Exhibit 10.11
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WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE-FAMILY MORTGAGE LOANS)
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BETWEEN
iOWN, INC., a California corporation
AND
BANK UNITED,
a federal savings bank
Dated as of October 8, 1999
TABLE OF CONTENTS
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1. DEFINITIONS........................................................... Page 1
1.1 Defined Terms............................................... Page 1
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1.2 Other Definitional Provisions............................... Page 12
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2. THE CREDIT............................................................ Page 12
2.1 The Commitment.............................................. Page 12
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2.2 Procedures for Obtaining Advances........................... Page 13
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2.3 Note........................................................ Page 15
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2.4 Interest.................................................... Page 15
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2.5 Principal Payments.......................................... Page 16
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2.6 Expiration of Commitment.................................... Page 17
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2.7 Method of Making Payments................................... Page 18
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2.8 Non-Usage Fee............................................... Page 18
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2.9 Miscellaneous Charges....................................... Page 18
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2.10 Bailee...................................................... Page 18
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3. COLLATERAL............................................................ Page 19
3.1 Grant of Security Interest.................................. Page 19
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3.2 Security Interest in Mortgage-backed Securities............. Page 20
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3.3 Delivery of Collateral Documents............................ Page 20
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3.4 Delivery of Additional Collateral or Mandatory Prepayment... Page 21
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3.5 Right of Redemption from Pledge............................. Page 21
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3.6 Collection and Servicing Rights............................. Page 22
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3.7 Return or Release of Collateral at End of Commitment........ Page 22
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3.8 Master Repurchase Agreement................................. Page 22
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4. CONDITIONS PRECEDENT.................................................. Page 22
4.1 Initial Advance............................................. Page 22
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4.2 Each Advance................................................ Page 24
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5. REPRESENTATIONS AND WARRANTIES........................................ Page 25
5.1 Organization; Good Standing Subsidiaries.................... Page 25
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5.2 Authorization and Enforceability............................ Page 25
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5.3 Financial Condition......................................... Page 26
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5.4 Litigation.................................................. Page 26
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5.5 Compliance with Laws........................................ Page 26
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5.6 Regulation U................................................ Page 26
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5.7 Investment Company Act...................................... Page 26
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5.8 Agreements.................................................. Page 26
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5.9 Title to Properties......................................... Page 27
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5.10 ERISA....................................................... Page 27
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5.11 Eligibility................................................. Page 27
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5.12 Special Representations Concerning Collateral............... Page 28
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5.13 RICO........................................................ Page 30
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5.14 Proper Names................................................ Page 30
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5.15 Direct Benefit From Loans................................... Page 30
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5.16 Loan Documents Do Not Violate Other Document................ Page 30
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5.17 Consents Not Required....................................... Page 30
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5.18 Material Fact Representations............................... Page 30
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5.19 Place of Business........................................... Page 31
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5.20 Use of Proceeds; Business Loans............................. Page 31
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5.21 No Undisclosed Liabilities.................................. Page 31
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5.22 Tax Returns and Payments.................................... Page 31
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5.23 Subsidiaries................................................ Page 31
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5.24 Holding Company............................................. Page 32
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5.25 Year 2000 Issue............................................. Page 32
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6. AFFIRMATIVE COVENANTS................................................. Page 32
6.1 Payment of Note............................................. Page 32
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6.2 Financial Statements and Other Reports...................... Page 32
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6.3 Maintenance of Existence: Conduct of Business............... Page 33
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6.4 Compliance with Applicable Laws............................. Page 34
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6.5 Inspection of Properties and Books.......................... Page 34
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6.6 Notice...................................................... Page 34
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6.7 Payment of Debt Taxes, etc.................................. Page 34
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6.8 Insurance................................................... Page 35
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6.9 Closing Instructions........................................ Page 35
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6.10 Other Loan Obligations...................................... Page 35
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6.11 Use of Proceeds of Advances................................. Page 35
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6.12 Special Affirmative Covenants Concerning Collateral......... Page 35
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6.13 Cure of Defects in Loan Documents........................... Page 36
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6.14 Year 2000 Compliant......................................... Page 37
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7. NEGATIVE COVENANTS.................................................... Page 37
7.1 Contingent Liabilities...................................... Page 37
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7.2 Pledge of Mortgage Loans.................................... Page 37
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7.3 Merger; Acquisitions........................................ Page 37
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7.4 Loss of Eligibility......................................... Page 38
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7.5 Debt to Adjusted Tangible Worth Ratio....................... Page 38
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7.6 Minimum Adjusted Tangible Net Worth......................... Page 38
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7.7 Transactions with Affiliates................................ Page 38
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7.8 Limits on Corporate Distributions........................... Page 38
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7.9 RICO........................................................ Page 38
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7.10 No Loans or Investments Except Approved Investments......... Page 38
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7.12 Changes in Accounting Methods............................... Page 39
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7.13 No Sales, Leases or Dispositions of Property................ Page 40
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7.14 Changes in Business or Assets............................... Page 40
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7.15 Changes in Office or Inventory Location..................... Page 40
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7.16 Special Negative Covenants Concerning Collateral............ Page 40
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7.17 No Indebtedness............................................. Page 40
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8. DEFAULTS; REMEDIES.................................................... Page 41
8.1 Events of Default........................................... Page 41
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8.2 Remedies.................................................... Page 44
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8.3 Application of Proceeds..................................... Page 46
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8.4 Lender Appointed Attorney-in-Fact........................... Page 47
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8.5 Right of Set-Off............................................ Page 47
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9. NOTICES............................................................... Page 47
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.................................. Page 48
11. FINANCIAL INFORMATION................................................. Page 49
12. MISCELLANEOUS......................................................... Page 49
12.1 Terms Binding Upon Successors; Survival of Representations.. Page 49
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12.2 Assignment.................................................. Page 49
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12.3 Amendments.................................................. Page 50
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12.4 Governing Law............................................... Page 50
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12.5 Participations.............................................. Page 50
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12.6 Relationship of the Parties................................. Page 50
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12.7 Severability................................................ Page 50
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12.8 Usury....................................................... Page 51
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12.9 Consent to Jurisdiction..................................... Page 51
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12.10 Arbitration................................................. Page 52
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12.11 ADDITIONAL INDEMNITY........................................ Page 53
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12.12 No Waivers Except in Writing................................ Page 54
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12.13 Waiver of Jury Trial........................................ Page 54
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12.14 Multiple Counterparts....................................... Page 54
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12.15 No Third Party Beneficiaries................................ Page 54
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12.16 RELEASE OF LENDER LIABILITY................................. Page 54
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12.17 Entire Agreement; Amendment................................. Page 54
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12.19 NO ORAL AGREEMENTS.......................................... Page 55
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EXHIBIT "A" .................................................................. Page 57
EXHIBIT "B" .................................................................. Page 59
EXHIBIT "C" .................................................................. Page 60
EXHIBIT "D" .................................................................. Page 64
EXHIBIT "E" .................................................................. Page 65
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EXHIBIT "F" .................................................................. Page 66
ANNEX "A" .................................................................. Page 67
EXHIBIT "G" .................................................................. Page 69
EXHIBIT "H" .................................................................. Page 70
EXHIBIT "I" .................................................................. Page 71
EXHIBIT "J" .................................................................. Page 73
EXHIBIT "K" .................................................................. Page 77
EXHIBIT "L" .................................................................. Page 79
EXHIBIT "M" .................................................................. Page 80
EXHIBIT "N" .................................................................. Page 83
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WAREHOUSING CREDIT AND SECURITY AGREEMENT
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THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Agreement"), is dated
as of October 8, 1999, by and between iOWN, INC., a California corporation (the
"Company"), having its principal office at 000 Xxxx Xxxxxx, Xxxxx 000, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000, and BANK UNITED, a federal savings bank (the
"Lender"), having its principal office at 0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000.
WHEREAS, the Company has requested the Lender to make certain loans to the
Company to finance the origination or purchase of Mortgage Loans (as that term
is herein defined) which loans are for the benefit of the Company;
WHEREAS, the Lender is willing to make such loans as herein provided, upon
the terms, agreements and covenants and subject to the conditions hereinafter
set forth and in reliance on the representations and warranties herein made and
referred to; and
WHEREAS, the Company and the Lender desire to set forth herein the terms
and conditions upon which the Lender shall provide warehouse financing to the
Company;
NOW, THEREFORE, for good and valuable consideration, the amount and
sufficiency of which are hereby acknowledged by the parties hereto, to induce
the Lender to provide the warehouse financing facility to the Company and in
reliance of the representations and warranties made herein, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or elsewhere in this
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Agreement (including the exhibits hereto) shall have the following meanings:
"Adjusted Tangible Net Worth" means, with respect to the Company at
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any date, the Tangible Net Worth of Company at such date [*] of the unpaid
principal balances of Mortgage Loans for which the Company owns the
Servicing Rights at such date.
"Advance" means a disbursement by the Lender under the Commitment
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pursuant to Article 2 of this Agreement.
"Advance Request" has the meaning set forth in Section 2.2(a) hereof.
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"Affiliate" shall mean any Person controlling, controlled by or under
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common control with any other Person. For purposes of this definition
"control" (including "controlled by" and "under common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract, or otherwise or owning or
possessing the power to vote 10% or more of any class of voting
[*] Confidential Treatment Requested
securities of any Person. Without limiting the generality of the foregoing,
for purposes of this Agreement, Company and each of its respective
Subsidiaries shall be deemed to be Affiliates of one another.
"Aged Mortgage Loans" means an Eligible Mortgage Loan that has been
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included in Collateral for a period of more than ninety (90) days.
"Agreement" means this Warehousing Credit and Security Agreement
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(Single Family Mortgage Loans), either as originally executed or as it may
from time to time be supplemented, modified or amended.
"Applicable Law" means the laws of the State of Texas and the United
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States of America in effect from time to time and applicable to the
transactions between the Lender and the Company pursuant to this Agreement
and the other Loan Documents whichever pen-nits the charging and collection
of the highest nonusurious rate of interest on such transactions. For
purposes of determining Texas law with respect to the highest nonusurious
rate of interest the "weekly ceiling" as defined in Chapter 303 of the
Texas Finance Code (the "Texas Finance Code"), as amended, shall be
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controlling.
"Approved Custodian" means a Person acceptable to the Lender from time
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to time' in its sole discretion, who possesses Mortgage Loans that secure
Mortgaged-backed Securities.
"Bailee Letter" has the meaning set forth in Section 3.3 hereof.
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"Business Day" means any day excluding Saturday, Sunday and any day on
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which Lender is closed for business.
"Capitalized Lease" means any lease under which rental payments are
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required to be capitalized on a balance sheet of the lessee in accordance
with GAAP.
"Capitalized Rentals" means the amount of aggregate rentals due and to
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become due under all Capitalized Leases under which the Company is a lessee
that would be reflected as a liability on a balance sheet of the Company.
"Change of Control" means
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(a) a sale of substantially all of the Company's assets to any
Person or related group of Persons; or,
(b) without the Lender's prior written consent, the transfer of
more than fifty percent (50%) of the total voting power entitled to
vote in election of directors, managers, or trustees of the Company.
"Collateral" has the meaning set forth in Section 3.1 hereof.
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"Collateral Documents" means all of the documents and other items
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described on Exhibit "C" hereto and required to be delivered to the Lender
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in connection with an Advance.
"Collateral Value" means
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(a) with respect to any Eligible Mortgage Loan, an amount equal
to the least of (i) the actual out-of-pocket cost of such Mortgage
Loan to the Company, i.e., the net amount actually funded against such
Mortgage Loan or the net purchase price of such Mortgage Loan, (ii)
the Par Value thereof, (iii) the amount which the Investor has
committed to pay for such Mortgage Loan pursuant to a Purchase
Commitment, or (iv) if in the absence of the Purchase Commitment, the
Fair Market Value of such Mortgage Loan;
(b) with respect to Mortgage-backed Securities, an amount equal
to the least of (i) the sum of the principal balances of the Mortgage
Loans from which such Mortgage-backed Securities were created, (ii)
the amount which the Investor has committed to pay for such Mortgage-
backed Securities pursuant to a Purchase Commitment, or (iii) the Fair
Market Value of such Mortgage-backed Security;
(c) with respect to Collateral that is not described within (a)
or (b), and that is pledged pursuant to Section 3.4 hereof, Collateral
Value shall equal an amount established by Lender in its sole
discretion;
(d) with respect to Collateral that is not described in (a), (b),
or (c) the Collateral Value shall be equal to $0.00;
(e) notwithstanding the foregoing, with respect to Mortgage Loans
that are not or cease to be Eligible Mortgage Loans, the Collateral
Value thereof shall equal $0.00.
"Commitment" has the meaning set forth in Section 2.1(a) hereof.
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"Company" has the meaning set forth in the first paragraph of this
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Agreement.
"Conventional Mortgage Loan" means a Single-family Mortgage Loan,
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other than an FHA Loan or VA Loan, that complies with all applicable
requirements for purchase under the FNMA or FHLMC standard form of
conventional mortgage purchase contract.
"Credit A Mortgage Loan" means a FHA Loan, VA Loan, Conventional
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Mortgage Loan, or Jumbo Loan.
"Debt" means, with respect to any Person, at any date (a) all
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indebtedness or other obligations of such Person which, in accordance with
GAAP, would be included in
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determining total liabilities as shown on the liabilities side of a balance
sheet of such Person at such date; and (b) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase
price of property or services; provided that for purposes of this
Agreement, there shall be excluded from Debt at any date loan loss
reserves, deferred taxes arising from capitalized excess service fees, and
operating leases. With respect to the Company, the term "Debt" shall
include all off balance sheet warehouse loan obligations owed to any
Person, including, without limitation, indebtedness or other obligations of
the Company under all master repurchase arrangements similar to the Master
Repurchase Agreement.
"Default" means the occurrence of any event or existence of any
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condition which, but for the giving of notice, the lapse of time, or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 2.4(c) hereof.
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"Electronic Request" has the meaning set forth in Section 2.2(a)
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hereof.
"Eligible Mortgage Loan" means a Mortgage Loan, that, at all times
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during the term of this Agreement, (a) is, without duplication, a Subprime
Mortgage Loan, a Credit "A" Mortgage Loan, or a Second Mortgage Loan; (b)
is evidenced by loan documents that are the standard forms approved by FNMA
or FHLMC or forms previously approved, in writing, by the Lender in its
sole discretion; (c) is validly pledged to the Lender, subject to no other
Liens; (d) is not in default in the payment of principal and interest or in
the performance of any obligation under the Mortgage Note or the Mortgage
evidencing or securing such Eligible Mortgage Loan for a period of 60 days
or more; (e) has closed less than 25 days prior to the date of the Advance
made in connection with such Eligible Mortgage Loan; and (f) is covered by
a Purchase Commitment.
"Eligible Mortgage Pool" means a pool of Mortgage Loans that will
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secure a "mortgage related security", as defined in Section 3(a)(41) of the
Exchange Act administered or to be administered by a trustee acceptable to
Lender in its sole discretion where the Mortgage, Mortgage Note and other
documents relating to such Mortgage Loans are held or to be held by an
Approved Custodian.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
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all rules and regulations promulgated thereunder, as amended from time to
time and any successor statute.
"Event of Default" means any of the conditions or events set forth in
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Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
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from time to time and any successor statute.
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"Fair Market Value" shall mean, at any date, with respect to:
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(a) any Mortgage-backed Security, the bid price rate reflected on
the Telerate screen for a Mortgage-backed Security with the closest
coupon rate that does not exceed that of the Mortgage-backed Security
in question multiplied by the original face amount of such Mortgage-
backed Security, and multiplied by the current pool factor for such
Mortgage-backed Security.
(b) any Mortgage Loan, the market price rate reflected on the
Telerate screen for thirty (30) day mandatory future delivery of such
Mortgage Loan multiplied by the outstanding principal balance thereof.
In the event Telerate does not publish or ceases to publish either the
market or bid price for any Mortgage Loan or Mortgage-backed Security
referenced in (a) and (b) above, the average bid price quoted in writing to
the Lender as of the date of determination by any two nationally recognized
dealers selected by Lender that are making a market in similar Mortgage
Loans or Mortgaged-backed Securities shall be utilized in lieu of the
market or bid price, as the case may be.
"FHA" means the Federal Housing Administration and any, successor
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thereto.
"FHA Loan" means a Single-family Mortgage Loan, payment of which is
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partially or completely insured by the FHA under the National Housing Act
or Title V of the Housing Act of 1949 or with respect to which there is a
current, binding and enforceable commitment for such insurance issued by
the FHA.
"FHLMC" means the Federal Home Loan Mortgage Corporation and any
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successor thereto.
"FHLMC Guide" means the Xxxxxxx Xxx Xxxxxxx' and Servicers' Guide,
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dated September 17, 1984, applicable bulletins, the applicable MIDANET
Users Guide (or the MIDAPHONE User's Guide) and any particular purchase
documents as defined in the Sellers' and Servicers' Guide, as revised
prior to the date hereof.
"FICA" means the Federal Insurance Contributions Act.
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"First Mortgage" means a mortgage or deed of trust which constitutes a
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first Lien on the property covered thereby.
"First Mortgage Loan" means a Mortgage Loan secured by a First
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Mortgage.
"Floating Rate" has the meaning set forth in Section 2.4(a) hereof
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"FNMA" means the Federal National Mortgage Association and any
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successor thereto.
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"FNMA Guide" means the FNMA Servicing Guide dated June 30,1990, as
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revised prior to the date hereof.
"Funding Account" means the non-interest bearing demand checking
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account established with, maintained by, and pledged to Lender into which
shall be deposited the proceeds of Advances, the proceeds from any sale of
Collateral, and from which funds shall be disbursed for the acquisition of
Mortgage Loans.
"GAAP" means generally accepted accounting principles set forth in the
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opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as
of the date of determination.
"GNMA" means the Government National Mortgage Association and any
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successor thereto.
"GNMA Guide" means the GNMA I Mortgage-Backed Securities Guide,
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Handbook GNMA 5500. I REV. 6, as revised prior to the date hereof, and as
may be revised from time to time, and GNMA II Mortgage-Backed Securities
Guide Handbook GNMA 5500.2, as revised prior to the date hereof.
"HUD" means the Department of Housing and Urban Development and any
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successor thereto.
"Indebtedness" means and includes, without duplication, (1) all items
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which in accordance with GAAP, consistently applied, would be included on
the liability side of a balance sheet on the date as of which Indebtedness
is to be determined (excluding shareholders' equity), (2) Capitalized
Rentals under any Capitalized Lease, (3) guaranties, endorsements and other
contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others, and (4) indebtedness secured by
any mortgage, pledge, security interest or other Lien existing on any
property owned by the Person with respect to which indebtedness is being
determined, whether or not the indebtedness secured thereby shall have been
assumed.
"Indemnified Liabilities" has the meaning set forth in Article 10
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hereof.
"Interim Date" has the meaning set forth in Section 4.1 (a)(5) hereof.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, or
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any subsequent federal income tax law or laws, as any of the foregoing have
been or may from time to time be amended.
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"Investor" means FNMA, FHLMC, GNMA, any of the Persons listed in
Exhibit "L" hereto, or a financially responsible institution which is
acceptable, to Lender, in its sole discretion; provided that at any time by
written notice to Company Lender may disapprove any Investor in its sole
discretion, whether or not that Person is named as an Investor in this
definition or in Exhibit "L" or has been previously approved as an Investor
by Lender. Upon receipt of such notice, the Persons named in Lender's
notice shall no longer be Investors from and after the date of the receipt
of such notice.
"Jumbo Loan" means a Single-family Mortgage Loan (other than a FHA
Loan or VA Loan) that is underwritten in accordance with standards of an
Investor that are generally comparable to the underwriting standards
established by FNMA or FHLMC, except that the amount of such Mortgage Loan
exceeds the maximum amount under those requirements, but in no event shall
the amount of such Single-family Mortgage Loan exceed one Million Dollars
($1,000,000.00) and provided further that such Single-family Mortgage Loan
exceeding Six Hundred Thousand Dollars ($600,000.00) must be underwritten
in accordance with Investor guidelines so that it is readily salable to
such Investor, and prior approved by an Investor for purchase.
