the REIT Issuance, to
be exercised in CTS's sole discretion, to purchase certain Loans
each month which in the aggregate equal or exceed by principal
balance the Monthly Purchase Target (as defined herein, as
amended) as more fully set forth in Section 10 hereof,";
(c) through the relettering of the existing clause (c)
thereof as clause (d) thereof;
(d) through the substitution of the phrase "substantially
all ARM Loans (as defined herein, as amended)" for the phrase
"substantially all Loans" in the last sentence therof.
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(e) through appending the following sentence at the end
thereof: "The Agent may exercise its rights hereunder directly
or, with respect to the public offering of Securities, the Agent
may act as financial advisor to arrange on behalf of CMGFC with
other parties to perform or participate in any underwriting of
Securities."
3. Form of Delivery. Section 3 of the Investment Banking Services
Agreement shall be amended as follows:
(a) through the replacement of the phrase "it is currently
contemplated that" in the fifth sentence thereof with the phrase
"it is currently contemplated that, prior to the REIT
Issuance,"; and
(b) through the addition of the following sentence
immediately after the sixth sentence thereof: "On and after the
REIT Issuance, (i) no Loan will qualify as an Alternate Sale
Loan, and (ii) no member of the CMGFC Group may sell any
Alternate Sale Loans."
4. Servicing of the Loans. Section 4 of the Investment Banking
Services Agreement shall be replaced in its entirety with the following:
4. Servicing of the Loans: For a particular
Securitization, the Loans will be serviced by a servicer that is
reasonably acceptable to CTS (the "Servicer"), in accordance
with the terms and provisions of the servicing agreement
referred to in the Purchase Agreement with respect to Loans to
be securitized and, upon securitization, the related Agreement.
The Servicer shall be entitled to a servicing fee no greater
than 0.50% per annum on the unpaid balance of the Loans related
to such Securitization or under the Purchase Agreement. Such
servicing agreement and the related Agreement, as applicable,
will, among other things, (a) require that CMGFC make certain
representations and warranties concerning the quality and the
underwriting of the Loans, (b) require that the Servicer make
certain representations and warranties concerning the servicing
of the Loans, and (c) to the extent such representations and
warranties are breached with respect to a particular Loan, will
require that CMGFC or the Servicer repurchase such Loan, as the
case may be. If and when CMGFC is acceptable to the Rating
Agencies and the credit enhancers (if any) to act as the
Servicer in particular Securitizations, CMGFC may act as the
Servicer in such future Securitizations, and possess the rights
and perform the obligations of the Servicer hereunder with
respect to such future Securitizations.'
5. Term. Section 5 of the Investment Banking Services Agreement
is amended as follows:
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14
(a) through the insertion of the phrase "which remain in
effect" immediately following the closure of the
parenthetical in clause (b) thereof;
(b) through the insertion of the notation "(A)" immediately
following the phrase "habitually failed" in clause (c)
(ii) thereof; and
(c) through the insertion of the phrase "or (B) to arrange, as
financial advisor, on behalf of CMGFC for the
securitization of pools of Loans through public offerings
with other parties acting as underwriters,"
6. Exclusive. Section 6 of the Investment Banking Services
Agreement is amended as follows:
(a) through the insertion of the notation "(A)" immediately
following the phrase "namely the extension of "in clause
(i) thereof;
(b) through the insertion of the phrase ", and/or (B) a
purchase facility by CTS under the Purchase Agreement to
CMGFC," immediately following the acronym "CMGFC" in
clause (i) thereof;
(c) through the insertion of the word "unilaterally"
immediately following the acronym "CTS" in clause (ii)(A)
thereof; and
(d) through the deletion of the phrase "or the Standby
Agreement" in clause (ii)(A) thereof.
7. Compensation. Section 8 of the Investment Banking Services
Agreement is amended through appending the following sentences at the end
thereof: 'During the Term of the Investment Banking Services Agreement, the
Agent shall be entitled to the above stated compensation whether or not it shall
(1) directly effect the Securitization of the Loans or (2) arrange as financial
advisor, on behalf of CMGFC, for the Securitization of the Loans through public
offerings by other parties acting as underwriters the "Other Underwriters"). Any
fees and expenses of such Other Underwriters shall be paid by CMGFC and shall
not reduce the compensation paid to the Agent under this Investment Banking
Services Agreement.'