"Lender" has the meaning set forth in the first paragraph of this
Agreement.
"LIBOR Rate" means a rate of interest equal to the London Interbank
Offered Rate for U. S. dollar deposits as quoted by Telerate, Bloomberg or
any other rate quoting service, selected by Lender in its sole discretion
for an interest period of one month. In the event such rate ceases to be
published, LIBOR Rate shall mean a comparable rate of interest reasonably
selected by Lender.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest).
"Loan Documents" means this Agreement, the Note, and each other
document, instrument or agreement executed by the Company or any other
Person in connection herewith or therewith, as any of the same may be
amended, restated, renewed or replaced from time to time.
"Margin Stock" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"Master Repurchase Agreement" means that certain Master Repurchase
Agreement dated of even date herewith by and between Company and Lender.
"Maximum Rate" means the maximum lawful non-usurious rate of interest
(if any) that, under Applicable Law, the Lender may charge the Company on
the Advances
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from time to time. To the extent that the interest rate laws of the State
of Texas are applicable and unless changed in accordance with law, the
applicable rate ceiling shall be the "weekly ceiling" determined in
accordance with the Texas Finance Code, as amended.
"Monthly Average LIBOR Rate" means the average of all LIBOR Rates
quoted during a given month. In the event (i) the, Note is paid in full
and the Commitment is terminated prior to a month end; or (ii) the initial
Advance hereunder occurs on a date other than the first day of that month
on which LIBOR Rates are quoted, the Monthly Average LIBOR Rate shall mean,
in the case of clause (i), the average of all LIBOR Rates quoted that month
up to and including the last Business Day prior to such payment in full;
or, in the case of clause (ii), the LIBOR Rates quoted on the date of the
initial Advance through the end of that month.
"Mortgage" means a First Mortgage or Second Mortgage on improved real
property.
"Mortgage-backed Securities" means FHLMC, GNMA or FNMA securities that
are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note. A
Mortgage Loan, unless otherwise expressly stated herein, means a Single-
family Mortgage Loan.
"Mortgage Note" means a note secured by a Mortgage.
"Mortgage Note Amount" means, as of the date of determination, the
then outstanding unpaid principal amount of a Mortgage Note.
"Mortgage Pool" means a pool of Mortgage Loans that were warehoused
with the Lender, on the basis of which there is to be issued a Mortgage-
backed Security.
"Mortgaged Property" means the property, real, personal, tangible or
intangible, securing a Mortgage Note.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA that is maintained for employees of the Company
or a Subsidiary of the Company.
"Net Investable Balances" means the average collected balances in non-
interest bearing deposit accounts controlled or maintained by the Company
and its Subsidiaries in accounts at the Lender, less balances to support
float, activity charges, reserve requirements, Federal Deposit Insurance
Corporation insurance premiums and such other assessments as may be imposed
by governmental authorities from time to time.
"Note" has the meaning set forth in Section 2.3 hereof.
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"Notices" has the meaning set forth in Article 9 hereof.
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"Obligations" means any and all indebtedness, obligations and
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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, or any of them, and any renewals, extensions, enlargements,
reinstatements or rearrangements thereof.
"Officer's Certificate" means a certificate executed on behalf of the
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Company by its chief financial officer or its treasurer or by such other
officer as may be designated herein, in form and substance satisfactory to
Lender.
"OTS" means the Office of Thrift Supervision.
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"Par Value" means, with respect to any Mortgage Loan, at the time of
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any determination, the unpaid principal balance of such Mortgage Loan on
such date.
"Participant" has the meaning set forth in Section 12.5 hereof.
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"Person" means and includes natural persons, corporations, limited
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partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
federal and state governments and agencies or regulatory authorities and
political subdivisions thereof
"Plans" has the meaning set forth in Section 5.10 hereof.
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"Pledged Mortgages" has the meaning set forth in Section 3.1(a)
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hereof.
"Pledged Securities" has the meaning set forth in Section 3.1(b)
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hereof.
"PMI" means any private mortgage insurance company which is
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acceptable to Lender, in its sole discretion; provided that at any time by
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written notice to Company, Lender may disapprove any PMI because it has
determined in its sole discretion and for any reason that it is no longer
comfortable with that Person being a PMI, whether or not that Person has
been previously approved as a PMI by Lender. Upon receipt of such notice,
the Persons named in Lender's notice shall no longer be PMIs from and after
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the date of receipt of such notice.
"Purchase Commitment" means a written commitment, in form and
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substance satisfactory to the Lender, issued in favor of the Company by an
Investor pursuant to which that Investor commits to purchase Mortgage Loans
or Mortgage-backed Securities.
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"Purchase Price" shall have the meaning set forth in the Master
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Repurchase Agreement.
"Redemption Amount" has the meaning set forth in Section 3.5 hereof.
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"RICO" means the Racketeer Influenced and Corrupt Organizations Act of
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1970, as amended.
"Second Mortgage" means a mortgage or deed of trust which constitutes
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a second Lien on the property covered thereby.
"Second Mortgage Loan" means a Mortgage Loan secured by a Second
--------------------
Mortgage that (a) has a combined loan-to-collateral value not greater than
100% (ratio to be based upon all loans, including such Second Mortgage Loan
and all loans secured by the Mortgaged Property securing such Second
Mortgage Loan) and (b) is underwritten in conformity with underwriting
standards approved by an Investor so that it is readily salable to such
Investor.
"Securities" means the Mortgage Notes, securities, and financial
----------
instruments sold by Company to the Lender under the Master Repurchase
Agreement at any time and from time to time.
"Servicing Contract" means, with respect to any Person, the
------------------
arrangement, whether or not in writing, pursuant to which such Person has
the right to service Mortgage Loans.
"Servicing Rights" means (a) the rights, obligations, remedies,
----------------
powers, and responsibilities of a Person to service Mortgage Loans owned by
that Person, including without limitation the right to collect principal
and interest payments, administer escrow accounts, and the right to own and
possess loan files and all records, documents, and data relating to such
Mortgage Loans, and (b) the obligations, rights, remedies, powers,
privileges, benefits and responsibilities of a Person to service Mortgage
Notes for GNMA, FNMA or FHLMC under and in accordance with the GNMA Guide,
the FNMA Guide and the FHLMC Guide, respectively or for any Investor under
any Servicing Contract, including, without limitation, (i) the right to
receive servicing fees, termination fees, net sales proceeds, late charges,
insufficient fund fees, and other ancillary income relating to the Mortgage
Notes (ii) the right to hold and administer the escrow accounts, and (iii)
the right to all loan files, insurance files, tax records, collection
records, documents, ledgers, computer printouts, computer tapes and other
records, data or information relating to the Mortgage Notes, the escrow
accounts or the servicing or otherwise necessary or proper to perform the
obligations of servicer.
"Single-family Mortgage Loan" means a Mortgage Loan secured by a
---------------------------
Mortgage covering improved real property containing one to four family
residences.
"Statement Date" has the meaning set forth in Section 4.1 (a)(5)
--------------
hereof.
10
"Subordinated Debt" means, with respect to any Person, all
-----------------
Indebtedness of such Person, for borrowed money, which is, by its terms
(which terms shall have been approved by the Lender) or by the terms of a
subordination agreement, in form and substance satisfactory to the Lender,
effectively subordinated in right of payment to all other present and
future obligations and all indebtedness of such Person, of every kind and
character, owed to the Lender.
"Subprime Mortgage Loan" means a Single-family Mortgage Loan that (a)
----------------------
is, in the reasonable judgment of the Lender, consistent in all respects
with traditional standards imposed by whole loan purchasers, relevant
rating agencies and pool insurers for classification as "A-", "B", or "C"
Mortgage Loans, (b) has a maximum loan amount that does not exceed
$350,000.00, (c) is secured by a First Mortgage or Second Mortgage, (d) has
a combined loan-to-collateral value ratio not greater than 100% (ratio to
be based upon all loans, including such Single-family Mortgage Loan, and
all loans secured by the Mortgaged Property securing such Single-family
Mortgage Loan), and (e) is covered by a Purchase Commitment.
"Subsidiary" means any corporation, association or other business
----------
entity in which more than fifty percent (50%) of the total voting power or
shares of stock entitled to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Tangible Net Worth" means, with respect to any Person at any date,
------------------
the sum of the total shareholders' equity in such Person (including capital
stock, additional paid-in capital, and retained earnings, but excluding
treasury stock, if any), on a consolidated basis; less the aggregate book
value of all intangible assets of such Person (as determined in accordance
with GAAP), including without limitation, goodwill, trademarks, trade
names, service marks, copyrights, patents, licenses, franchises, and
Servicing Rights, each to be determined in accordance with GAAP consistent
with those applied 'in the preparation of the financial statements referred
to in Section 5.3 hereof; provided that, for purposes of this Agreement,
there shall be excluded from total assets, advances or loans to
shareholders, officers or Affiliates, investments in Affiliates, assets
pledged to secure any liabilities not included in the Debt of such Person
and those other assets which would be deemed by HUD to be non-acceptable in
calculating adjusted net worth in accordance with its requirements in the
Audit Guide for Audit of Approved Non-Supervised Mortgagees", as in effect
as of such date.
"Termination Date" means [*] or such earlier date upon which Lender's
----------------
obligation to fund shall be terminated pursuant to the terms of this
Agreement.
"Tribunal" means any court or governmental department commission,
--------
board, bureau, agency, or instrumentality of any state, commonwealth,
nation, territory,
[*] Confidential Treatment Requested
11
possession, county, parish, or municipality, whether now or hereafter
constituted and/or existing.
"VA" means the Veterans Administration and any successor thereto.
--
"VA Loan" means a Single-family Mortgage Loan, payment of which is
-------
partially or completely guaranteed by the VA under the Servicemen's
Readjustment Act of 1944 or Chapter 37 of Title 38 of the United States
Code or with respect to which there is a current binding and enforceable
commitment for such a guaranty issued by, the VA.
"Wet Settlement Advance" means a disbursement by the Lender under the
----------------------
Commitment and pursuant to Section 2.2(a) of this Agreement in respect of
the closing or settlement of a Single-family Mortgage Loan, in anticipation
of and pending subsequent delivery and examination of the Collateral
Documents as provided in Section II of Exhibit "C".
-----------
"Year 2000 Issue" means the failure of computer software, hardware,
---------------
and firmware systems and equipment containing embedded computer chips to
properly receive, transmit, process, manipulate, store, retrieve, re-
transmit or in any other way utilize data and information due to the
occurrence of the, year 2000 or the inclusion of dates on or after January
1, 2000.
1.2 Other Definitional Provisions.
-----------------------------
(a) Accounting terms not otherwise defined herein shall have the
meanings given the terms under GAAP.
(b) Defined terms may be used in the singular or the plural, as the
context requires.
2. THE CREDIT.
2.1 The Commitment.
--------------
(a) Subject to the terms and conditions of this Agreement and provided
no Default or Event of Default has occurred and is continuing, the Lender
agrees, from time to time during the period from the date hereof to and
including the Termination Date, to make Advances to the Company, provided
the sum of the total aggregate principal amount outstanding at any one time
of all such Advances plus the aggregate Purchase Prices of all Securities
which have not been repurchased by the Company under the Master Repurchase
Agreement shall not exceed TEN MILLION AND NO/100 DOLLARS
($10,000,000.00). The obligation of the Lender to make Advances hereunder
up to such limit is hereinafter referred to as the "Commitment." Within the
Commitment, the Company may borrow, repay and reborrow. All Advances under
this Agreement shall constitute a single indebtedness, and all of the
Collateral shall be
12
security for the Note and for the performance of all the Obligations of the
Company to the Lender. Notwithstanding anything contained herein to the
contrary or otherwise, each purchase of Securities by the Lender under the
Master Repurchase Agreement will automatically reduce by the amount of the
purchase price for such Securities, dollar for dollar, the principal amount
available to be borrowed within the Commitment for so long as that purchase
is outstanding under the Master Repurchase Agreement.
(b) Advances shall be used by the Company solely for the purpose of
funding the acquisition or origination of Eligible Mortgage Loans, as
specified in the Advance Request and none other, and shall be made at the
request of the Company in the manner hereinafter provided in Section 2.2,
against the pledge of such Mortgage Loans and such other collateral as is
set forth in Section 3.1 hereof as Collateral therefor. Advances shall
also be subject to the following restrictions:
(1) No Advance shall be made against Mortgage Loans which are not
Eligible Mortgage Loans.
(2) The aggregate amount of Wet Settlement Advances outstanding
at any one time shall not exceed [*].
(3) The aggregate amount of Advances against Second Mortgage
Loans outstanding at any one time shall not exceed [*].
(4) The aggregate amount of Advances against Aged Mortgage Loans
outstanding at any one time shall not exceed [*].
(c) No Advance against an Eligible Mortgage Loan shall exceed an
amount equal to [*] of the Collateral, Value of such
Mortgage Loan, to be determined as of the date such Mortgage Loan is
pledged to Lender.
2.2 Procedures for Obtaining Advances.
---------------------------------
(a) The Company may obtain an Advance hereunder subject to the
following:
(1) The Company may obtain an Advance hereunder, subject to the
satisfaction of the conditions set forth in Sections 4.1 and 4.2
hereof, upon compliance with the procedures set forth in this Section
2.2 and in Exhibit "C" attached hereto and made a part hereof Requests
-----------
for Advances shall be initiated by the Company (i) by delivering to
the Lender and its designee, by telecopy (with original to be sent
immediately thereafter by overnight mail) a completed and signed
request for an Advance (an "Advance Request") in the form of Exhibit
-------
"A", attached hereto and made a part hereof, or (ii) by using the
---
[*] Confidential Treatment Requested
13
electronic data transmission service provided by the Lender and its
licensor, MBMS Incorporated, to transmit to the Lender a request for
Advance ("Electronic Request"), which shall include all information
required by Exhibit "A" through the Warehouse Management System
-----------
software provided by the Lender and its licensor, MBMS Incorporated.
The Lender shall have the right, on not less than three (3) Business
Days' prior notice to the Company, to modify the Advance Request,
Electronic Request, or any exhibits hereto to conform to current legal
requirements or Lender practices, and, as so modified, said Advance
Request, Electronic Request or exhibits shall be deemed a part hereof
In consideration of the Lender permitting the Company to make
Electronic Requests for Advances utilizing the Warehouse Management
System software or Advance Requests by telecopy, the Company covenants
and agrees to assume liability for and to protect, indemnify and save
the Lender harmless from, any and all liabilities, obligations,
damages, penalties, claims, causes of action, costs, charges and
expenses, including attorneys' fees and expenses of employees, which
may be imposed, incurred by or asserted against the Lender by reason
of any loss, damage or claim howsoever arising or incurred because of,
out of or in connection with (i) any action of the Lender pursuant to
Electronic Requests or Advance Requests by telecopy, (ii) the breach
of any provisions of this Agreement by the Company, (iii) the transfer
of funds pursuant to such Electronic Requests or Advance Requests by
telecopy, or (iv) the Lender's honoring or failing to honor any
Electronic Request or Advance Request by telecopy for any reason or no
reason whatsoever. The Lender is entitled to rely upon and act upon
Electronic Requests or Advance Requests by telecopy, and the Company
shall be unconditionally and absolutely estopped from denying (x) the
authenticity and validity of any such transaction so acted upon by the
Lender once the Lender has advanced funds and has deposited or
transferred such funds as requested in any such Electronic Request or
Advance Request by telecopy, and (y) the Company's liability and
responsibility therefor.
(2) In the case of any Wet Settlement Advances, the Company shall
follow the procedures and, at or prior to the Lender's making of such
Wet Settlement Advance, shall deliver to the Lender or its designee
the documents set-forth in Section 11 of Exhibit "C" hereto. In case
-----------
of Collateral financed through a Wet Settlement Advance, the Company
shall cause all Collateral Documents to be delivered to the Lender or
its designee within five (5) Business Days after the date of the Wet
Settlement Advance relating thereto.
(3) Before funding, the Lender and its designee shall have a
reasonable time to examine such Advance Request and the Collateral
Documents to be delivered prior to such requested Advance, as set
forth in the applicable Exhibit hereto, and may reject such of them as
do not meet the requirements of this Agreement or of the related
Purchase Commitment. The Advance Request and the Collateral Documents
must be received by Lender no later than 2:00 p.m. Houston, Texas time
in order for funding to occur the same day.
14
(b) To make an Advance, the Lender shall credit the Funding Account
upon compliance by the Company with the terms of this Agreement.
2.3 Note. The Company's obligation to pay the principal of, and interest
----
on, all Advances made by the Lender shall be evidenced by a promissory note (the
"Note") of the Company dated as of the date hereof, in form of Exhibit "N"
-----------
hereto. The term "Note" shall include all extensions, renewals and
modifications of the Note and all substitutions therefor. All terms and
provisions of the Note are hereby incorporated herein.
2.4 Interest.
--------
(a) (1) Except as provided in Section 2.4(c) below, the unpaid
amount of each Advance against Mortgage Loans that are not Aged
Mortgage Loans shall bear interest from the date of such Advance until
paid in full, at a rate of interest equal to the lesser of (i) the
Maximum Rate, or (ii) [*] (the "Floating Rate") [*] provided, however,
that the unpaid portion of Advances against Mortgage Loans (excluding
Aged Mortgage Loans) equal to Net Investable Balances shall bear
interest at the rate of [*].
(2) Except as provided in Section 2.4(c) below, the unpaid amount
of each Advance outstanding against Aged Mortgage Loans shall bear
interest from the date such Mortgage Loans become Aged Mortgage Loans
until such Advance is paid in full at a rate of interest equal to the
lesser of (i) the Maximum Rate or (ii) a fluctuating rate of interest
which is equal to [*] per annum over, the Monthly Average LIBOR Rate.
(3) Notwithstanding the foregoing, provided that, the Company
achieves a minimum Adjusted Tangible Net Worth [*] the interest rates
set forth in Section 2.4(a)(1) and (2) above shall be reduced [*]
effective on the first (1st) day of the first (1st) calendar month
following the Company's satisfactory achievement of the [*] minimum
Adjusted Tangible Net Worth requirement [*].
(b) Interest shall be computed on the basis of a 360-day year and
applied to the actual number of days elapsed in each interest calculation
period and shall be payable monthly in arrears, on the first day of each
month, commencing with the first month following the date of this
Agreement, and ending on Termination Date.
(c) Obligations not paid when due (whether at stated maturity, upon
acceleration following the occurrence of an Event of Default or otherwise)
shall bear interest, from the date due until paid in full, at a rate of
interest ("Default Rate") at all times equal to the lesser of (i) [*] or
(ii) the Maximum Rate, said interest to be payable on demand by Lender.
[*] Confidential Treatment Requested
15
2.5 Principal Payments.
------------------
(a) The outstanding unpaid principal amount of all Advances shall be
payable in full upon [*].
(b) The Company shall have the right to prepay the outstanding
Advances in whole or in part from time to time, without premium or penalty,
subject to the Company's obligation to pay the Non-Usage Fee pursuant to
Section 2.8 hereof.
(c) The Company shall be obligated to pay to the Lender, without the
necessity of prior demand or notice from the Lender, and the Company
authorizes the Lender to charge the Funding Account or any other accounts
of the Company (excluding any monies held by Company in trust for third
parties) in Lender's possession for the amount of any outstanding Advance
against a specific Mortgage Loan, upon the earliest occurrence of any of
the following events:
(1) The expiration of [*] from the date of any Advance for any
Mortgage Loan (excluding Aged Mortgage Loans);
(2) The expiration of [*] from the date the Mortgage Loan was
delivered to an Investor for examination and purchase, without the
purchase being made, or upon rejection of the Mortgage Loan as
unsatisfactory by an Investor;
(3) The expiration of [*] from the date Mortgage Loan is delivered
to the certificating custodian acceptable to the Lender for the
issuance of a Mortgage-backed Security;
(4) The expiration of [*] Business Days from the date a Wet
Settlement Advance was made without receipt of all Collateral
Documents relating to such Mortgage Loan, or such Collateral
Documents, upon examination by the Lender, are found not to be in
compliance with the requirements of this Agreement or the related
Purchase Commitment;
(5) The expiration of [*] calendar days from the date a Collateral
Document in connection with such Mortgage Loan was delivered to the
Company for correction or completion, without being returned to the
Lender, corrected or completed;
(6) The Mortgage Loan is not or ceases to be an Eligible Mortgage
Loan;
(7) The expiration of [*] Business Days after the date on which
the related Purchase Commitment, if any, expires, is terminated or
otherwise
[*] Confidential Treatment Requested
16
canceled or no longer in full force and effect and the specific
Mortgage Loan was not delivered under the Purchase Commitment prior to
such termination, expiration or cancellation;
(8) Upon sale of the Mortgage Loan.
Upon receipt of such payment by the Lender, such Mortgage Loans or
Mortgage-backed Securities shall be considered to have been redeemed from
pledge, and the Collateral Documents relating thereto which have not been
delivered to the Investor or the pool custodian or pool trustee shall be
released by the Lender to the Company.
(d) With respect to Aged Mortgage Loans, the Company shall be
obligated to pay to the Lender (and the Company authorizes the Lender to
charge the Funding Account or any other accounts of the Company [excluding
monies held by the Company in trust for third parties] in Lender's
possession for the payment thereof) the principal payments in the amounts
and on the dates specified below:
(1) On the date a Pledged Mortgage becomes an Aged Mortgage Loan,
a principal payment in an amount necessary to reduce the outstanding
unpaid Advances made against such Aged Mortgage Loan to an amount
equal to [*] of the Collateral Value of such Aged Mortgage Loan;
(2) On the date an Aged Mortgage Loan has been included in the
Collateral for [*] (computed from the date such Aged Mortgage Loan was
originally pledged to the Lender), a principal payment in an amount
necessary to reduce the outstanding unpaid Advances made against such
Aged Mortgage Loan to an amount equal to [*] of the Collateral Value
of such Aged Mortgage Loan;
(3) On the date an Aged Mortgage Loan has been included in the
Collateral for [*] (computed from the date such Aged Mortgage Loan was
originally pledged to the Lender), a principal payment in an amount
necessary to reduce the outstanding unpaid Advances made against such
Aged Mortgage Loan to an amount equal to [*] of the Collateral Value
of such Aged Mortgage Loan;
(4) On the date an Aged Mortgage Loan has been included in the
Collateral for [*] (computed from the date such Aged Mortgage
Loan was originally pledged to the Lender), an amount equal to the
[*] against such Aged Mortgage Loan.
2.6 Expiration of Commitment. Unless extended or terminated earlier as
------------------------
permitted hereunder, the Commitment shall expire of its own term, and without
the necessity of action by the Lender, at the close of business on the
Termination Date. However, the remainder of this Agreement shall remain in full
force and effect until all amounts due on the Obligations have
[*] Confidential Treatment Requested
17
been paid in full. The Lender has not made, and does not hereby make, any
commitment to renew, extend, rearrange or otherwise refinance the outstanding
and unpaid principal of the Note or accrued interest thereon. In the event,
however, the Lender from time to time renews, extends, rearranges, increases
and/or otherwise refinances any portion or all of any Obligation and any accrued
interest thereon at any time, such refinancing shall be evidenced by an
appropriate promissory note in form and substance satisfactory to the Lender
and, unless otherwise noted or modified at such time or times by the terms of
such promissory note or any agreements executed in connection therewith, any
such promissory note or notes and refinancing evidenced thereby shall be
governed in all respects by the terms of this Agreement.
2.7 Method of Making Payments. Except as otherwise specifically provided
-------------------------
herein, all payments hereunder shall be made to the Lender not later than the
close of business (Houston time) on the date when due unless such date is a non-
Business Day, in which case, such payment shall be due on the first Business Day
thereafter, and shall be made in lawful money of the United States of America in
immediately available funds.
2.8 Non-Usage Fee. At the end of each month during the term of this
-------------
Agreement (i.e., from its effective date through the Termination Date), the
-----
Lender shall determine average usage of the Commitment by calculating the
arithmetic daily average of the outstanding balance of Advances in that month.
The Lender shall then subtract the average usage (the "Unused Portion") from the
--------------
Commitment (the result being called the "Unused Portion") and the Company shall
--------------
pay in arrears (without duplication of payment), on or before five (5) days
after the later of (a) the end of each month or (b) the Company's receipt of the
Lender's xxxx for such monthly period, a Non-Usage Fee equal to [*] on the total
amount of the Unused Portion of the Commitment for that month, as compensation
to the Lender for its agreement to make the Commitment available to the Company
during that month and not as compensation for the use, forbearance or detention
of money (i.e., as a "true commitment fee" under Texas law); provided that such
------ --------
fee shall be waived for any month if the Unused Portion for such month is [*] of
the Commitment. Each calculation by the Lender of the amount of any Non-Usage
Fee shall be conclusive and binding on the Company, absent manifest error.
2.9 Miscellaneous Charges. At the end of each month during the term of
---------------------
this Agreement, the Company shall pay to the Lender in arrears on or before five
(5) days after the later of (a) the end of each calendar month or (b) the
Company's receipt of the Lender's xxxx for such monthly period, a transaction
fee equal to [*] per Pledged Mortgage held by Lender during such month and for
which Lender has not previously received a transaction fee, for the handling and
administration of Advances and Collateral. For the purposes hereof, Company
shall, at its sole cost and expense, pay all miscellaneous charges and expenses
incurred by the Lender in connection with the handling and administration of
Advances and Collateral, including, without limitation, all charges for security
delivery fees, wiring fees, and charges for overnight delivery of Collateral to
Investors. Miscellaneous charges are due when incurred, but shall not be
delinquent if paid within ten (10) days after receipt of an invoice or an
account analysis statement from the Lender.
[*] Confidential Treatment Requested
18
2.10 Bailee. Lender appoints Company and Company shall act as its bailee to
------
(i) hold in trust for Lender (A) the original recorded copy of the mortgage,
deed of trust, or trust deed securing each Pledged Mortgage, (B) a mortgagee
policy of title insurance (or binding unexpired and unconditional commitment to
issue such insurance if the policy has not yet been delivered to Company)
insuring the Company's perfected, first priority Lien created b, that mortgage,
deed of trust, or trust deed, (C) the original insurance policies for each
Pledged Mortgage, and (D) all other original documents relating to each Pledged
Mortgage, including any promissory notes, any other loan documents, and
supporting documentation, surveys, settlement statements, closing instructions,
and Mortgage-backed Securities, and (ii) deliver to Lender any of the foregoing
items as soon as reasonably practicable upon Lender's request.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of the Note
--------------------------
and for the performance of all of the Company's Obligations hereunder, the
Company hereby assigns and transfers all right, title and interest in and to and
grants a security interest to the Lender in the following described property,
whether now owned or hereafter acquired (the "Collateral"):
(a) All Mortgage Loans including all Mortgage Notes and Mortgages
evidencing such Mortgage Loans including without limitation all Mortgage
Loans in respect of which Wet Settlement Advances have been made by the
Lender, which from time to time are delivered or caused to be delivered to
the Lender or its designee, come into the possession, custody or control of
the Lender for the purpose of assignment or pledge or in respect of which
an Advance has been made by the Lender hereunder (the "Pledged Mortgages").
(b) All Mortgage-backed Securities which are from time to time
delivered or caused to be delivered to, or are otherwise in the possession
of the Lender, or-its designee, its agent, bailee or custodian as assignee
or pledged to the Lender, or for such purpose are registered by book-entry
in the name of the Lender (the "Pledged Securities").
(c) All private mortgage insurance and all commitments issued by the
FHA or VA to insure or guarantee any Mortgage Loans included in the Pledged
Mortgages; all guaranties related to Pledged Securities; all Purchase
Commitments held by the Company covering the Pledged Mortgages or the
Pledged Securities and all proceeds resulting from the sale thereof to
Investors pursuant thereto; all personal property, contract rights,
servicing and servicing fees and income or other proceeds, amounts and
payments payable to the Company as compensation or reimbursement, accounts
and general intangibles of whatsoever kind relating to the Pledged
Mortgages, the Pledged Securities and all other documents or instruments
relating to the Pledged Mortgages, the Pledged Securities, including,
without limitation, any interest of the Company in any fire, casualty or
hazard insurance policies and any awards made by any public body or decreed
by any court of competent jurisdiction for a taking or for degradation of
value in any eminent domain proceeding as the same relate to the Pledged
Mortgages.
19
(d) All right, title and interest of the Company in and to all escrow
accounts, documents, instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records (including all information, records, tapes, data,
programs, discs and cards necessary or helpful in the administration or
servicing of the foregoing Collateral) and other information and data of
the Company relating to the foregoing Collateral.
(e) All now existing or hereafter acquired cash delivered to or
otherwise in the possession of the Lender or its agent, bailee or custodian
or designated on the books and records of the Company as assigned and
pledged to the Lender.
(f) All cash and non-cash proceeds of the foregoing Collateral,
including all dividends, distributions and other rights in connection with,
and all additions to, modifications of and replacements for, the foregoing
Collateral, and all products and proceeds of the foregoing Collateral,
together with whatever is receivable or received when the foregoing
Collateral or proceeds thereof are sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary,
including, without limitation, all rights to payment with respect to any
cause of action affecting or relating to the foregoing Collateral or
proceeds thereof.
3.2 Security Interest in Mortgage-backed Securities. The Company's ability
-----------------------------------------------
to convert Mortgage Loans that are within the Collateral to Mortgage-backed
Securities are subject to the following conditions:
(a) Pledged Mortgages that are to be transferred to a Pool custodian
in connection with the issuance of Mortgage-backed Securities, shall be
released from the Lender's security interest only against payment to the
Lender of the amount due the Lender in connection with such Pledged
Mortgages as determined in accordance with Section 3.5 of this Agreement or
against the issuance of such Mortgage-backed Securities and the
continuation of the Lender's first priority, perfected security interest in
such Mortgage-backed Securities and the proceeds thereof until payment due
the Lender in respect of said Pledged Mortgages is made to the Lender.
(b) In the case of Mortgage-backed Securities created from Pledged
Mortgages, the Lender shall have the exclusive right to the possession of
the Mortgage-backed Securities or, if the Mortgage-backed Securities are
not to be issued in certificated form, shall have the right to have the
book entries for the Mortgage-backed Securities issued in the Lender's name
or the name or names of its designees. Lender shall cause delivery of the
Mortgage-backed Securities to be made to the Investor or the book entries
registered -in the name of the Investor or the Investor's designee only
against payment therefor. The Company acknowledges that the Lender may
enter into one or more standing arrangements with other financial
institutions for the issuance of Mortgage-backed Securities in book entry
form in the name of such other financial institutions, as agent for the
Lender, and the Company agrees upon request of the Lender,
20
to execute and deliver to such other financial institutions the Company's
written concurrence in any such standing arrangements.
3.3 Delivery of Collateral Documents. The Lender or its designee
--------------------------------
exclusively shall deliver Pledged Mortgages or Pledged Securities to (a) an
Investor that has issued a Purchase Commitment with respect thereto for its
examination and purchase, or (b) an Approved Custodian for purposes of
examination or delivery in connection with the issuance of Mortgage-backed
Securities. In such cases where the Lender must deliver documents to an Investor
or Approved Custodian, the Lender must receive signed shipping instructions (in
the form of Exhibit "D" attached hereto), no later than 2:00 p.m. Houston,
-----------
Texas time one (1) Business Day prior to the expiration of the appended
Purchase Commitment, in addition to any other documents listed in Section III of
Exhibit "C" in respect of the issuance of Mortgage-backed Securities. If
-----------
shipping instructions are received by Lender before 2:00 p.m. Houston, Texas
time of any Business Day, Lender will ship the documents together with the
Bailee Letter (in form of Exhibit "K") to the Investor or Approved Custodian on
-----------
the same Business Day, otherwise Lender will ship the documents, the next
Business Day following receipt of shipping instructions. In any case in which an
Advance has been made hereunder against Pledged Mortgages, based on the
existence of a Purchase Commitment covering such Pledged Mortgages, the Company
agrees that such Pledged Mortgages will not be placed in any mortgage pool other
than an Eligible Mortgage Pool, unless such Pledged Mortgages have been redeemed
from pledge as permitted hereunder or other arrangements, satisfactory to the
Lender in its sole discretion, have been made for the redemption of such Pledged
Mortgages from pledge hereunder. The Lender may deliver any document relating to
the Collateral to the Company for correction or completion against a trust
receipt in the form of Exhibit "E" attached hereto executed by the Company.
-----------
The Company hereby represents and warrants to and agrees with the Lender that
any request by the Company for release of the Collateral consisting of or
relating to Mortgage Loans to the Company shall be solely for the purposes of
correcting clerical or non-substantial documentation problems in preparation for
returning such Collateral to the Lender for ultimate sale or exchange and the
aggregate Collateral Value of the Collateral released to the Company pursuant to
this Section 3.3 will not exceed [*]; the Company shall request such
release in compliance with all of the terms and conditions of such release set
forth herein; and the Company will return to the Lender such documentation
released to the Company pursuant to this Section 3.3 within ten (10) calendar
days after such delivery.
3.4 Delivery of Additional Collateral or Mandatory Prepayment. At any time
---------------------------------------------------------
that the aggregate Collateral value of the Collateral then pledged hereunder is
less than the aggregate amount of the Advances then outstanding hereunder, the
Lender may request, and the Company shall within two (2) Business Days after
Notice by the Lender (a) deliver to the Lender or its designee for pledge
hereunder additional Mortgage Loans and/or cash, in aggregate amounts sufficient
to cover the difference between the Collateral Value of the Collateral pledged
and the aggregate amount of Advances outstanding hereunder, or (b) repay the
Advances in an amount sufficient to reduce the aggregate balance thereof
outstanding to an amount equal to or below the Collateral Value of the
Collateral pledged hereunder. If at any time or from time to time any of the
limitations of Section 2.1 hereof are exceeded, the Company shall immediately
pay to the Lender the amount of such excess for application to the principal
balance of the Note.
[*] Confidential Treatment Requested
21
3.5 Right of Redemption from Pledge. So long as no Event of Default has
-------------------------------
occurred, the Company may redeem a Mortgage Loan or Mortgage-backed Security, by
notifying the Lender of its intention to redeem such Mortgage Loan or Mortgage-
backed Security, from pledge and by paying, or causing an Investor to pay, to
the Lender, for application to prepayment of the principal balance of the Note,
an amount (the "Redemption Amount") equal to the Collateral Value of the
Mortgage Loan or Mortgage-backed Security, to be released as of the date of such
application, but, in no event less than the amount of the outstanding, unpaid
Advances made with respect to or relating to such Mortgage Loan or Mortgage-
backed Security.
3.6 Collection and Servicing Rights. So long as no Event of Default shall
-------------------------------
have occurred, the Company shall be entitled to service and receive and collect
directly all sums payable to the Company in respect of the Collateral other than
proceeds of any Purchase Commitment or proceeds of the sale of any Collateral.
Following the occurrence of any Event of Default, the Lender or its designee
shall thereafter be entitled to service and receive and collect all sums payable
to the Company in respect of the Collateral, and in such case (a) the Lender or
its designee in its discretion may, in its own name or in the name, of the
Company or otherwise, demand, xxx for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for any of the.
Collateral, but shall be under no obligation to do so, (b) the Company shall, if
the Lender so requests, forthwith pay to the Lender at its principal office all
amounts thereafter received by the Company upon or in respect of any of the
Collateral, advising the Lender as to the source of such funds, and (c) all
amounts so received and collected by the Lender shall be held by it as part of
the Collateral.
3.7 Return or Release of Collateral at End of Commitment. If (a) the
----------------------------------------------------
Commitment shall have expired or been terminated, and (b) no Advances, interest
or other Obligations evidenced by the Loan Documents or due under this Agreement
shall be outstanding and unpaid, the Lender shall deliver or release all
Collateral in its possession to the Company. The receipt of the Company for any
Collateral released or delivered to the Company pursuant to any provision of
this Agreement shall be a complete and full acquittance for the Collateral so
returned, and the Lender shall thereafter be discharged from any liability or
responsibility therefor.
3.8 Master Repurchase Agreement. If the Lender purchases any Pledged
---------------------------
Mortgages under the Master Repurchase Agreement the Purchase Price to be paid by
the Lender for such Pledged Mortgage under the Master Repurchase Agreement shall
be credited against the Note in an amount equal to the outstanding Advance made
against such Pledged Mortgage and the balance of the Purchase Price after such
application, if any, shall be paid to the Company. Any Pledged Mortgage shall be
eligible for purchase by Lender under the Master Repurchase Agreement
following, delivery of such Pledged Mortgage to the Investor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the initial
---------------
Advance under this Agreement is subject to the satisfaction, in the sole
discretion of the Lender, on or before the date thereof, of the following
conditions precedent:
22
(a) The Lender shall have received the following, all of which must
be satisfactory in form and content to the Lender, in its sole discretion:
(1) The Loan Documents dated as of the date hereof duly executed by
the Company;
(2) Certified copies of the Company's articles of incorporation and
bylaws and certificates of good standing dated no less recently than ninety
(90) days prior to the date of this Agreement and a certification from the
taxing authority of the state of incorporation stating that the Company is
in good standing with said taxing authority;
(3) An original resolution of the board of directors of the Company,
certified as of the date of this Agreement by its corporate secretary,
authorizing the execution, delivery and performance of this Agreement and
the other Loan Documents, and all other instruments or documents to be
delivered by the Company pursuant to this Agreement;
(4) A certificate (in the form of Exhibit "J") of the Company's
-----------
corporate secretary as to the resolution of the board of directors of the
Company authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents and the incumbency and authenticity
of the signatures of the officers of the Company executing this Agreement
and the other Loan Documents and each Advance Request and all other
instruments or documents to be delivered pursuant hereto (the Lender being
entitled to rely thereon until a new such certificate has been furnished to
the Lender);
(5) Financial statements of the Company (and its Subsidiaries, on a
consolidated basis) containing a balance sheet as of December 31, 1998 (the
"Statement Date") and related statements of income, changes in
stockholders, equity and cash flows for the period ended on the Statement
Date and a balance sheet as of April 30, 1999 ("Interim Date") and related
statement of income for the period ended on the Interim Date, all prepared
in accordance with GAAP applied on a basis consistent with prior periods
and in the case of the statements as of the Statement Date, audited by
independent certified public accountants of recognized standing acceptable
to the Lender;
(6) A favorable written opinion of counsel to the Company, dated as
of the date of this Agreement, to be in substantially the form of
Exhibit "M" hereto, and addressed to the Lender;
-----------
(7) A tax, lien and judgment search of the appropriate public records
for the Company, including a search of Uniform Commercial Code financing
statements, which search shall not have disclosed the existence of any
prior Lien on the Collateral other than in favor of the Lender or as
permitted hereunder;
23
(8) Copies of the certificates, documents or other written
instruments which evidence the Company's eligibility described in Section
5.11 hereof, all in form and substance satisfactory to the Lender;
(9) Copies of the Company's errors and omissions insurance policy or
mortgage impairment insurance policy and blanket bond coverage policy, all
in form and content satisfactory to the Lender, showing compliance by the
Company as of the date of this Agreement with the related provisions of
Section 6.8 hereof and showing Lender as an additional loss payee on such
policies;
(10) Executed financing statements in recordable form covering the
Collateral and ready for filing in all jurisdictions required by the
Lender;
(11) Evidence that the Funding Account has been established with the
Lender.
4.2 Each Advance. The obligation of the Lender to make the initial and
------------
each subsequent Advance under this Agreement is subject to the satisfaction, in
the sole discretion of the Lender, as of the date of each such Advance, of the
following additional conditions precedent:
(a) In connection with an Advance, the Company shall have delivered
to the Lender 'the Advance Request or the Electronic Request, Collateral
Documents, and documents required under and shall have satisfied the
procedures set forth in Section 2.2 and Exhibit "C". All items delivered
-----------
to the Lender or its designee shall be satisfactory to the Lender in form
and content, and the Lender may reject such of them as do not meet the
requirements of this Agreement or of the related Purchase Commitment.