8. Loan Purchase. Section 10 of the Investment Banking Services
Agreement shall be replaced in its entirety with the following:
10. Loan Purchase.
(a) Prior to the issuance by CMGFC of its stock or units
including its stock in anticipation of CMGFC electing Real
Estate Investment Trust status (the "REIT Issuance"), in
connection with any Securitization, CTS or an affiliate
thereof (the "Purchaser") shall
3
15
have the right to purchase from CMGFC, at CTS's sole
option, an amount of Loans (the "Purchased Loans")
representing up to (A) 75%, during and prior to 1997, (B)
50%, during 1998, and (C) 25%, during 1999 and thereafter,
of the Loans, by principal balance, intended to be
securitized in such Securitization (however, in individual
transactions, the percentage so purchased may vary by as
much as 5% from the level specified for such year), or
such greater amount as agreed to by CMGFC and the Agent,
immediately prior to their transfer for such
Securitization.
(b) On or after the REIT Issuance, and through and including
December 31, 2001, during each month the Purchaser shall
have the right to purchase from CMGFC, at CTS's sole
option, an amount of Loans (also the "Purchased Loans")
representing up to 75% of the Loans that are fixed rate
loans which are originated or acquired by CMGFC during
such month, by principal balance (the "Monthly Purchase
Target"), or such greater amount as agreed to by CMGFC and
the Agent. CMGFC may also use Loans which are adjustable
rate loans ("ARM Loans") to satisfy the Monthly Purchase
Target for any month by offering to sell such Loans to the
Purchaser, provided that the ARM Loans, by principal
balance, represent no more than 50% of the related Monthly
Purchase Target.
(c) On or after the REIT Issuance, and through and including
December 31, 2001, on the fifth business day after the
close of each calendar quarter, to the extent that the (i)
sum of the Monthly Purchase Targets for the months in the
previous calendar quarter, exceeds (ii) the aggregate
principal balance of eligible Loans offered for sale by
CMGFC to the Purchaser during such calendar quarter in
accordance with the terms of this Investment Banking
Services Agreement, then CMGFC shall promptly pay to CTS a
sum equal to the product of (y) 0.0040, and (z) the amount
by which value determined pursuant to clause (i) hereof,
exceeds the value determined pursuant to clause (ii)
hereof.
(d) The Purchased Loans will be selected so as to be
representative in all respects to the Loans being
securitized in such Securitization. The Purchaser shall
pay CMGFC an amount equal to the fair market value of the
Purchased Loans as the purchase price therefor, as
determined as set forth in the best published rate sheet
price for such Loans by CMC. The sale of the Purchased
Loans will be effected through a purchase agreement
wherein CMGFC will provide the Purchaser with (i) the same
representations and warranties with respect to the
Purchased Loans as will be provided in the Securitization
to the Issuer, with respect to the Loans securitized
thereunder, (ii) indemnification for any liabilities
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16
resulting from the breach of such representations and
warranties, and (iii) the right to assign such
representations and warranties and such right to
indemnification to any assignee of the Purchaser. The
Purchaser shall have the right (x) to deposit the
Purchased Loans into the Issuer effecting such
Securitization, (y) to assign the rights described in
clause (iii) above to the Issuer in lieu of being required
to separately provide such representations and warranties
and such indemnification and (z) to receive in
consideration therefor a fractional portion of the total
amount of (A) the Residual Interest and the I/O Interests
issued in such Securitization, if any, (B) the other
Securities issued in such Securitization which were not
sold to the public or the underwriters or privately placed
with third persons, and (C) the net proceeds of such
Securitization equal to the ratio between the principal
balance of the Purchased Loans and the principal balance
of all the Loans securitized in such Securitization.'
9. Address. The Address block set forth on page one of the
Investment Banking Services Agreement is replaced in its entirety by the
following:
CMG Funding Corp.