(b) The Lender shall have received evidence satisfactory to it as to
the making mid/or continuation of any book entry or the due filing and
recording in all appropriate offices of all financing statements and other
instruments as may be necessary to perfect the security interest of the
Lender in the Collateral under the Uniform Commercial Code of Texas or
other applicable law.
(c) The representations and warranties of the Company contained in
Article 5 hereof shall be accurate and complete in all material respects as
if made on and as of the date of each Advance.
(d) The Company shall have performed all agreements to be performed
by it hereunder, including without limitation, the payment of all Non-Usage
Fees when due hereunder, and, as of the date of the Advance Request, and
after giving effect to the requested Advance, there shall exist no Default
or Event of Default hereunder.
(e) The Company shall not have incurred any material liabilities,
direct or contingent, except as approved by Lender pursuant to Section
7.17, since the dates of the Company's most recent financial statements
theretofore delivered to the Lender.
24
(f) The Lender shall have received from counsel for the Company, if
requested by the Lender in its sole discretion, an updated opinion, in form
and substance satisfactory to the Lender, addressed to the Lender and dated
as of the date of such Advance, covering such of the matters as the Lender
may reasonably request.
(g) Such additional documents, instruments, and information as Lender
or its legal counsel may require, including, without limitation, all
documents, instruments and information required pursuant to Section 4.1 of
this Agreement.
Acceptance of the proceeds of the requested Advance by the Company shall be
deemed a representation by the Company that all conditions set forth in this
Article 4 shall have been satisfied as of the date of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Lender, as of the date of
this Agreement and (unless otherwise notified in writing by the Company and
Lender, in its sole discretion, approves in writing) as of the date of each
Advance Request and the making of each Advance, that:
5.1 Organization, Good Standing, Subsidiaries. The Company and each
-----------------------------------------
Subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, has
the full legal power and authority to own its property and to carry on its
business as currently conducted and is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction in which the
transaction of its business makes such qualification necessary, except in
jurisdictions, if any, where a failure to be in good standing has no material
adverse effect on the business, operations, assets or financial condition of the
Company or any such Subsidiary. For the purposes hereof, good standing shall,
include qualification for any and all licenses and payment of any and all taxes
required in the jurisdiction of its incorporation and in each jurisdiction in
which the Company transacts business. The Company has no Subsidiaries except as
set forth on Exhibit "G" hereto. Exhibit "G" sets forth with respect to each
----------- -----------
such Subsidiary, its name, address, place of incorporation, each state in which
it is qualified as a foreign corporation, and the percentage ownership of the
Company in such Subsidiary.
5.2 Authorization and Enforceability. The Company has all requisite
--------------------------------
corporate power and authority to execute, deliver, create, issue, comply and
perform this Agreement, the Note and all other Loan Documents to which the
Company is party and to make the borrowings hereunder. The execution, delivery
and performance by the Company of this Agreement, the Note and all other Loan
Documents to which the Company is party and the making of the borrowings
hereunder and thereunder, have been duly and validly authorized by all necessary
corporate action on the part of the Company (none of which actions has been
modified or rescinded, and all of which actions are in full force and effect)
and do not and will not conflict with or violate any provision of law or of the
articles of incorporation or by-laws of the Company, conflict with or
25
result in a breach of or constitute a default or require any consent under any
contracts to which Company is a party, or result in the creation of any Lien
upon any property or assets of the Company other than the Lien on the Collateral
granted hereunder, or result in or require the acceleration of ;any Indebtedness
of the Company pursuant to any agreement, instrument or indenture to which the
Company is a party or by which the Company or its property may be bound or
affected. This Agreement, the Note and all other Loan Documents contemplated
hereby or thereby constitute legal, valid, and binding obligations of the
Company, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other such laws affecting the enforcement
of creditors' rights generally.
5.3 Financial Condition. The balance sheet of the Company provided to
-------------------
Lender pursuant to Section 4.1(a)(5) hereof (and if applicable, its
Subsidiaries, on a consolidating and consolidated basis) as at the Statement
Date, and the related statements of income, changes in stockholders' equity, and
cash flows for the fiscal year ended on the Statement Date, heretofore furnished
to the Lender, fairly present the financial condition of the Company and its
Subsidiaries as at the Statement Date and the Interim Date and the results of
its and their operations for the fiscal period ended on the Statement Date and
the Interim Date. The Company had, on the Statement Date and the Interim Date,
no known material liabilities, direct or indirect, fixed or contingent, matured
or unmatured, or liabilities for taxes, long-term leases or unusual forward or
long-term commitments not disclosed by, or reserved against in, said balance
sheet and related statements, and at the present time there are no material
unrealized or anticipated losses from any loans, advances or other commitments
of the Company except as heretofore disclosed to the Lender in writing. Said
financial statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved. Since the Statement Date,
there has been no material adverse change in the business, operations, assets or
financial condition of the Company or its Subsidiaries, nor is the Company aware
of any state of facts particular to the Company which (with or without notice or
lapse of time or both) would or could result in any such material adverse
change.
5.4 Litigation. Except as disclosed on Exhibit "H", there are no actions,
---------- -----------
claims, suits or proceedings pending, or to the knowledge of the Company,
threatened or reasonably anticipated against or affecting the Company or any
Subsidiary of the Company in any court or before any arbitrator or before any
government commission, board, bureau or other administrative agency which, if
adversely determined, may reasonably be expected to result in any material and
adverse change in the business, operations, assets or financial condition of the
Company or any of Company's Subsidiaries, as a whole.
5.5 Compliance with Laws. To the knowledge of Company, neither the
--------------------
Company nor any Subsidiary of the Company is in violation of any provision of
any law, or of any judgment, award, rule, regulation, order, decree, writ or
injunction of any court or public regulatory body or authority which might have
a material adverse effect on the business, operations, assets or financial
condition of the Company or any of Company's Subsidiaries, as a whole.
5.6 Regulation U. The Company is not engaged principally, or as one of its
------------
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin
26
Stock, and no part of the proceeds of any Advances made hereunder will be used
to purchase or carry any Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock.
5.7 Investment Company Act. Neither the Company nor any of its
----------------------
Subsidiaries is an "investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
5.8 Agreements. Neither the Company nor any Subsidiary of the Company is a
----------
party to any agreement, instrument or indenture, or subject to any restriction,
materially and adversely affecting its business, operations, assets or financial
condition, except as disclosed in the financial statements described in Section
5.3 hereof The Company and each Subsidiary of the Company are not in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions, contained in any agreement, instrument, or indenture which
default could have a material adverse effect on the business, operations,
properties or financial condition of the Company as a whole. No holder of any
Indebtedness of the Company or of any of its Subsidiaries has given notice of
any alleged default thereunder or, if given, the same has been cured or will be
cured by Company within the cure period provided therein, and no liquidation or
dissolution of the Company or any of its Subsidiaries and no receivership,
insolvency, bankruptcy, reorganization or other similar proceedings relative to
the Company or any of its Subsidiaries or any of their respective properties is
pending, or to the knowledge of the Company, threatened.
5.9 Title to Properties. The Company and each Subsidiary of the Company
-------------------
has good, valid, insurable (in the case of real property) and marketable title
to all of its properties and assets (whether real or personal, tangible or
intangible) reflected on the financial statements described in Section 5.3
hereof, and all such properties and assets are free and clear of all Liens
except as disclosed in such financial statements and not prohibited under this
Agreement.
5.10 ERISA. All plans ("Plans") of a type described in Section 3(3) of
-----
ERISA in respect of which the Company or any Subsidiary of the Company is an
"Employer," as defined in Section 3(5) of ERISA, are in substantial compliance
with ERISA, and none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Internal Revenue Code, and neither the Company nor any Subsidiary of the
Company has incurred any material liability (including any material contingent
liability) to or on account of any such Plan pursuant to Sections 4062, 4063,
4064, 4201 or 4204 of ERISA, and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a material risk
to the Company or a Subsidiary of the Company of incurring a liability to or on
account of any such Plan pursuant to any of the foregoing Sections of ERISA. No
Plan or trust forming a part thereof has been terminated since December 1, 1974.
5.11 Eligibility. The Company has all requisite corporate power and
-----------
authority and all necessary licenses, permits, franchises and other
authorizations to own and operate its property and to carry on its business as
now conducted. If approved now or hereafter as a lender or seller/servicer for
any one or more of the governmental agencies as set forth below, the Company
27
will remain at all times approved and qualified and in good standing and meet
all requirements applicable to such status:
(a) FNMA approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to be sold to
FNMA.
(b) FHLMC approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to be sold to
FHLMC.
(c) GNMA approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to be sold to
GNMA.
(d) HUD approved lender, eligible to originate, purchase, hold, sell
and service FHA-insured Mortgage Loans.
(e) VA lender in good standing under the VA loan guarantee program
eligible to originate, purchase, hold, sell, and service VA-guaranteed
Mortgage Loans.
5.12 Special Representations Concerning Collateral. The Company hereby
---------------------------------------------
represents and warrants to the Lender, as of the date of this Agreement and as
of the date of each Advance, that:
(a) The Company is the legal and equitable owner and holder, free and
clear of all Liens (other than Liens granted hereunder), of the Pledged
Mortgages and the Pledged Securities. All Pledged Mortgages, Pledged Securities,
and Purchase Commitments have been duly authorized and validly granted or issued
to the Company, and all of the foregoing items of Collateral comply with all of
the requirements of this Agreement, and have been validly pledged or assigned to
the Lender, subject to no other Liens.
(b) The Company has, and will continue to have, the full right, power
and authority to pledge the Collateral pledged and to be pledged by it
hereunder.
(c) Any Mortgage Loan and related documents included in the Pledged
Mortgages (1) as of the date of the Advance Request for such Mortgage Loan, has
been duly executed and delivered by the parties thereto at a closing held not
more than twenty-five (25) days prior to such date; (2) has been made in
compliance with all requirements of the Real Estate Settlement Procedures Act,
Equal Credit Opportunity Act, the federal Truth-In-Lending Act and all other
applicable laws and regulations; (3) to the Company's knowledge, is valid and
enforceable in accordance with its terms, without defense or offset; (4) has not
been modified or amended except in writing, which writing is part of the
Collateral Documents, nor any requirements thereof waived; and (5) complies with
the terms of this Agreement and, if applicable, with the related Purchase
Commitment held by the Company. Each Mortgage Loan has been fully advanced in
the face amount thereof and each Mortgage creates a Lien on the premises
described therein.
28
(d) No monetary default, nor, to the knowledge of the Company, any event
which, with notice or lapse of time or both, would become a default, has
occurred and is continuing under any Mortgage Loan included in the Pledged
Mortgages; provided, however, that, with respect to Pledged Mortgages which have
already been pledged as Collateral hereunder, if any such default or event has
occurred, the Company will promptly notify the Leader and the same shall not
have continued for more than sixty (60) days.
(e) The Company has complied with all laws, rules and regulations in
respect of the FHA insurance or VA guarantee of each Mortgage Loan included in
the Pledged Mortgages designated by the Company as an FHA insured or VA
guaranteed Mortgage Loans, and such insurance or guarantee is in full force and
effect. All such FHA insured and VA guaranteed Mortgage Loans comply in all
respects with all applicable requirements for purchase under the FNMA standard
form of selling contract for FHA insured and VA guaranteed loans and any
supplement thereto then in effect.
(f) All fire and casualty policies covering Mortgaged Property encumbered
by a Pledged Mortgage (1) name the Company and its successors and assigns as the
insured under a standard mortgagee clause, (2) are and will continue to be in
full force and effect, and (3) afford and will continue to afford insurance
against fire and such other risks as are usually insured against in the broad
form of extended coverage insurance from time to time available, as well as
insurance against flood hazards if the same is required by FHA or VA.
(g) Pledged Mortgages encumbering Mortgaged Property located in a special
flood hazard area designated as such by the Secretary of HUD are and shall
continue to be covered by special flood insurance under the National Flood
Insurance Program.
(h) Each FHA insured Mortgage Loan pledged hereunder meets all applicable
governmental requirements for such insurance. Each Mortgage Loan, against which
an Advance is made on the basis of a Purchase Commitment meets all requirements
of such Purchase Commitment. The Company shall assure that Mortgage Loans
pledged pursuant to this Agreement and intended to be used in the formation of
Mortgage-backed Securities shall comply, or prior to the formation of any such
Mortgage-backed Security, shall comply with the requirements of the governmental
instrumentality, department or agency guaranteeing such Mortgage-backed
Security.
(i) For Pledged Mortgages which will be used to secure GNMA Mortgage-
backed Securities, the Company has received from GNMA a Confirmation Notice or
Confirmation Notices for Request Additional Commitment Authority and for Request
Pool Numbers, and there remains available thereunder a commitment on the part of
GNMA sufficient to permit the issuance of GNMA Mortgage-backed Securities in an
amount at least equal to the amount of such Pledged Mortgages designated by the
Company as the Mortgage Loans to be used to secure such GNMA Mortgage-backed
Securities; each such Confirmation Notice is in full force and effect; each of
such Pledged Mortgages has been assigned by the Company to one of such Pool
Numbers and a portion of the available GNMA Commitment has been allocated
thereto by the Company, in an amount at least equal to the principal amount of
each Mortgage Note secured by
29
such Pledged Mortgages; and each such assignment and allocation has been
reflected in the books and records of the Company.
(j) Each Pledged Mortgage in excess of $250,000.00 is supported by an
appraisal that meets the appraisal requirements of FNMA or FHLMC (in the case of
residential Mortgaged Property), or the Office of Thrift Supervision for the
type of Mortgaged Property securing that Pledged Mortgage; or, alternatively,
such Pledged Mortgage is eligible for purchase or is guaranteed or insured by a
U.S. Government agency or a U.S. Government sponsored enterprises.
5.13 RICO. The Company is not in violation of any laws, statutes or
----
regulations, including, without limitation, RICO, which contain provisions which
could potentially override Lender's security interest in the Collateral.
5.14 Proper Names. The Company does not operate in any jurisdiction under
------------
a trade name, division, division name or name other than those names set forth
on Exhibit "I" attached hereto and all such names included on Exhibit "I" are
----------- -----------
utilized by the Company only in the jurisdictions listed therein.
5.15 Direct Benefit From Loans. The Company has received, or, upon the
-------------------------
execution and funding thereof, will receive (a) direct benefit from the making
and execution of this Agreement and the other Loan Documents to which it is a
party, and (b) fair and independent consideration for the entry into, and
performance of, this Agreement and the other Loan Documents to which it is a
party. Contemporaneously with the disbursements of each Advance by the Lender to
the Company, all such proceeds will be used to finance the origination or
purchase of Eligible Mortgage Loans.
5.16 Loan Documents Do Not Violate Other Documents. Neither the
---------------------------------------------
execution and delivery by the Company of this Agreement or any other Loan
Document to which it is a party nor the consummation of the transactions herein
and therein contemplated, nor the performance of, or compliance with, the terms
and provisions hereof and thereof, does or will contravene, breach or conflict
with any provision of either of its articles of incorporation or by-laws, or any
applicable law, statute, rule or regulation or any judgment, decree, writ,
injunction, franchise, order or permit applicable to the Company or its assets
or properties, or does or will conflict or be inconsistent with, or does or will
result in any breach or default of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of any Lien upon any of the property or assets of the Company
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
or other instrument to which the Company is a party or by which the Company or
any of its property may be bound, the contravention, conflict inconsistency,
breach or default of which will have a materially adverse effect on the
Company's condition, financial or otherwise, or affect its ability to perform,
promptly and fully, its obligations hereunder or under any of the other Loan
Documents.
5.17 Consents Not Required. Except for those consents that have already
---------------------
been obtained and delivered to Lender or required as a condition to any Advance
hereunder, no consent of any Person and no consent, license, permit, approval,
or authorization of, exemption
30
by, or registration or declaration with, any Tribunal is required in connection
with the execution, delivery, performance, validity, or enforceability of this
Agreement or any of the Loan Documents by the Company.
5.18 Material Fact Representations. Neither the Loan Documents nor any
-----------------------------
other agreement, document certificate, or written statement furnished to the
Lender by or on behalf of the Company in connection with the transactions
contemplated in any of the Loan Documents contains any untrue statement of a
material adverse fact. There are no material adverse facts or conditions
relating to the making of the Commitment any of the Collateral, and/or the
financial condition and business of the Company known to the Company which have
not been fully disclosed, in writing, to the Lender, it being understood that
this representation is made as of, and shall be limited to the date of this
Agreement. All writings heretofore or hereafter exhibited or delivered to the
Lender by or on behalf of the Company are and will be genuine and what they
purport to be.
5.19 Place of Business. The principal place of business of the Company is
-----------------
000 Xxxx Xxxxxx, Xxxxx 000, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000, and the chief
executive office of the Company and the office where it keeps its financial
books and records relating to its property and all contracts relating thereto
and all accounts arising therefrom is located at the address set forth for the
Company in Section 9 hereof.
5.20 Use of Proceeds; Business Loans. The Company will use the proceeds of
-------------------------------
the Advances made pursuant to the Commitment solely as follows, and for no other
purpose: finance the origination and purchase of Eligible Mortgage Loans. All
loans evidenced by the Note are and shall be "business loans", as such term is
used in the Depository Institutions Deregulation and Monetary Control Act of
1980, as amended, and such loans are for business or commercial purposes and not
primarily for personal, family, household or agricultural use, as such terms are
used or defined in Texas Finance Code, Regulation Z promulgated by the Board of
Governors of the Federal Reserve System, and Titles I and V of the Consumer
Credit Protection Act. The provisions of the Texas Finance Code which regulate
revolving loans and revolving triparty accounts shall not apply to this
Agreement.
5.21 No Undisclosed Liabilities. Other than as permitted in Section 7.17
--------------------------
hereof, the Company does not have any liabilities or Indebtedness, direct or
contingent, except for liabilities or Indebtedness which, in the aggregate, do
not exceed [*].
5.22 Tax Returns and Payments. All federal, state and local income,
------------------------
excise, property and other tax returns required to be filed with respect to
Company's operations and those of its Subsidiaries in any jurisdiction have been
filed on or before the due date thereof (plus any applicable extensions); all
such returns are true and correct; all taxes, assessments, fees and other
governmental charges upon the Company, and Company's Subsidiaries and upon its
property, income or franchises, which are due and payable have been paid,
including, without limitation, all FICA payments and withholding taxes, if
appropriate, other than those which are being contested in good faith by
appropriate proceedings, diligently pursued and as to which the
[*] Confidential Treatment Requested
31
Company has established adequate reserves determined in accordance with GAAP,
consistently applied. The amounts reserved, as a liability for income and other
taxes payable, in the financial statements described in Section 5.3 hereof are
sufficient for payment of all unpaid federal, state and local income, excise,
property and other taxes, whether or not disputed, of the Company and its
Subsidiaries, accrued for or applicable to the period and on the dates of such
financial statements and all years and periods prior thereto and for which the
Company, and Company's Subsidiaries may be liable in their own right or as
transferee of the assets of, or as successor to, any other Persons
5.23 Subsidiaries. Except as shown on Exhibit "G", the Company has not
------------ -----------
issued, and does not have outstanding, any warrants, options, rights or other
obligations to issue or purchase any shares of its capital stock or other
securities. The outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable. All of
Company's Subsidiaries are listed on Exhibit "G" attached hereto.
-----------
5.24 Holding Company. The Company is not a "holding company" or a
---------------
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
5.25 Year 2000 Issue. The Company and its Subsidiaries have reviewed the
---------------
effect of the year 2000 Issue on the computer software, hardware, and firmware
systems and equipment containing embedded microchips owned or operated by or for
the Company and its Subsidiaries or used or relied upon in the conduct of their
business (including systems and equipment supplied by others or with which such
computer systems of the Company and its Subsidiaries interface). The Company and
its Subsidiaries have reviewed and determined that the costs to the Company and
its Subsidiaries of any reprogramming required as a result of the Year 2000
Issue to permit the proper functioning of such systems and equipment and the
proper processing of data, and the testing of such reprogramming, and of the
reasonably foreseeable consequences of the year 2000 Issue to the Company or any
of its Subsidiaries (including reprogramming errors and the failure of systems
or equipment supplied by others), are not reasonably expected to result in a
Default or Event of Default or to have a material adverse effect on the
business, assets, operations, prospects, or condition (financial or otherwise)
of the Company or its Subsidiaries.
6. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment is
outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or' under any other Loan Document, the Company
shall:
6.1 Payment of Note. Punctually pay or cause to be paid the principal of,
---------------
interest on and all other amounts payable hereunder and under the Note in
accordance with the terms thereof
6.2 Financial Statements and Other Reports. Deliver or cause to be
--------------------------------------
delivered to the Lender:
32
(a) As soon as available and in any event within thirty (30) days
after the end of each calendar month, statements of income and changes in
stockholders' equity and cash flow of the Company and, if applicable,
Company's Subsidiaries, on a consolidated and consolidating basis for the
immediately preceding month, and related balance sheet as at the end of the
immediately preceding month, all in reasonable detail, prepared in
accordance with GAAP applied on a consistent basis, and certified as to the
fairness of presentation by the president and chief financial officer of
the Company, subject, however, to year-end audit adjustments.
(b) As soon as available and in any event within ninety (90) days
after the close of each fiscal year: statements of income, changes in
stockholders' equity and cash flows of the Company, and, if applicable,
Company's Subsidiaries, on a consolidated and consolidating basis for such
year, the related balance sheet as at the end of such year (setting forth
in comparative form the corresponding figures for the preceding fiscal
year), all in reasonable detail, prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved, and accompanied by
an opinion in form and substance satisfactory to the Lender and prepared by
an accounting firm reasonably satisfactory to the Lender, or other
independent certified public accountants of recognized standing selected by
the Company and acceptable to the Lender, as to said financial statements
and a certificate signed by the president and chief financial officer of
the Company stating that said financial statements fairly present the
financial condition and results of operations of the Company and, if
applicable, Company's Subsidiaries as at the end of, and for, such year.
(c) Together with each delivery of financial statements required in
this Section 6.2, an Officer's Certificate in substantially the form of
Exhibit "F" hereto.
-----------
(d) With respect to Aged Mortgage Loans, copies of the complete
credit and collateral file relating each Aged Mortgage Loan, an updated
title opinion covering the Mortgaged Property securing each Aged Mortgage
Loan issued inform and substance acceptable to Lender and issued by a title
company acceptable to Lender, a current appraisal or brokers price opinion
certifying the current market value of the Mortgaged Property securing each
Aged Mortgage Loan in form and substance acceptable to Lender and such
other information or documentation relating to the borrowers or Mortgaged
Property of each Aged Mortgage Loan, all of the foregoing to be provided as
the Lender in its discretion may request at any time or from time to time
and at the sole cost and expense of the Company.
(e) Reports in respect of the Pledged Mortgages and Pledged
Securities, in such detail and at such times as the Lender in its
discretion may request at any time or from time to time, including, without
limitation, a monthly pipeline report in form satisfactory to Lender, to be
delivered with the monthly financial statements required in Section 6.2(a).
33
(f) Copies of all regular or periodic financial and other reports, if
any, which the Company shall file with the Securities and Exchange
Commission or any governmental agency successor thereto and copies of any
audits completed by GNMA, FHLMC, or FNMA. Copies of the Mortgage Bankers'
Financial Reporting Forms (FNMA Form 1002) which the Company shall have
filed with FNMA.
(g) From time to time, with reasonable promptness, such further
information regarding the business, operations, properties or financial
condition of the Company as the Lender may reasonably request.
6.3 Maintenance of Existence, Conduct of Business. Preserve and maintain
---------------------------------------------
its corporate existence in good standing and all of its rights, privileges,
licenses and franchises necessary in the normal conduct of its business,
including, without limitation, its eligibility as lender, seller/servicer and
issuer described under Section 5.11 hereof, conduct its business in an orderly
and efficient manner, maintain a net worth of acceptable assets as required by
HUD at any and all times for maintaining the Company's status as a FHA approved
mortgagee; and make no material change in the nature or character of its
business or engage in any business in which it was not engaged on the date of
this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements of all
-------------------------------
applicable laws, rules, regulations and orders of any governmental authority, a
breach of which could materially adversely affect its business, operations,
assets, or financial condition, except where contested in good faith and by
appropriate proceedings, and with sufficient reserves established therefor.
6.5 Inspection of Properties and Books. Permit authorized representatives
----------------------------------
of the Lender to (a) discuss the business, operations, assets and financial
condition of the Company and Company's Subsidiaries with their officers and
employees and to examine their books of account, records, reports and other
papers and make copies or extracts thereof, and (b) inspect all of the Company's
property and all related information and reports at Lender's expense, all at
such reasonable times as the Lender may request. The Company will provide its
accountants with a copy of this Agreement promptly after the execution hereof
and will instruct its accountants to answer candidly any and all questions that
the officers of the Lender or any authorized representatives of the Lender may
address to them in reference to the financial condition or affairs of the
Company and Company's Subsidiaries. The Company may have its representatives in
attendance at any meetings between the officers or other representatives of the
Lender and the Company accountants held in accordance with this authorization.
6.6 Notice. Give prompt written notice to the Lender of (a) any action,
------
suit or proceeding instituted by or against the Company or any of its
Subsidiaries in any federal or state court or before any commission or other
regulatory body (federal, state or local, domestic or foreign) which action,
suit or proceeding has at issue in excess of Twenty-Five Thousand Dollars
($25,000.00) (except for normal collection and foreclosure proceedings initiated
by the Company, in connection with a Mortgage Loan or any other mortgage loan),
or any such proceedings threatened against the Company, or any of Company's
Subsidiaries in writing
34
containing the details thereof, (b) the filing, recording or assessment of any
federal, state or local tax Lien against it, or any of its assets or any of its
Subsidiaries, (c) the occurrence of any Event of Default hereunder or the
occurrence of any Default and continuation thereof for five (5) days, (d) the
suspension, revocation or termination of the Company's eligibility, in any
respect, as approved lender, seller/servicer or issuer as described under
Section 5.11 hereof, (e) the transfer, loss or termination of any Servicing
Contract to which the Company is a party, or which is held for the benefit of
the Company, and the reason for such transfer, loss or termination, if known to
the Company, and (0 any other action, event or condition of any nature which may
lead to or result in a material adverse effect upon the business, operations,
assets, or financial condition of the Company or Company's Subsidiaries or
which, with or without notice or lapse of time or both, would constitute a
default under any other agreement instrument or indenture to which the Company
is a party or to which the Company its properties or assets may be subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations and
----------------------------
Indebtedness of the Company, and cause to be paid and performed all obligations
and Indebtedness of its' Subsidiaries in accordance with the terms thereof and
pay and discharge or cause to be paid and discharged all taxes, assessments and
governmental charges or levies imposed upon the Company or its Subsidiaries, or
upon their respective income, receipts or properties before the same shall
become past due, as well as all lawful claims for labor, materials and supplies
or otherwise which, if unpaid, might become a Lien or charge upon such
properties or any part thereof, provided, however, that the Company and its
-------- -------
Subsidiaries shall not be required to pay obligation, Indebtedness, taxes,
assessments or governmental charges or levies or claims for labor, materials or
supplies for which the Company or its Subsidiaries shall have obtained an
adequate bond or adequate insurance or which are being contested in good faith
and by proper proceedings which are being reasonably and diligently pursued if
such proceedings do not involve any likelihood of the sale, forfeiture or loss
of any such property or any interest therein while such proceedings are pending,
and provided further that book reserves adequate under generally accepted
accounting principles shall have been established with respect thereto and
provided further that the owing Person's title to, and its right to use, its
property is not materially adversely affected thereby.
6.8 Insurance. Maintain (a) errors and omissions insurance or mortgage,
---------
impairment insurance and blanket bond coverage, with such companies and in such
amounts as satisfy prevailing FNMA and FHLMC requirements applicable to a
qualified mortgage originating institution, and (b) liability insurance and fire
and other hazard insurance on its properties, with responsible insurance
companies approved by the Lender, in such amounts and against such risks as is
customarily carried by similar businesses operating in the same vicinity; and
(c) within thirty (30) days after notice from the Lender, obtain such additional
insurance as the Lender shall reasonably require, all at the sole expense of the
Company. Copies of such policies shall be furnished to the Lender without charge
upon obtaining such coverage or any renewal of or modification to such coverage.
6.9 Closing Instructions. The Company agrees to indemnify and hold the
--------------------
Lender harmless from and against any loss, including reasonable attorneys' fees
and costs, attributable to the failure of a title insurance company, agent or
attorney to comply with the disbursement or
35
instruction letter or letters of the Company or of the Lender relating to any
Mortgage Loan. The Lender shall have the right to pre-approve the closing
instructions of the Company to the title insurance company, agent or attorney in
any case where the Mortgage Loan to be created at settlement is intended to be
warehoused by the Company pursuant hereto.
6.10 Other Loan Obligations. Perform all obligations under the terms of
----- ----------------
each loan agreement, note, mortgage, security agreement or debt instrument by
which the Company is bound or to which any of its property is subject, and
promptly notify the Lender in writing of a declared default under or the
termination, cancellation, reduction or non-renewal of any of its other lines of
credit or financing agreements with any other lender. Exhibit "B" hereto is a
-----------
true and complete list of all such lines of credit or financing agreements as of
the date hereof.
6.11 Use of Proceeds of Advances. Use the proceeds of each Advance solely
--------------------
for the purpose of financing or purchasing Eligible Mortgage Loans.
6.12 Special Affirmative Covenants Concerning Collateral.
---------------------------------------------------
(a) Warrant and defend the right, title and interest of the Lender in
and to the Collateral against the claims and demands of all Persons
whomsoever.
(b) Service or cause to be serviced all Pledged Mortgages in
accordance with the standard requirements of the issuers of Purchase
Commitments covering the same and all applicable FHA and VA requirements,
including without limitation taking all actions necessary to enforce the
obligations of the obligors under such Mortgage Loans. The Company shall
service or cause to be serviced all Mortgage Loans backing Pledged
Securities in accordance with applicable governmental requirements and
issuers of Purchase Commitments covering the same. The Company shall hold
all escrow funds collected in respect of Pledged Mortgages and Mortgage
Loans backing Pledged Securities in trust, without commingling the same
with non-custodial funds, and apply the same for the purposes for which
such funds were collected.
(c) Execute and deliver to the Lender such Uniform Commercial Code
financing statements with respect to the Collateral as the Lender may
request. The Company shall also execute and deliver to the Lender such
further instruments of sale, pledge or assignment or transfer, and such
powers of attorney, as required by the Lender to secure the Collateral, and
shall do and perform all matters and things necessary or desirable to be
done or observed, for the purpose of effectively creating, maintaining and
preserving the security and benefits intended to be afforded the Lender
under this Agreement. The Lender shall have all the rights and remedies of
a secured party under the Uniform Commercial Code of Texas, or any other
applicable law, in addition to all rights provided for herein.
(d) Notify the Lender within two (2) Business Days after receipt of
notice from an Investor of any default under, or of the termination of, any
Purchase
36
Commitment relating to any Pledged Mortgage, Eligible Mortgage Pool or
Pledged Security.
(e) Promptly comply in all respects with the terms and conditions of
all Purchase Commitments, and all extensions, renewals and modifications or
substitutions thereof or thereto. The Company will cause to be delivered
to the Investor the Pledged Mortgages and Pledged Securities to be sold
under each Purchase Commitment not later than the expiration thereof.
(f) Maintain, at its principal office or in a regional office
approved by the Lender, or in the office of a computer service bureau
engaged by the Company and approved by the Lender, and, upon request shall
make available to the Lender the originals, or copies in any case where the
originals have been delivered to the Lender or to an Investor, of its
Mortgage Notes and Mortgages included in Pledged Mortgages, Mortgage-backed
Securities delivered to the Lender as Pledged Securities, Purchase
Commitments, and all related Mortgage Loan documents and instruments, and
all files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records and other information and
data relating to the Collateral.
6.13 Cure of Defects in Loan Documents. Promptly cure and cause to be
---------------------------------
promptly cured any defects in the creation, issuance, execution and delivery of
this Agreement and the other Loan Documents; and upon request of the Lender and
at the Company's expense, the Company will promptly execute and deliver, and
cause to be executed and delivered, to the Lender or its designee, all such
additional documents, agreements and/or instruments in compliance with or in
accomplishment of the covenants and agreements of this Agreement and the other
Loan Documents, and/or to create, perfect; preserve, extend and/or maintain any
and all Liens created pursuant hereto or pursuant to any other Loan Document as
valid and perfected Liens (of a priority as set forth in this Agreement) in
favor of the Lender to secure the Obligations, all as reasonably requested from
time to time by the Lender.
6.14 Year 2000 Compliant. Take all necessary action to complete in all
-------------------
material respects by December 31, 1999, the reprogramming of computer software,
hardware, and firmware systems used or relied upon in the conduct of the
Company's business (including systems and equipment supplied by others or with
which such systems of Company interface) required as a result of the Year 2000
Issue to permit the proper functioning of such computer systems and other
equipment and testing of such systems and equipment as so reprogrammed. At the
request of the Leader, Company shall provide to the Lender reasonable assurance
of its compliance with the preceding sentence.
7. NEGATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment is
outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or any other Loan Document, the Company shall
not, either directly or indirectly, without the prior written consent of the
Lender:
37
7.1 Contingent Liabilities. Assume, incur, create, guarantee, endorse, or
----------------------
otherwise become or be liable for the obligation of any Person other than the
Company except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and excluding the sale of Mortgage
Loans with recourse in the ordinary course of the company's business.
7.2 Pledge of Mortgage Loans. Except for Mortgage Loans pledged to the
------------------------
lenders described in Exhibit "B", pledge or grant a security interest in any
-----------
existing or future Mortgage Loans acquired by the Company other than to the
Lender except as otherwise expressly permitted in this Agreement; provided,
however, that if no Default or Event of Default has occurred and is continuing,
servicing on individual Mortgage Loans may be sold concurrently with and
incidental to the sale of such Mortgage Loans (with servicing released) in the
ordinary course of the Company's business.
7.3 Merger; Acquisitions. Wind up, liquidate or dissolve its affairs or
--------------------
enter into any transaction of merger or consolidation (except mergers or
consolidations of a Subsidiary into the Company, with the Company as the
surviving corporation), or convey, sell, lease or otherwise dispose of (or agree
to do any of the foregoing at any future time) all or any part of its property
or assets which are material (including, but not limited to, any rights to
service Mortgage Loans), individually or in the aggregate, other than obsolete
or worn out property, whether now owned or hereafter acquired, other than in the
ordinary course of business as presently conducted and at fair market value,
without the prior approval of the Lender (which approval shall not be reasonably
withheld), except that the Company and its Subsidiaries may, in the ordinary
course of business, acquire Mortgage Loans for resale and sell Mortgage Loans
and Mortgage-backed Securities.
7.4 Loss of Eligibility. Take any action that would cause the Company to
-------------------
lose all or any part of its status as an eligible lender, seller/servicer and
issuer as described under Section 5.11 hereof.
7.5 Debt to Adjusted Tangible Worth Ratio. Permit the ratio of Debt to
-------------------------------------
Adjusted Tangible Worth of tile Company (and its Subsidiaries, on a consolidated
basis) to exceed [*] computed as of the end of each calendar month.
7.6 Minimum Adjusted Tangible Net Worth. Permit Adjusted Tangible Net
-----------------------------------
Worth of the Company (and its Subsidiaries, on a consolidated basis) to be less
than [*] computed as of the end of each calendar month; provided, however, that
-------- -------
if the interest rate on the Note is reduced in accordance with Section 2.4(a)(3)
hereof, the minimum Adjusted Tangible Net Worth requirement pursuant to this
Section 7.6 from that date and thereafter shall increase from [*].
7.7 Transactions with Affiliates. Directly or indirectly (a) make any
----------------------------
loan, advance, extension of credit or capital contribution to any of its
Affiliates, (b) transfer, sell, pledge, assign or otherwise dispose of any of
its assets to or on behalf of such Affiliates, (c) merge or
[*] Confidential Treatment Requested
38
consolidate with or purchase or acquire, assets from such Affiliates, or (d)
transfer, pledge, or assign or otherwise pay management fees in excess of [*]
per annum to or on behalf of such Affiliates, except for transactions described
in clauses (a) through (c) of this Section 7.7 involving not more than [*] each.
7.8 Limits on Corporate Distributions. Pay, make or declare or incur any
---------------------------------
liability to pay, make or declare any dividend (excluding stock dividends) or
other distribution, direct or indirect, on or on account of any shares of its
stock or any redemption or other acquisition, direct or indirect, of any shares
of its stock or of any warrants, rights or other options to purchase any shares
of its stock nor purchase, acquire, redeem or retire any stock or ownership
interest in itself whether now or hereafter outstanding except that so long as
no Default, Event of Default or violation of Sections 7.5, and 7.6 hereof exists
at such time, or would exist immediately thereafter, the Company may declare and
pay cash dividends to its shareholders; provided, however, that (a) such cash
-------- --------
dividends must be declared and paid within 20 days after delivery to Lender of
the financial statements described in Section 6.2(a) hereof, and (b) provided,
--------
further that such dividends shall not exceed, in the aggregate during any fiscal
-------
year, fifty percent (50%) of the Company's net income for such fiscal year.
7.9 RICO. Violate any laws, statutes or regulations, whether federal or
----
state, for which forfeiture of its properties is a potential penalty, including,
without limitations, RICO.
7.10 No Loans or Investments Except Approved Investments. Without the
---------------------------------------------------
prior written consent of Lender, make or permit to remain outstanding any loans
or advances to, or investments in, any Person, except that the foregoing
restriction shall not apply to:
(a) investments in marketable obligations maturing no later than 180 days
from the date of acquisition thereof by the Company and issued and full,
guaranteed, directly, by the full faith and credit of the Government of the
United States of America or any agency thereof; and
(b) investments, in certificates of deposit maturing no later than 180
days from the date of issuance thereof and issued by commercial banks in the
United States and such banks rated by Xxxxx'x Investor Service, Inc. and
receiving a rating of [*] or higher on Moody's short term debt rating or
rated by Standard & Poor's Corporation and receiving a rating of [*] or
higher on S&P's short term debt rating, or issued by Lender, it being
acknowledged and agreed that the foregoing requirements shall pertain to
certificates of deposit issued and/or received on a date on or after the date of
this Agreement); and
(c) investments not to exceed [*] in the aggregate.
7.11 Charter Documents and Business Termination.
------------------------------------------
(a) Except as permitted in Section 7.3 and 7.11 (d) hereof, issue,
sell or commit to issue or sell any shares of its capital stock of any
class, or other equity or investment security,
[*] Confidential Treatment Requested
39
(b) Amend or otherwise modify its corporate charter or otherwise
change its corporate structure in any manner which will have a materially
adverse effect on the Company's condition, financial or otherwise, or which
will have a material adverse effect upon the Company's ability to perform,
promptly and fully, its obligations hereunder or under any of the other
Loan Documents, or
(c) Take any action with a view toward its dissolution,* liquidation
or termination; or, in fact, dissolve, liquidate or terminate its
existence; or
(d) Prior written consents of the Lender is not required if the
Company issues (a) shares or capital stock in a public offering greater
than [*] (b) issues shares or capital stock in secondary offering greater
than [*] (c) sells shares or capital stock to existing investors, or (d)
sells shares or capital stock to a new investor in which the new investor's
ownership is less than [*] of the entity.
7.12 Changes in Accounting Methods. Make any change in its accounting
-----------------------------
method as in effect on the date of this Agreement or change its fiscal year
ending date from December 31, unless such changes (a) are required for
conformity with generally accepted accounting principles and, in such event, the
Company will give prior written notice of each such change to the Lender or (b)
or if not so required, are in conformity with generally accepted accounting
principles and have the prior written approval of the Lender which approval
shall not be unreasonably withheld.
7.13 No Sales, Leases or Dispositions of Property. Except in the ordinary
--------------------------------------------
course of its business, sell, lease, transfer or otherwise dispose of all or any
material portion or portions or integral part of its properties or assets,
whether now owned or hereafter acquired (whether in a single transaction or in a
series of transactions), or enter into any arrangement, directly or indirectly,
with any person, whereby it shall sell or transfer any of its properties or
assets, whether now owned or hereafter acquired, and thereafter rent or lease as
lessee such property or any part thereof which it intends to use for
substantially the same purpose or purposes as the property sold or transferred.
7.14 Changes in Business or Assets. Except as permitted by Section 7.3
-----------------------------
hereof, make any substantial change (a) in the nature of its business as now
conducted, or (b) in the use of its property as now used and proposed to be
used.
7.15 Changes in Office or Inventory Location. Change the address and/or
---------------------------------------
location of its chief executive office or principal place of business or the
place where it keeps its books and records or its inventory to a location
outside the State of California unless, prior to any such change, the Company
shall execute and cause to be executed such additional agreements and/or lien
instruments as the Lender may reasonably request to conform with the provisions
hereof and the transactions and perfected Liens in the Collateral contemplated
under Us Agreement and the other Loan Documents.
[*] Confidential Treatment Requested
40
7.16 Special Negative Covenants Concerning Collateral.
------------------------------------------------
(a) Amend or modify, or waive any of the terms and conditions of, or
settle or compromise any claim in respect of, any Pledged Mortgages or
Pledged Securities.
(b) Sell, assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge or otherwise encumber (except pursuant to
this Agreement or as permitted herein) any of the Collateral or any
interest therein.
(c) Make any compromise, adjustment or settlement in respect of any
of the Collateral or accept other than cash in payment or liquidation of
the Collateral.
7.17 No Indebtedness. Except for the Indebtedness described in Exhibit
--------------- -------
"B" hereto, without the prior written consent of Lender, incur, create, assume
---
or guarantee or in any manner become or be liable or permit to be outstanding
any Indebtedness (including obligations for the payment of rentals other than
provided for herein) nor guarantee any contract or other obligation, and will
not in any way become or be responsible for obligations of any Person, whether
by agreement to purchase the Indebtedness of any other Person or agreement for
the furnishing of funds to any other Person through the purchase of goods,
supplies or services (or by way of stock purchase, capital contribution, advance
or loan) for the purpose of paying or discharging the Indebtedness of any other
Person or otherwise, except that the foregoing restrictions shall not apply to:
(a) the Obligations.
(b) liabilities for taxes, assessments, governmental charges or
levies which are not yet due and payable or which are being contested in
good faith by appropriate proceedings diligently conducted if reserves
adequate under generally accepted accounting principles have been
established therefor.
(c) endorsements of negotiable instruments for collection in the
ordinary course of business.
(d) Indebtedness incurred in the ordinary course of business in,
connection with normal trade or business obligations which are payable
within 90 days of the occurrence thereof, provided, however, that no
-------- -------
Indebtedness shall be incurred by the Company to any Affiliate other than
in the ordinary course of business and upon substantially the same or
better terms as it could obtain in an arm's length transaction with a
Person who is not an Affiliate.
(e) Indebtedness of less than [*] in the aggregate, incurred in the
ordinary course of business.
[*] Confidential Treatment Requested
41
(f) Indebtedness incurred in the ordinary course of business for the
purpose of leasing office space or equipment to be used in the conduct of
the business of the Company.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the following conditions
-----------------
or events shall be an event of default ("Event of Default"):
(a) Failure to pay the principal of any Advance when, due, whether at
stated maturity, by acceleration, or otherwise; or failure to pay any
installment of interest on any Advance or any other amount due under this
Agreement within ten (10) days after the due date; or failure to pay,
beyond any applicable grace period, the principal or interest on any other
indebtedness due the Lender; or
(b) Failure of the Company to pay any sums due and payable under the
Master Repurchase Agreement or Company's breach or default of any term,
condition, covenant, or agreement of the Master Repurchase Agreement; or
(c) Failure of the Company or any of its Subsidiaries to pay, or any
default in the payment of any principal or interest on, any other
Indebtedness or in the payment of any contingent obligation beyond any
period of grace provided; or breach or default with respect to any other
material term of any other Indebtedness of any loan agreement, mortgage,
indenture or other agreement relating thereto, if the effect of such
failure, default or breach is to cause, or to permit the holder or holders
thereof (or a trustee on behalf of such holder or holders) to cause,
Indebtedness of the Company or its Subsidiaries in the aggregate amount of
[*] or more to become or be declared due prior to its stated maturity (upon
the giving or receiving of notice, lapse of time, both, or otherwise) or
failure of the Company to comply with Section 6.11 hereof; or
(d) Any of the Company's representations or warranties made or deemed
made herein or in any other Loan Document, or in any statement or
certificate at any time given by the Company in writing pursuant hereto or
thereto shall be inaccurate or incomplete in any materially adverse respect
on the date as of which made or deemed made; or
(e) The Company shall default in the performance of or compliance
with any term or covenant contained in this Agreement and such default
shall not have been remedied or waived within thirty (30) days after
receipt of notice from the Lender of such default other than those referred
to above in Subsections 8.1 (a), 8.1 (b), 8.1 (c), or 8.1 (d); or
(f) (1) A court having jurisdiction shall enter a decree or order
for relief in respect of the Company or any of Company's Subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect in
[*] Confidential Treatment Requested
42
respect of the Company or any of Company's Subsidiaries, which decree or
order is not stayed; or a filing of an involuntary case under any
applicable bankruptcy, insolvency or other similar law in respect of the
Company or any of Company's Subsidiaries has occurred; or (2) any other
similar relief shall be granted under any applicable federal or state law;
or a decree or order of a court having jurisdiction for the appointment of
a receiver, liquidator, sequestrator, trustee, custodian or other officer
having similar powers over the Company or any of Company's Subsidiaries, or
over all or a substantial part of their respective property, shall have
been entered; or the involuntary appointment of an interim receiver,
trustee or other custodian of the Company or any of Company's Subsidiaries,
for all or a substantial part of their respective property; or the issuance
of a warrant of attachment, execution or similar process against any
substantial part of the property of the Company or any of Company's
Subsidiaries, and the continuance of any such events in Subsections (1) and
(2) above for sixty (60) days unless dismissed or discharged; or
(g) The Company or any of Company's Subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion to an involuntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; the making by the Company or any of Company's Subsidiaries of any
assignment for the benefit of creditors; or the failure of the Company or
any of Company's Subsidiaries, or the admission by any of them of its
inability, to pay its debts as such debts become due; on
(h) Any money judgment, writ or warrant of attachment, or similar
process involving in any case an amount in excess of [*] shall be entered
or filed against the Company or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event no later than
five (5) days prior to the date of any Proposed sale thereunder; or
(i) Any order, judgment or decree shall be entered against the Company
decreeing the dissolution or split up of the Company and such order shall
remain undischarged or unstayed for a period in excess of twenty (20) days;
or
(j) Any Plan maintained by the Company or any of Company's
Subsidiaries shall be terminated within the meaning of Title IV of ERISA or
a trustee shall be appointed by an appropriate United States district court
to administer any Plan, or the Pension Benefit Guaranty Corporation (or any
successor thereto) shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan if as of the date thereof the
Company's or any Subsidiary's liability (after giving effect to the tax
consequences thereof) to the Pension Benefit Guaranty Corporation (or any
successor thereto) for unfunded guaranteed vested benefits under the Plan
exceeds the then current
[*] Confidential Treatment Requested
43
value of assets accumulated in such Plan by more than [*] (or in the case
of a termination involving the Company or any of Company's Subsidiaries as
a "substantial employer" (as defined in Section 4001(a)(2) of ERISA) the
withdrawing employer's proportionate share of such excess shall exceed such
amount); or
(k) The Company or any of Company's Subsidiaries as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an annual amount exceeding [*]; or
(l) The Company shall purport to disavow its obligations hereunder or
shall contest the validity or enforceability hereof, or the Lender's
security interest on any portion of the Collateral shall become
unenforceable or otherwise impaired; provided that, subject to the Lender's
approval, no Event of Default shall occur as a result of such impairment if
all Advances made against any such Collateral shall be paid in full within
ten (10) days of the date of such impairment; or
(m) The Company dissolves or terminates its existence, or
discontinues its usual business; or
(n) Any court shall find or rule, or the Company shall assert or
claim, (i) that the Lender does not have a valid, perfected, enforceable
Lien and security interest in the Collateral of the priority as represented
in this Agreement or in any other Loan Document, or (ii) that this
Agreement or any of the Loan Documents does not or will not constitute the
legal, valid, binding and enforceable obligations of the party or parties
(as applicable) thereto, or (iii) that any Person has a conflicting or
adverse Lien, claim or right in, or with respect to, the Collateral and the
Company is unable within 10 days; to have such finding or ruling reversed
or to have such adverse Lien, claim or right removed; or
(o) The Company shall have concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made any
transfer of its property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien upon
any of its property through legal proceedings or distraint or other process
which is not vacated within 60 days from the date thereof; or
(p) There shall be a material adverse change in the financial
condition, business or operations of the Company; or
(q) A Change of Control occurs.
[*] Confidential Treatment Requested
44
8.2 Remedies.
--------
(a) Upon the occurrence of any Event of Default described in Sections
8.1(f) or 8.1(g), the Commitment shall be terminated and all Obligations of
the Company shall automatically become due and payable, without presentment
for payment, demand, notice of non-payment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, maturity, or any
other notices or requirements of any kind of Lender to the Company or any
other Person liable thereon or with respect thereto, all of which are
hereby expressly waived by the Company.
(b) Upon the occurrence of any Event of Default, other than those
described in Sections 8.1(f) or 8.1(g) the Lender may, by written notice to
the Company, terminate the Commitment and/or declare all Obligations of the
Company to be immediately due and payable, whereupon the same shall
forthwith become due and payable, together with all accrued and unpaid
interest thereon, and the obligation of the Lender to make any Advances
shall thereupon terminate.
(c) Upon the occurrence of any Event of Default, the Lender may also
do any of the following:
(1) Foreclose upon or otherwise enforce its security interest in
and Lien on the Collateral to secure all payments and performance of
Obligations of the Company in any manner permitted by law or provided
for hereunder.
(2) Notify all obligors in respect of the Collateral that the
Collateral has been assigned to the Lender and that all payments
thereon are to be made directly to the Lender or such other party as
may be designated by the Lender, settle, compromise, or release, in
whole or in part, any amounts owing on the Collateral, any such
obligor or any Investor or any portion of the Collateral, (in terms
acceptable to the Lender; enforce payment and prosecute any action or
proceeding with respect to any and all Collateral; and where any such
Collateral is in default, foreclose on and enforce security interests
in, such Collateral by any available judicial procedure or without
judicial process and sell property acquired as a result of any such
foreclosure.
(3) Act, or contract with a third party to act, as servicer or
subservicer of each item of Collateral requiring servicing and perform
all obligations required in connection with Purchase Commitments, such
third party's fees to be paid by the Company.
(4) Require the Company to assemble the Collateral and/or books
and records relating thereto and make such available to the Lender at
a place to be designated by the Lender.
45
(5) Enter onto property where any Collateral or books and
records relating thereto are located and take possession thereof with
or without judicial process.
(6) Prior to the disposition of the Collateral, prepare it for
disposition in any manner and to the extent the Lender deems
appropriate.
(7) Exercise all rights and remedies of a secured creditor under
the Uniform Commercial Code of Texas or other applicable law,
including, but not limited to, selling or otherwise disposing of the
Collateral, or any part thereof, at one or more public or private
sales, whether or not such Collateral is present at the place of sale,
for cash or credit or future delivery, on such terms and in such
manner as the Lender may determine, including, without limitation,
sale pursuant to any applicable Purchase Commitment. If notice is
required under such applicable law, the Lender will give the Company
not less than ten (10) days notice of any such public sale or of the
date after which private sale may be held. The Company agrees that
ten (10) days notice shall be reasonable notice. The Lender may,
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at
the time and place fixed for the sale, and such sale may be made at
any time or place to which the same may be so adjourned. In case of
any sale of all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the Lender until
the selling price is paid by the purchaser thereof, but the Lender
shall not incur any liability in case of the failure of such purchaser
to take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The
Lender may, however, instead of exercising the power of sale herein
conferred upon it, proceed by a suit or suits at law or in equity to
collect all amounts due upon the Collateral or to foreclose the pledge
and sell the Collateral or any portion thereof under a judgment or
decree of a court or courts of competent jurisdiction, or both.
(8) Proceed against the Company on the Note.
(d) The Lender shall incur no liability as a result of the sale or
other disposition of the Collateral, or any part thereof, at any public or
private sale or disposition. The Company hereby waives (to the extent
permitted by law) any claims it may have against the Lender arising by
reason of the fact that the price at which the Collateral may have been
sold at such private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
outstanding Advances and the unpaid interest accrued thereon, even if the
Lender accepts the first offer received and does not offer the Collateral
to more than one offeree and none of the actions described herein shall
render Lender's disposition of the Collateral in such a manner as
commercially unreasonable.
46
(e) The Company specifically waives (to the extent permitted by law)
any equity or right of redemption, all rights of redemption, stay or
appraisal which the Company has or may have under any rule of law or
statute now existing or hereafter adopted, and any right to require the
Lender to (1) proceed against any Person, (2) proceed against or exhaust
any of the Collateral or pursue its rights and remedies as against the
Collateral in any particular order, or (3) pursue any other remedy in its
power. The Lender shall not be required to take any steps necessary to
preserve any rights of the Company against holders of mortgages prior in
lien to the Lien of any Mortgage included in the Collateral or to preserve
rights against prior parties.
(f) The Lender may, but shall not be obligated to, advance any sums or
do any act or thing necessary to uphold and enforce the Lien and priority
of, or the security intended to be afforded by, any Mortgage included in
the Collateral, including, without limitation, payment of delinquent taxes
or assessments and insurance premiums. All advances, charges, costs and
expenses, including reasonable attorneys' fees and disbursements, incurred
or paid by the Lender in exercising any right, power or remedy conferred by
this Agreement or in the enforcement hereof, together with interest
thereon, at the Default Rate, from the time of payment until repaid, shall
become a part of the principal balance outstanding hereunder and under the
Note.
(g) No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy provided hereunder, at law or in
equity shall operate as a waiver thereof; nor shall any single or partial
exercise by the Lender of any right, power or remedy provided hereunder, at
law or in equity preclude any other or further exercise thereof or the
exercise of any other right power or remedy. The remedies herein provided
are cumulative and are not exclusive of any remedies provided at law or in
equity.
8.3 Application of Proceeds. The proceeds of any sale, disposition or
-----------------------
other enforcement of the Lender's security interest in all or any part of the
Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses of such sale or
-----
enforcement including reasonable compensation to the Lender's agents and
counsel, and all expenses, liabilities and advances made or incurred by or
on behalf of the Lender in connection therewith;
Second, to the payment of any other amounts due (other than principal
------
and interest) under the Note or this Agreement;
Third, to the payment of interest accrued and unpaid on the Note;
-----
Fourth to the payment of the outstanding principal balance of the
------
Note; and
47
Finally to the payment to the Company, or to its successors or
-------
assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining from such proceeds.
If the proceeds of any such sale, disposition or other enforcement are
insufficient to cover the costs and expenses of such sale, as aforesaid, and the
payment in fall of all Obligations of the Company, the Company shall remain
liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby appointed the
---------------------------------
attorney-in-fact of the Company, with full power of substitution, for the
purpose of carrying out the provisions hereof and taking any action and
executing any instruments which the Lender may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest and shall remain in full force and
effect until the full and final payment and performance of all Obligations.
Without limiting the generality of the foregoing, the Lender shall have the
right and power to give notices of its security interest in the Collateral to
any Person, either in the name of the Company or in its own name, to endorse all
Pledged Mortgages or Pledged Securities payable to the order of the Company, to
change or cause to be changed the book-entry registration or name of subscriber
or Investor on any Pledged Security, or to receive, endorse and collect all
checks made payable to the order of the Company representing any payment on
account of the principal of or interest on, or the proceeds of sale of, any of
the Pledged Mortgages or Pledged Securities and to give full discharge for the
same.
8.5 Right of Set-Off. If the Company shall default in the payment of the
----------------
Note, any interest accrued thereon, or any other sums which may become payable
hereunder when due, or in the performance of any of its other Obligations under
this Agreement, the Lender, shall have the right, at any time and from time to
time, without notice, to set-off and to appropriate or apply any and all
property or indebtedness of any kind at any time held or owing by the Lender to
or for the credit of the account of the Company (excluding any monies held by
the Company in trust for third parties) against and on account of the
Obligations, irrespective of whether or not the Lender shall have made any
demand hereunder and whether or not said Obligations shall have matured,
provided, however, that the Lender shall not be allowed to set-off against funds
-------- -------
in accounts with respect to which (i) the Company is a trustee or an escrow
agent in respect of bona fide third parties other than Affiliates, and (ii) such
trust or escrow arrangement was so denominated at the time of the creation of
such, account.
9. NOTICES.
All notices, demands, consents, requests and other communications required
or permitted to be given or made hereunder (collectively, "Notices") shall,
except as otherwise expressly provided hereunder, be in writing and shall be
delivered in person or mailed, first class, return receipt requested, postage
prepaid, or delivered by overnight courier, addressed to the respective parties
hereto at their respective addresses hereinafter set forth or, as to any such
party, at such other address as may be designated by it in a Notice to the
other. All Notices shall be conclusively deemed to have been properly given or
made when duly delivered, in person or by
48
overnight courier, or if mailed on the third Business Day after being deposited
in the mails, addressed as follows:
If to the Company: iOwn, Inc.
Attn: Xxxxxx X. Xxxx, President
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
If to the Lender: Bank United
Attn: Xx. Xxxxx X. Xxxxxx, Vice President
Mortgage Banker Finance
0000 Xxxxx Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
with a copy to: Bank United
Attn: Xxxxx Xxxxxxxx
Managing Director, Mortgage Banker Financing
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
and: Bank United
Attn: Xxxxxxxx X. Xxxxxxx
General Counsel
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Company shall: (a) pay all out-of-pocket costs and expenses of the
Lender, including, without limitation, reasonable attorneys' fees, in connection
with the preparation, negotiation, documentation, enforcement and administration
of this Agreement, the Note, and other Loan Documents and the making and
repayment of the Advances and the payment of interest thereon; provided,
--------
however, costs and expenses of Lender for attorneys fees in connection with the
-------
preparation, negotiation and documentation of the lending transaction evidenced
by this Agreement shall not exceed $3,000.00 plus the reasonable expenses of
Lender's counsel; (b) pay, and hold the Lender and any holder of the Note
harmless from and against, any and all present and future stamp, documentary and
other similar taxes with respect to the foregoing matters and save the Lender
and the holder or holders of the Note harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay such
taxes; (c) INDEMNIFY, PAY AND HOLD HARMLESS THE LENDER AND ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES OR AGENTS AND ANY SUBSEQUENT
49
HOLDER OF THE NOTE FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER (THE "INDEMNIFIED LIABILITIES") WHICH MAY BE IMPOSED
UPON, INCURRED BY OR ASSERTED AGAINST THE LENDER OR SUCH HOLDER IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN
DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY TO THE EXTENT
THAT ANY SUCH INDEMNIFIED LIABILITIES RESULT (DIRECTLY OR INDIRECTLY) FROM ANY
CLAIMS MADE, OR ANY ACTIONS, SUITS OR PROCEEDINGS COMMENCED OR THREATENED, BY OR
ON BEHALF OF ANY CREDITOR (EXCLUDING THE LENDER AND THE HOLDER OR HOLDERS OF THE
NOTE), SECURITY HOLDER, SHAREHOLDER, CUSTOMER (INCLUDING, WITHOUT LIMITATION,
ANY PERSON HAVING ANY DEALINGS OF ANY KIND WITH THE COMPANY), TRUSTEE, DIRECTOR,
OFFICER, EMPLOYEE AND/OR AGENT OF THE COMPANY ACTING IN SUCH CAPACITY, THE
COMPANY OR ANY GOVERNMENTAL REGULATORY BODY OR AUTHORITY. THE FOREGOING
INDEMNITY SHALL NOT APPLY TO THE EXTENT THE INDEMNIFIED LIABILITIES RESULT FROM
THE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER OR LENDER'S OWN VIOLATIONS OF
REGULATIONS APPLICABLE TO IT. THE AGREEMENT OF THE COMPANY CONTAINED IN THIS
SUBSECTION (c) SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT AND
THE PAYMENT IN FULL OF THE NOTE. ATTORNEYS' FEES AND DISBURSEMENTS INCURRED IN
ENFORCING, OR ON APPEAL FROM, A JUDGMENT PURSUANT HERETO SHALL BE RECOVERABLE
SEPARATELY FROM AND, IN ADDITION TO ANY OTHER AMOUNT INCLUDED IN SUCH JUDGMENT,
AND THIS CLAUSE IS INTENDED TO BE SEVERABLE FROM THE OTHER PROVISIONS OF THIS
AGREEMENT AND TO SURVIVE AND NOT BE MERGED INTO SUCH JUDGMENT.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the Lender hereunder
shall be prepared in accordance with GAAP, applied on a basis consistent with
that applied in preparing the financial statements as at, and for the period
ended, the Statement Date (except to the extent otherwise required to conform to
good accounting practice).