0000 Xxxx Xxxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
10. Effectiveness This Agreement, even after due execution by the
parties hereto, will not become effective until (i) each of the Conversion
Letter Agreement dated as of November 18, 1997 by and between CTS and CMGFC (the
"Conversion Letter Agreement"), the Termination Letter dated as of November 18,
1997, by and between CTS and Xxxx Xxx as Shareholder of CMGFC, Amendment 2 to
the Registration Rights Agreement dated as of November 18, 1997, by and between
CMGFC and CTS, Amendment 2 to the Standby and Working Capital Financing
Agreement dated as of November 18, 1997, by and among CMGFC as Borrower, CTS as
Lender and CMG Funding Securities Corp. as Residualholder, and Warrant No. 1
issued by CMGFC to CTS and dated as of November 18, 1997, have each also been
duly executed and delivered by the parties thereto, and (ii) the 546,883 shares
of Common Stock have been conveyed to CTS pursuant to Paragraph 2 of the
Conversion Letter Agreement.
11. Governing Law. This Amendment shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to its rules regarding conflict of laws.
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17
IN WITNESS WHEREOF, the parties have executed this Amendment 1 to
the Investment Banking Services Agreement as of the day and year first above
written.
CMG Funding Corp.
By:
--------------------------
Name: Xxxx X. Xxx
Title:
ContiTrade Services, L.L.C.
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
ContiFinancial Services
Corporation
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
6
18
AMENDMENT 2 TO LETTER AGREEMENT
REFERRED TO AS THE INVESTMENT BANKING SERVICES AGREEMENT
This Amendment 2, dated as of December 31, 1997 (the
"Amendment"), to the Letter Agreement (the "Investment Banking Services
Agreement"), dated as of December 17, 1996, among CMG Funding Corp., ("CMGFC")
and Continental Mortgage Group, L.C. (now succeeded by CMG Funding Corp.),
ContiTrade Services L.L.C., ("CTS") and ContiFinancial Services Corporation.
WHEREAS, the parties hereto have entered into the Investment
Banking Services Agreement, as well as a series of other agreements designated
as Documents in the Letter Agreement;
WHEREAS, the parties hereto have previously amended the
Investment Banking Services Agreement pursuant to an amendment dated as of
November 18, 1997 ("Amendment 1"); and
WHEREAS, the parties hereto now wish to amend the certain
provisions in the Investment Banking Services Agreement, as amended by Amendment
1.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 17 of the
Investment Banking Services Agreement, to amend the Investment Banking Services
Agreement and restate certain provisions thereof as follows:
1. Defined Terms. Capitalized terms used herein without
definition have the meanings ascribed to them in the Investment Banking Services
Agreement.
2. Loan Purchase. Section 10 of the Investment Banking Services
Agreement shall be replaced in its entirety with the following:
10. Loan Purchase.
(a) Prior to January 1, 1998 and prior to the issuance by
CMGFC of its stock or units including its stock in
anticipation of CMGFC electing Real Estate Investment
Trust status (the "REIT Issuance"), in connection with any
Securitization, CTS or an affiliate thereof (the
"Purchaser") shall have the right to purchase from CMGFC,
at CTS's sole option, an amount of Loans (the "Purchased
Loans") representing up to 75% of the Loans, by principal
balance, intended to be securitized in such Securitization
(however, in individual transactions, the percentage so
purchased may vary by as much as 5% from the level
specified for such year), or such greater amount as agreed
to by CMGFC and the Agent, immediately prior to their
transfer for such Securitization.
19
(b) On or after January 1, 1998 and prior to the earlier to
occur of (i) the REIT Issuance, or (ii) January 1, 2002,
during each month the Purchaser shall have the right to
purchase from CMGFC, at CTS's sole option, an amount of
Loans (also the "Purchased Loans") representing up to 50%
of the Loans which are originated or acquired by CMGFC
during such month, by principal balance (the "Monthly
Purchase Target"), or such greater amount as agreed to by
CMGFC and the Agent.