12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors: Survival of Representations. The
----------------------------------------------------------
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. All
representations, warranties, covenants and agreements herein contained on the
part of the Company shall survive the making of any Advance and the execution of
the Note, and shall be effective so long as the Commitment is outstanding
hereunder or there remain any Obligations of the Company hereunder or under the
Note to be paid or performed.
50
12.2 Assignment. This Agreement may not be assigned by the Company. The
----------
Lender may assign, at any time, in whole or in part, its rights and delegate its
obligations under this Agreement and the other Loan Documents, along with the
Lender's security interest in any or all of the Collateral, and any assignee
thereof may enforce Us Agreement and the other Loan Documents, and such security
interest.
12.3 Amendments. Except as otherwise provided in Us Agreement, this
----------
Agreement may not be amended, modified or supplemented unless such amendment,
modification or supplement is set forth in a writing signed by the parties
hereto.
12.4 Governing Law. This Agreement and the other Loan Documents shall be
-------------
governed by the laws of the State of Texas, without reference to its principles
of conflicts of laws.
12.5 Participations. The Lender may at any time sell, assignor grant
--------------
participations in, or otherwise transfer to any other Person (a "Participant"),
all or part of the Obligations of the Company under this Agreement. Without
limitation of the exclusive right of the Lender to collect and enforce such
Obligations, the Company agrees that each disposition will give rise to a
debtor-creditor relationship of the Company to the Participant, and the Company
authorizes each Participant, upon the occurrence of an Event of Default, to
proceed directly by right of setoff, banker's lien, or otherwise, against any
assets of the Company which may be in the hands of such Participant The Company
authorizes the Lender to disclose to any prospective Participant and any
Participant any and all information in the Lender's possession concerning the
Company, this Agreement and the Collateral.
12.6 Relationship of the Parties. This Agreement provides for the making
---------------------------
of Advances" by the Lender, in its capacity as a lender, to the Company, in its
capacity as a borrower, and for the payment of interest, repayment of principal
by the Company to the Lender, and for the payment of certain fees by the Company
to the Lender. The relationship between the Lender and the Company is limited
to that of creditor/secured party, on the one hand, and debtor, on the other
hand. The provisions herein for compliance with financial covenants and
delivery of financial statements are intended solely for the benefit of the
Lender to protect its interests as lender in assuring payments of interest and
repayment of principal and payment of certain fees, and nothing contained in
this Agreement shall be construed as permitting or obligating the Lender to act
as a financial or business advisor or consultant to the Company, as permitting
or obligating the Lender to control the Company or to conduct the Company's
operations, as creating any fiduciary obligation on the part of the. Lender to
the Company, or as creating any joint venture, agency, or other relationship
between the parties hereto other than as explicitly and specifically stated in
this Agreement. The Company acknowledges that it has had the opportunity to
obtain the advice of experienced counsel of its own choosing in connection with
the negotiation and execution of this Agreement and to obtain the advice of such
counsel with respect to all matters contained herein, including, without
limitation, the provision for waiver of trial by jury. The Company further
acknowledges that it is experienced with respect to financial
51
and credit matters and has made its own independent decisions to apply to the
Lender for credit and to execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be declared
------------
to be illegal or unenforceable in any respect, such illegal or unenforceable
provision shall be and become absolutely null and void and of no force and
effect as though such provision were not in fact set forth herein, but all other
covenants, terms, conditions and provisions hereof shall nevertheless continue
to be valid and enforceable.
12.8 Usury. It is the intent of Lender and the Company in the execution
-----
and performance of this Agreement and the Note or any Loan Document to remain in
strict compliance with Applicable Law from time to time in effect. In
furtherance thereof, Lender and the Company stipulate and agree that none of the
terms and provisions contained in the Note, this Agreement or any Loan Document
shall ever be construed to create a contract to pay for the use, forbearance or
detention of money with interest at a rate or in an amount in excess of the
Maximum Rate or amount of interest permitted to be charged under Applicable Law.
For purposes of this Agreement, the Note and any other Loan Document, "interest"
shall include the aggregate of all charges which constitute interest under
Applicable Law that are contracted for, taken, charged, reserved, or received
under this Agreement the Note or any other Loan Document. The Company shall
never be required to pay unearned interest or interest at a rate or in an amount
in excess of the Maximum Rate or amount of interest that may be lawfully charged
under Applicable Law, and the provisions of this paragraph shall control over
all other provisions of this Agreement and the Note or any Loan Document, which
may be in actual or apparent conflict herewith. If the Note is prepaid, or if
the maturity of the Note is accelerated for any reason, or if under any other
contingency the effective rate or amount of interest which would otherwise be
payable under the Note would exceed the Maximum Rate or amount of interest
Lender or any other holder of the Note is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event Lender or any holder of
the Note shall charge, contract for, take, reserve or receive monies that are
deemed to constitute interest which would, in the absence of this provision,
increase the effective rate or amount of interest payable under the Note to a
rate or amount in excess of that permitted to be charged, contracted for, taken,
reserved or received under Applicable Law then in effect then the principal
amount of the Note or the amount of interest which would otherwise be payable
under the Note or both shall be reduced to the amount allowed under Applicable
Law as now or hereinafter construed by the courts having jurisdiction, and all
such moneys so charged, contracted for, taken, reserved or received that are
deemed to constitute interest in excess of the Maximum Rate or amount of
interest permitted by Applicable Law shall immediately be returned to or
credited to the account of the Company upon such determination. Lender and the
Company further stipulate and agree that, without limitation of the foregoing,
all calculations of the rate or amount of interest contracted for, charged,
taken, reserved or received under the Note which are made for the purpose of
determining whether such rate or amount exceeds the Maximum Rate, shall be made
to the extent not prohibited by Applicable Law, by amortizing, prorating,
allocating and spreading during the period of the full stated term of the Note,
all interest at any time contracted for, charged, taken, reserved or received
from the Company or otherwise by Lender or any other holder of the Note.
52
12.9 Consent to Jurisdiction. Subject to the provisions of Section 12.10
-----------------------
of this Agreement, the Company hereby agrees that any action or proceeding under
this Agreement, the Note or any document delivered pursuant hereto may be
commenced against it in any court of competent jurisdiction within the State of
Texas, by service of process upon the Company by first class registered or
certified mail, return receipt requested, addressed to the Company at its
address last known to the Lender. The Company agrees that any such suit, action
or proceeding arising out of or relating to this Agreement or any other such
document may be instituted in Xxxxxx County, State District Court or in the
United States District Court for the District of Texas at the option of the
Lender, and the Company hereby waives any objection to the venue, or any claim
as to inconvenient forum, of any such suit, action or proceeding. Nothing
herein shall affect the right of the Lender to accomplish service of process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction or court.
12.10 Arbitration. To the maximum extent not prohibited by law, any
-----------
controversy, dispute or claim arising out of, in connection with, or relating to
the Commitment or the Loan Documents or any transaction provided for therein,
including but not limited to any claim based on or arising from an alleged tort
or an alleged breach of any agreement contained in any of the Loan Documents,
shall, at the request of any party to the Loan Documents (either before or after
the commencement of judicial proceedings), be settled by arbitration pursuant to
Title 9 of the United States Code, which the parties hereto acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). If Title 9 of the United States Code is inapplicable to any such claim,
dispute or controversy for any reason, such arbitration shall be conducted
pursuant to the Texas General Arbitration Act and in accordance with the
Commercial Arbitration Rules of the AAA. In any such arbitration proceeding:
(i) all statutes of limitations which would otherwise be applicable shall apply;
and (ii) the proceeding shall be conducted in Houston, Texas, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a panel
of three arbitrators if the amount in controversy is over $ 1,000,000.00. All
arbitrators shall be selected by the process of appointment from a panel
pursuant to Section 13 of the AAA Commercial Arbitration Rules and each
arbitrator shall be either an active attorney, a mortgage banker or retired
judge with an AAA acknowledged expertise in the subject matter of the
controversy, dispute or claim. Any award rendered in any such arbitration
proceeding shall be final and binding, and judgment upon any such award may be
entered in any court having jurisdiction.
If any party to any Loan Document files a proceeding in any court to
resolve any such controversy, dispute or claim, such action shall not constitute
a waiver of the right of such party or a bar to the right of any other party to
seek arbitration under the provisions of this Section of that or any other
claim, dispute or controversy, and the court shall, upon motion of any party to
the proceeding, direct that such controversy, dispute or claim be arbitrated in
accordance with this Section.
Notwithstanding any of the foregoing, the parties hereto agree that no
arbitrator or panel of arbitrators shall possess or have the power to (i) assess
punitive damages, (ii) dissolve, rescind
53
or reform (except that the arbitrator may construe ambiguous terms) any Loan
Document, (iii) enter judgment on the debt, (iv) exercise equitable powers or
issue or enter any equitable remedies with respect to matters submitted to
arbitration, or (v) allow discovery of attorney/client privileged information.
The Commercial Arbitration Rules of the AAA are hereby modified to this extent
for the purpose of arbitration of any dispute, controversy or claim arising out
of, in connection with, or relating to the Loan or any Loan Document. The
parties hereby further agree to waive, each to the other, any claims for
punitive damages and agree neither an arbitrator nor any court shall have the
power to assess such damages.
No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to any Loan Document before, during or
after any arbitration proceeding to: (i) exercise self-help remedies such as
setoff or repossession; (ii) foreclose (judicially or otherwise) any Lien on or
security interest in any real or personal Collateral; or (iii) obtain emergency
relief from a court of competent jurisdiction to prevent the dissipation,
damage, destruction, transfer, hypothecation, pledging or concealment of assets
or of Collateral securing any Indebtedness, obligation or guaranty referenced in
any Loan Document. Such emergency relief may be in the nature of, but is not
limited to: pre-judgment attachments, garnishments, sequestrations, appointments
of receivers, or other emergency injunctive relief to preserve the status quo.
12.11 Additional Indemnity. IN ADDITION TO THE INDEMNITY PROVIDED IN
--------------------
SECTION 10, THE COMPANY SHALL INDEMNIFY AND HOLD THE LENDER, ITS SUCCESSORS,
ASSIGNS, AGENTS, AND EMPLOYEES, HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES, FINES, PENALTIES, AND
LIABILITIES, INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS, ARISING
OUT OF, CONNECTED WITH, OR RESULTING FROM (A) THE OPERATION OF THE COMPANY'S
BUSINESSES, (B) THE LENDER'S PRESERVATION OR ATTEMPTED PRESERVATION OF
COLLATERAL, AND (C) ANY FAILURE OF THE SECURITY INTERESTS AND LIENS IN THE
COLLATERAL GRANTED TO THE LENDER PURSUANT TO THIS AGREEMENT TO BE OR TO REMAIN
PERFECTED OR TO HAVE THE PRIORITY AS CONTEMPLATED THEREIN. THIS INDEMNITY SHALL
NOT APPLY TO THE EXTENT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR
ARISES OUT OF THE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. AT THE
LENDER'S REQUEST, THE COMPANY SHALL, AT ITS OWN COST AND EXPENSE, DEFEND OR
CAUSE TO BE DEFENDED ANY AND ALL SUCH ACTIONS OR SUITS THAT MAY BE BROUGHT
AGAINST' THE LENDER AND, IN ANY EVENT, SHALL SATISFY, PAY, AND DISCHARGE ANY AND
ALL JUDGMENTS, AWARDS, PENALTIES, COSTS, AND FINES THAT MAY BE RECOVERED AGAINST
THE LENDER IN ANY SUCH ACTION, PLUS ALL ATTORNEYS' FEES AND COSTS RELATED
THERETO TO THE EXTENT PERMITTED BY APPLICABLE LAW; PROVIDED, HOWEVER, THAT THE
LENDER SHALL GIVE THE COMPANY (TO THE EXTENT THE LENDER SEEKS INDEMNIFICATION
THEREFOR FROM THE COMPANY UNDER THIS SECTION 12.11) WRITTEN NOTICE OF ANY SUCH
CLAIM, DEMAND, OR SUIT AFTER THE LENDER HAS RECEIVED WRITTEN NOTICE THEREOF, AND
THE LENDER
54
SHALL NOT SETTLE ANY SUCH CLAIM, DEMAND, OR SUIT, IF THE LENDER SEEKS
INDEMNIFICATION THEREFOR FROM THE COMPANY, WITHOUT FIRST GIVING NOTICE TO THE
COMPANY OF THE LENDER'S DESIRE TO SETTLE AND OBTAINING THE CONSENT OF THE
COMPANY TO THE SAME, WHICH CONSENT THE COMPANY HEREBY AGREES NOT TO UNREASONABLY
WITHHOLD. ALL OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 12.11 SHALL SURVIVE
THE PAYMENT OF THE NOTE AND THE OBLIGATIONS.
12.12 No Waivers Except in Writing. No failure or delay on the part of
----------------------------
the Lender in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. No notice to or demand on
the Company or any other Person in any case shall entitle the Company or such
other Person to any other or further notice or demand in similar or other
circumstances.
12.13 Waiver of Jury Trial. Company hereby expressly waives any right to
--------------------
a trial by jury in any action or legal proceeding arising out of or relating to
this Agreement or any other Loan Document for the transactions contemplated
hereby or thereby.
12.14 Multiple Counterparts. This Agreement may be executed in any number
---------------------
of counterparts, all of which, taken together, shall constitute one and the same
instrument.
12.15 No Third Party Beneficiaries. This Agreement is for the sole and
----------------------------
exclusive benefit of the Company and Lender. This Agreement does not create,
and is not intended to create, any rights in favor of or enforceable by any
other Person. This Agreement may be amended or modified by the agreement of the
Company and Lender, without any requirement or necessity for notice to, or the
consent of or approval of any other Person.
12.16 Release Of Lender Liability. TO THE MAXIMUM EXTENT NOT PROHIBITED
---------------------------
BY LAW FROM TIME TO TIME IN EFFECT, THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY (AND AFTER IT HAS CONSULTED WITH ITS OWN ATTORNEY) IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT NO CLAIM MAY BE MADE BY THE COMPANY AGAINST THE
LENDER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS,
AGENTS OR INSURERS, OR ANY OF ITS OR THEIR SUCCESSORS AND ASSIGNS, FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY BREACH OR
WRONGFUL CONDUCT (WHETHER THE CLAIM IS BASED ON CONTRACT OR TORT OR DUTY IMPOSED
BY LAW) ARISING OUT OF, OR RELATED TO, THE TRANSACTIONS' CONTEMPLATED BY ANY OF
THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION, OR
EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH. IN FURTHERANCE OF THE
FOREGOING, THE COMPANY HEREBY WAIVES, RELEASES AND AGREES NOT TO XXX UPON ANY
CLAIM FOR ANY SUCH DAMAGES, WHETHER
55
OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
12.17 Entire Agreement; Amendment. This Agreement, the Note, and the
---------------------------
other Loan Documents referred to herein embody the final, entire Agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof The provisions of this Agreement and the other Loan
Documents to which the Company is a party may be amended or waived only by an
instrument in writing signed by the parties hereto.
12.18 Consents. With respect to any consent of Lender required by the
--------
provisions of Sections 7.3 and 7.11 hereof, Lender agrees, upon receipt of
written Notice from Company requesting its consent pursuant to such Sections, it
will use its best efforts to notify Company of its decision within seven (7)
Business Days from its receipt of Company's Notice; provided, however, if Lender
-------- -------
fails to notify Company of its decision within such time period, such failure
shall not be deemed consent of the Lender nor shall it impose any liability
whatsoever on the Lender.
12.19 No Oral Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL
------------------
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY:
--------
iOWN, INC., a California corporation
By: /s/ Xxxxxxx X. Xxxx
----------------------------------------
Name: Xxxxxxx X. Xxxx
--------------------------------------
Title: Vice President, Lending Services
-------------------------------------
LENDER
------
BANK UNITED
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
56
EXHIBITS:
--------
A - Advance Request
B - Existing Company Indebtedness
C - Procedures and Documentation for Warehousing Single-family Mortgage
Loans
D - Shipping Instructions
E - Trust Receipt
F - Officer's Certificate
G - Subsidiaries
H - Litigation
I - Trade Names
J - Secretary's Certificate
K - Bailee Letter
L - Investors
M - Legal Opinion
N - Promissory Note
57
Bank United
EXHIBIT "A"
-----------
ADVANCE REQUEST FORM
SINGLE-FAMILY MORTGAGE LOANS
Loan Information
----------------
Mortgage Company: [Company Name] Loan Number: __
Mortgagor:__________________________ Prepared By: __
Street Address:_____________________ Warehouse Date: __/__/____
City, State, Zip:___________________ SSN: __ __ __ - __ __ - __ __ __ __
Note Amount:$_______________________ Note Date: __/__/____
Advance Request:$___________________ X Wet X Regular (Dry)
Loan Specific Take-out Commitment? X Yes X No Mortgage Loan Interest Rate:___%
(if "Yes," Investor:______________________________.
Expiration date __/__/____. Take-out Price:______%)
LTV of Mortgage Loan is:___% (if over 100%, FICO score:_______)
Documentation is: X Stated Doc X Full Doc
Loan Type (check all that apply): X 1/st/ lien X 2/nd/ lien X FNMA/FHLMC X
FHA/VA X Jumbo X Subprime
Closing Agent Information
-------------------------
Closing Agent is: X Title Company X Attorney
Name: _____________________________ Phone(___) ___-____
Address:________________________________________________________________________
Method of Advance
-----------------
X Wire Transfer (instructions included) X Bank United Check
Wire Amount:$___________.____ Check Amount:
$___________.____
X Bank United Cashier's Check
Check Amount:
$___________.____
Please debit the $___________.____ difference from our account number __ __ __
__-__ __ __-__ __
Wire Instructions
-----------------
Receiving Bank:__________________ ABA Number:__ __ __-__ __ __-__ __ __
City:____________________________ State:_______________________________________
Account Name:____________________ Account Number:______________________________
Required Documentation
----------------------
Wet Settlement Advance Regular (Dry) Advance
---------------------- ---------------------
X Completed Advance Request form X Completed Advance Request form
X Copy of Purchase Commitment X Original Mortgage Note endorsed in blank
58
X Insured Closing Letter from Title Company X Original Assignment of Mortgage
in blank
X Closing Instructions from
Company to Closing Agent X Copy of Mortgage certified by
the Closing Agent as a true copy
closing by check, a copy of the check of the original sent for recording
We will deliver the following within 5 days: X Copy of Purchase Commitment
-------------------------------------------
Commitment X Insured Closing Letter from
Title Company or
X Original Mortgage Note endorsed in blank Closing Instructions from
X Original Assignment of Mortgage in blank Company to Closing Agent
X Copy of Mortgage certified by the Closing
Agent as a true copy of the original sent
for recording.