(c) On or after the REIT Issuance, and through and including
December 31, 2001, during each month the Purchaser shall
have the right to purchase from CMGFC, at CTS's sole
option, an amount of Loans (also the "Purchased Loans")
representing up to 75% of the Loans that are fixed rate
loans which are originated or acquired by CMGFC during
such month, by principal balance (also the "Monthly
Purchase Target"), or such greater amount as agreed to by
CMGFC and the Agent. CMGFC may also use Loans which are
adjustable rate loans ("ARM Loans") to satisfy the Monthly
Purchase Target for any month by offering to sell such
Loans to the Purchaser, provided that the ARM Loans, by
principal balance, represent no more than 50% of the
related Monthly Purchase Target.
(d) On or after January 1, 1998, and through and including
December 31, 2001, on the fifth business day after the
close of each calendar quarter, to the extent that the (i)
sum of the Monthly Purchase Targets for the months in the
previous calendar quarter, exceeds (ii) the aggregate
principal balance of eligible Loans offered for sale by
CMGFC to the Purchaser during such calendar quarter in
accordance with the terms of this Investment Banking
Services Agreement, then CMGFC shall promptly pay to CTS a
sum equal to the product of (y) 0.0040, and (z) the amount
by which value determined pursuant to clause (i) hereof,
exceeds the value determined pursuant to clause (ii)
hereof.
(e) The Purchased Loans will be selected so as to be
representative in all respects to the Loans being
securitized in such Securitization. The Purchaser shall
pay CMGFC an amount equal to the fair market value of the
Purchased Loans as the purchase price therefor, as
determined as set forth in the best published rate sheet
price for such Loans by CMC. The sale of the Purchased
Loans will be effected through a purchase agreement
wherein CMGFC will provide the Purchaser with (i) the same
representations and warranties with respect to the
Purchased Loans as will be provided in the Securitization
to the Issuer, with respect to the Loans securitized
thereunder, (ii) indemnification for any liabilities
resulting from the breach of such representations and
warranties,
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and (iii) the right to assign such representations and
warranties and such right to indemnification to any
assignee of the Purchaser. The Purchaser shall have the
right (x) to deposit the Purchased Loans into the Issuer
effecting such Securitization, (y) to assign the rights
described in clause (iii) above to the Issuer in lieu of
being required to separately provide such representations
and warranties and such indemnification and (z) to receive
in consideration therefor a fractional portion of the
total amount of (A) the Residual Interest and the I/O
Interests issued in such Securitization, if any, (B) the
other Securities issued in such Securitization which were
not sold to the public or the underwriters or privately
placed with third persons, and (C) the net proceeds of
such Securitization equal to the ratio between the
principal balance of the Purchased Loans and the principal
balance of all the Loans securitized in such
Securitization.'
3. Effectiveness This Agreement, even after due execution by the
parties hereto, will not become effective until (i) each of the Conversion
Letter Agreement No. 2 dated as of December 31, 1997 by and between CTS and
CMGFC (the "Conversion Letter Agreement No. 2"), Amendment 3 to the Registration
Rights Agreement dated as of December 31, 1997, by and between CMGFC and CTS,
Amendment 3 to the Standby and Working Capital Financing Agreement dated as of
December 31, 1997, by and among CMGFC as Borrower, CTS as Lender and CMG Funding
Securities Corp. as Residualholder, Amendment 2 to the Purchase and Sale
Agreement dated as of December 31, 1997, among CMGFC and CTS, Warrant No. 2
issued by CMGFC to CTS and dated as of December 31, 1997 has been exchanged for
Warrant No. 1 held by CTS, and Warrant No. 3 issued by CMGFC to CTS and dated as
of December 31, 1997, have each also been duly executed and delivered by the
parties thereto, and (ii) the 410,581 shares of Class A Preferred Stock have
been conveyed to CTS pursuant to Paragraph 2 of the Conversion Letter Agreement
No. 2.
4. Governing Law. This Amendment shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to its rules regarding conflict of laws.
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21
IN WITNESS WHEREOF, the parties have executed this Amendment 2 to
the Investment Banking Services Agreement as of the day and year first above
written.
CMG Funding Corp.
By:
---------------------------
Name: Xxxx X. Xxx
Title:
ContiTrade Services, L.L.C.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
ContiFinancial Services
Corporation
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
4