Bailee Pledge Agreement
-----------------------
The Company creates and grants in favor and for the benefit of the Lender a
security interest in and to the Single-family Mortgage Loan referenced herein
and all instruments and documents described as Required Documentation and has
given notice of same to the Closing Agent. The Company agrees that the
Assignment of Mortgage to the Investor will not be sent for recording prior to
the Investor's purchase of the Mortgage Loan. The company agrees that this
Bailee Pledge Agreement shall be binding upon and ensure to the benefit of the
legal representatives, successors, and assigns of the Lender and that all
rights, interests, duties, and liabilities arising hereunder shall be determined
according to the laws of the State of Texas.
Company:[COMPANY NAME]
a______________________________
By: _______________________________
Name: _______________________________
Title: _______________________________
Date: _______________________________
59
EXHIBIT "B"
-----------
LIST OF EXISTING INDEBTEDNESS OF COMPANY
----------------------------------------
----------------------------------------------------------------------------------------------------
LENDER TYPE OF COMMITMENT COLLATERAL OUTSTANDING
FINANCING AMOUNT BALANCE AS OF
_________, 1999
----------------------------------------------------------------------------------------------------
Comdisco Subordinated [*] See Attachment [*]
----------------------------------------------------------------------------------------------------
Debt (to be repaid in [*] installments)
----------------------------------------------------------------------------------------------------
[*] Confidential Treatment Requested
60
Attachment for Exhibit B
SECTION 3. SECURITY INTEREST
As security for the prompt complete and indefeasible payment when due (whether
at stated payment dates or otherwise) of all the Secured Obligations and in
order to Induce Lender to make the Loan upon the terms and subject to the
conditions of the Note(s), Borrower hereby assigns, conveys, Mortgages, pledges,
hypothecates and transfers to Lender for security purposes only, and hereby
grants to Lender a security interest in, all of Borrower's right title and
interest in, to and under each of the following (all of which being hereinafter
collectively called the "Collateral"):
(a) All Receivables;
(b) All Equipment;
(c) All Fixtures;
(d) All General Intangibles;
(e) All Inventory;
(f) All other goods and personal property of Borrower whether tangible or
intangible and whether now or hereafter owned or existing, leased,
consigned by or to, or acquired by, Borrower and wherever located; and
(g) To the extent not otherwise included, all Proceeds of each of the foregoing
and all accessions to, substitutions and replacements for, and rents,
profits and products of each of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BORROWER
61
EXHIBIT "C"
-----------
PROCEDURES AND DOCUMENTATION FOR WAREHOUSING
--------------------------------------------
SINGLE-FAMILY MORTGAGE LOANS
----------------------------
The following procedures and documentation requirements must be
observed in all respects by the Company. All documents must be satisfactory to
Lender in its sole discretion. Terms used below, which are not otherwise
defined, shall have the meanings given them in the Warehousing Credit and
Security Agreement, as amended, modified or renewed from time to time. The HUD,
FNMA and FHLMC form numbers referred to herein are for convenience only and the
Company shall use the equivalent forms required at the time of delivery of the
Mortgage Loans or Mortgage-backed Securities.
I. Prior to making an Advance that is not a Wet Settlement Advance, the
Lender must receive the following:
1. Copy of settlement or funding check issued to, or signed
wire transfer request directing funds to escrow/title
company or closing agent.
2. If not an Electronic Request, Original Request for Advance
against Single-Family Mortgage Loans (Exhibit "A").
-----------
3. Original signed Mortgage Note, endorsed by the Company in
blank with corresponding interim endorsements, if
applicable.
4. Copy of the Mortgage certified true by the escrow/title
company or closing agent.
5. Certified true copies of all interim assignments (recorded
or sent for recordation) of the Mortgage.
6. An Assignment of the Mortgage to the Lender in recordable
form but unrecorded.
7. Copy of specific Purchase Commitment.
II. Prior to making a Wet Settlement Advance, the Lender must receive the
following:
1. Copy of settlement or funding check issued to, or signed
wire transfer request directing funds to escrow/title
company or closing agent.
62
2. If not an Electronic Request, Original Request for Advance
against Single-Family Mortgage Loans (Exhibit "A").
-----------
3. Copy of specific Purchase Commitment.
4. A copy of the Company's final closing instructions to the
title company or closing agent, noting Lender's security
interest in the loan, as provided below:
"You are hereby notified that Bank United, a federal savings bank
(the "Lender") has a security interest in the promissory note,
the deed of trust or mortgage, and all other supporting documents
for the above referenced loan. Unless the Lender otherwise
instructs you, all loan documents are to be returned to the
undersigned company within twenty-four (24) hours after
settlement."
The Mortgage Note and other supporting documents described in Section
I must be received by the Lender within five (5) Business Days of the
date of the Wet Settlement Advance.
III. The Lender exclusively shall deliver Pledged Mortgages or Pledged
Securities and all related loan documents and/or pool documents to
Investor or Approved Custodian unless otherwise agreed in writing.
A. The following procedures are to be followed for deliveries of
Pledged Mortgages to Investors:
No later than 2:00 p.m. Houston, Texas time one (1) Business Day prior
to the expiration date of the Purchase Commitment, the Lender must receive the
following:
1. Signed or electronic shipping instructions for the delivery of
the Pledged Mortgages including the following:
a) Name and address of the office of the Investor to which the
loan documents are to be shipped and the preferred method of
delivery;
b) Instructions for endorsement of the Mortgage Note;
c) Names of Mortgagor and Mortgage Note Amounts of Pledged
Mortgages to be shipped; and
d) Number and expiration date of the Purchase Commitment.
2. All loan documents related to the Pledged Mortgages required for
delivery to the Investor.
63
3. For deliveries of Pledged Mortgages to FNMA for cash purchase,
the following additional documents are required:
a) Original Loan Schedule (FNMA Form 1068 or 1069) showing the
Lender's designated FNMA payee code as recipient of the loan
purchase proceeds.
4. For deliveries of Pledged Mortgages to FHLMC for cash purchase,
the following additional documents are required:
a) Original completed Warehouse Lender Release of Security
Interest (FHLMC Form 996) to be executed by the Lender.
b) Original Wire Transfer Authorization for a Cash Warehouse
Delivery (FHLMC Form 987), designating the Lender as the
Warehouse Lender and showing the cash collateral account
designated by the Lender as the receiving account for loan
purchase proceeds.
B. The following procedures are to be followed for deliveries of
Pledged Mortgages to Approved Custodians:
No later than one (1) Business Day prior to required delivery date to
the Approved Custodian, the Lender must receive the following:
1. Signed or electronic shipping instructions for the delivery of
the Pledged Mortgages to the Approved Custodian including the
following:
a) Name and address of the office of the Approved Custodian to
which the loan documents are to be shipped and the preferred
method of delivery;
b) Instructions for endorsement of the Mortgage Note; and
c) Names of Mortgagor and Mortgage Note Amounts of Pledged
Mortgages to be shipped.
d) Commitment number and expiration date of the Purchase
Commitment for the Pledged Securities.
2. All loan documents related to the Pledged Mortgages required for
the issuance of the Mortgage-backed Securities.
64
3. For FNMA Mortgage-backed Securities issuance, the following
additional documents are required:
a) Original Schedule of Mortgages (FNMA Form 2005 or 2025).
b) Original executed Security Release Certification (FNMA Form
2004) to be executed by the Lender.
c) Original Delivery Schedule (FNMA Form 2014), instructing
FNMA to issue the Mortgage-backed Securities in the name of
the Company with the Lender as pledgee and to deliver the
Mortgage-backed Securities to the Lender's custody account
at Banker's Trust (Account No. 92798) and bearing the
following instructions: These instructions may not be
changed without the prior written consent of Bank United.
4. For FHLMC Mortgage-backed Securities issuance, the following
additional documents are required:
a) Original Settlement Information and Delivery Authorization
(FHLMC Form 939), designating the Lender as the Warehouse
Lender and instructing FHLMC to deliver the Mortgage-backed
Securities to the Lender's custody account at Banker's
Trust, Account No. 92798.
5. For GNMA Mortgage-backed Securities issuance, the following
additional documents are required:
a) Signed original Schedule of Mortgages (HUD Form 11706).
b) Signed original Schedule of Subscribers (HUD Form 11705)
instructing GNMA to issue the Mortgage-backed Securities in
the name of the Company and designating Bankers Trust as
Agent for the Lender as the subscriber, using the following
language: BANKERS TRUST AS AGENT FOR BANK UNITED and deliver
the Mortgage-backed Securities to the Lender's custody
Account No. 92798 at Bankers Trust. The following
instructions must also be included on the form: "These
instructions may not be changed without the prior written
consent of Bank United."
c) Completed original Release of Security Interest (HUD Form
1711A) to be executed by the Lender.
Upon instruction by the Company, the Lender will complete the
endorsement of the Mortgage Note and make arrangements for the
delivery of the complete loan
65
package with the appropriate Bailee Letter to the Investor or Approved
Custodian. Upon receipt of Mortgage-backed Securities, the Lender will
cause such Mortgage-backed Securities to be delivered to the Investor
which issued the Purchase Commitment. Mortgage-backed Securities will
be released to the Investor only upon payment of the purchase proceeds
to the Lender. Cash proceeds of sales of Pledged Mortgages and Pledged
Securities shall be applied to related Advances outstanding under the
Commitment. Provided no Default exists, the Lender shall return any
excess proceeds of the sale of Mortgage Loans or Mortgage-backed
Securities to the Company, unless otherwise instructed in writing.
66
EXHIBIT "D"
-----------
FORM OF SHIPPING REQUEST AND AUTHORIZATION
------------------------------------------
[Company Letterhead]
Date: _______________________________
BANK UNITED
(Address]
Attention:____________________________ Re: Commitment No.________________
This letter is to serve as authorization for you to endorse and ship Loan
Documents for the following loans:
Loan Number Borrower Name Note Amount
----------- ------------- -----------
to the following address:
NAME:
ADDRESS:
ATTENTION:
Please endorse the notes as follows:
Please ship the Loan Documents either by ____________ or by such other courier
service we have specifically approved in writing. You are not responsible for
any delays in shipment or any other actions or inactions of the courier.
However, because the commitment expires on ___________, 19__, we ask that you
deliver the Loan Documents to the courier no later than ___________, 19__.
Please have the courier xxxx us by using our account no._____________. If you
should have any questions, or should feel the need for additional documentation,
please do not hesitate to call _________________________________.
iOWN, INC., a California corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
67
EXHIBIT "E"
-----------
TRUST RECEIPT
-------------
Trust Receipt No. ______________ ______________________, 19__
The undersigned, iOWN, INC., a California corporation (the "Company"),
acknowledges receipt from Bank United, a federal savings bank ("Lender"),
pursuant to that certain Warehousing Credit and Security Agreement (Single-
Family Mortgage Loans) dated effective as of October 8, 1999, by and between the
Company and Lender (the "Agreement"), of the following described property (the
"Trust Property"), possession of which is herewith entrusted to the Company for
the purposes set forth below:
Mortgage Loan No.________________________ Note Amount:____________________
Obligor:_________________________________
Purpose: [Specify nature of clerical or other documentation problem to be
corrected.]
The Company hereby acknowledges that a security interest in the Trust
Property and in the proceeds of the Trust Property has been granted to the
Lender pursuant to the Agreement.
In consideration of the delivery of the Trust Property by the Lender
to the Company, the Company hereby agrees to hold the Trust Property in trust
for the Lender as provided under and in accordance with all provisions of the
Agreement and to return the Trust Property to the Lender no later than the close
of business on the tenth day following the date hereof or, if such day is not a
Business Day, on the following Business Day. The Company further agrees that
the aggregate Collateral Value of Single-family Mortgage Loans with respect to
which notes or other documentation has been released under trust receipts, does
not exceed $500,000.00.
iOWN, INC., a California corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
Delivery to Company Acknowledged
BANK UNITED
By:_____________________________
Name:______________________________________________
Title:_____________________________________________
The undersigned, acknowledges that the above-mentioned Trust Property
has been returned to the Lender on ________________________, 19__.
68
BANK UNITED
By:___________________________________
Name:_________________________________
Title:________________________________
69
EXHIBIT "F"
-----------
OFFICER'S CERTIFICATE
---------------------
COMPANY: iOWN, INC., a California corporation
LENDER: BANK UNITED
DATE: ____________________________________________________________
REPORTING PERIOD: ___________________ ended ___________________, 199__
This certificate is delivered to Lender under the Warehousing Credit and
Security Agreement dated effective as of October 8, 1999, between Company and
Lender (the "Agreement"), all the defined terms of which have the same meanings
when used herein.
I hereby certify that: (a) I am, and at all times mentioned herein have been,
the duly elected, qualified, and acting officer of Company designated below; (b)
to the best of my knowledge, the Financial Statements of Company for the period
shown above (the "Reporting Period") and which accompany this certificate were
prepared in accordance with GAAP and present fairly the financial condition of
Company as of the end of the Reporting Period and the results of its operations
for the Reporting Period, (c) a review of the Agreement and of the activities of
the Company during the Reporting Period has been made under my supervision with
a view to determining Company's compliance with the covenants, requirements,
terms, and conditions of the Agreement, and such review has not disclosed the
existence during or at the end of the Reporting Period (and I have no knowledge
of the existence as of the date hereof) of any Event of Default or Default,
except as disclosed on Annex "A" hereto (which specifies the nature and period
---------
of existence of each Event of Default or Default if any, and what action Company
has taken, is taking, and proposes to take with respect to each); (d) the
calculations described on the attached Annex "A" evidence that the Company is in
---------
compliance with the requirements of Sections 7.5 and 7.6 of the Agreement at the
end, of the Reporting Period (or if Company is not in compliance, showing the
extent of non-compliance and specifying the period of non-compliance and what
actions the Company proposes to take with respect thereto; (e) the Company was,
as of the end of the Reporting Period, in compliance and good standing with
applicable FNMA, GNMA, FHLMC, and HUD net worth requirements.
iOWN, INC., a California corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
70
ANNEX "A"
---------
COMPANY NAME: iOWN, INC., a California corporation
REPORTING PERIOD: _______________________________________________________
All financial calculations set forth herein are as of the Reporting Period.
I. TANGIBLE NET WORTH
The Tangible Net Worth of the Company is:
GAAP Net Worth: $________
Minus: Intangible Assets, including Capitalized Servicing Rights: $________
Minus: Advances or loans to shareholders, officers or Affiliates $________
Minus: Investments in Affiliates: $________
Minus: Assets pledged to secure liabilities not included in Debt: $________
Minus: Any other HUD nonacceptable assets: $________
TANGIBLE NET WORTH: $________
II. ADJUSTED TANGIBLE NET WORTH
The Adjusted Tangible Net Worth of the Company is:
Tangible Net Worth (from above): $________
[*] $________
ADJUSTED TANGIBLE NET WORTH: $________
Minimum Adjusted Tangible Net Worth is [*]
Covenant Satisfied:_________________ Covenant Not Satisfied:_________
III. DEBT OF THE COMPANY
Total Liabilities: $________
71
DEBT: $___________
IV. DEBT TO ADJUSTED TANGIBLE NET WORTH
The ratio of Debt to Adjusted Tangible Net Worth is: _____to 1.
Maximum Debt to Adjusted Tangible Net Worth Ratio is [*].
Covenant Satisfied:_________________ Covenant Not Satisfied:____________
V. DEFAULTS OR EVENTS OF DEFAULT (disclose nature and period of existence and
action being taken in connection therewith; if none, state none)
72
EXHIBIT "G"
-----------
LIST OF SUBSIDIARIES
--------------------
------------------------------------------------------------------------------------------------
NAME ADDRESS OF STATE OF WHERE COMPANY
PRINCIPAL INCORPORATION QUALIFIED PERCENTAGE
OFFICE FOREIGN CO OWNERSHIP
------------------------------------------------------------------------------------------------
None.
------------------------------------------------------------------------------------------------
73
EXHIBIT "H"
-----------
DISCLOSURE OF PENDING LITIGATION
(Include the caption of the case, including styling, cause number, and court in
which it is pending, date filed, status of the proceedings, and description of
claims, counterclaims and damages asserted.)
None.
74
EXHIBIT "I"
-----------
TRADE NAMES OF COMPANY
----------------------
TRADE NAME JURISDICTION USED
Xxxx: iOwn, Inc. Federal Trademark, Service Xxxx
Owner Name: IOWN
(Applicant): Home Shark, Inc.
Owner Address:
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attorney of Record: Xxxxxxx X. Xx
Serial Number: 75-630471
Filing Date: 01/29/1999
Register: Principal
Type of Xxxx: Service Xxxx
International Class: 036
Goods and Services: on-line consumer and
business lending services via a global computer
information network
75
TRADE NAME JURISDICTION USED
Xxxx: Homeshark Federal Trademark, Service Xxxx
(Applicant): Refi America, Inc.
Owner Address:
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Owner Name: (Last Listed Owner)
Refi America, Inc.
Owner Address:
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attorney of Record: Xxxx X. Xxxxxxx
Serial Number: 75-169846
Filing Date: 09/23/1996
Register: Principal
Published for Opposition: 03/09/1999
Type of Xxxx: Service Xxxx
International Class: 036
Goods and Services: home purchase and sales
assistance services rendered via a global
computer information network, namely,
mortgage lending services. property listing
services, and providing information of use to
home buyers, home sellers, and real estate
brokers
76
EXHIBIT "J"
-----------
CERTIFICATE OF CORPORATE RESOLUTIONS
AND INCUMBENCY OF OFFICERS
(BORROWING AUTHORITY)
-------------------
I, the undersigned, hereby certify that I am the Secretary of iOWN, INC., a
corporation duly organized and existing under the laws of the State of
California (the "Corporation").
I further certify that true and correct copies of the Articles of
Incorporation and Bylaws of the Corporation together with all amendments thereto
are attached hereto as Exhibits "A" and "B", respectively, and that such
--------------------
articles and bylaws remain unaltered and in full force and effect.
I further certify that the following resolutions were duly adopted by the
Board of Directors of the Corporation at a meeting of the Board of Directors of
the Corporation, duly and legally called and held in accordance with the
Articles of Incorporation and Bylaws of the Corporation on the ___ day of
___________ 1999, at which meeting a quorum was present and voting throughout,
or (if the foregoing date was not completed) pursuant to a written consent
signed by all of the members of the Board of Directors of the Corporation in
accordance with the Articles of Incorporation and Bylaws of the Corporation, and
that such resolutions are now in full force and effect and have not been
amended, modified or revoked:
"RESOLVED, that each of the following officers of this Corporation:
Xxxxxx X. Xxxx, President
Xxx Xxxxxxxxxxx, Chief Financial Officer
Xxxxxxx X. Xxxx, Vice President, Lending Services
acting alone without the joinder of any other officer, is hereby
authorized in the name and on behalf of this Corporation (i) to
borrow from and to otherwise incur liabilities to BANK UNITED
("Lender") from time to time, in such amounts, for such periods
of time, at such rates of interest and payable in such manner as
such officers may deem necessary or proper, and (ii) as evidence
of such indebtedness so incurred, to execute and deliver to
Lender such promissory notes, loan agreements and other
instruments, documents and agreements, containing such terms and
provisions as may be acceptable or agreeable to any one of such
officers, such acceptance and agreement to be conclusively
evidenced by the execution and delivery thereof by any one of
such officers;
FURTHER RESOLVED, that this Corporation grant to Lender a
lien and/or security interest upon such assets of this
Corporation as may be agreed upon between any one of the above
named officers and Lender, as security for all present and future
indebtedness, obligations and liabilities of this Corporation to
Lender and that each of said officers, acting alone without the
joinder of any other officer, is hereby authorized in the name
and on behalf of this Corporation to
77
execute and deliver such security agreements, deeds of trust and
other instruments, documents and agreements as may be required by
Lender in connection with each such grant of a lien and/or
security interest and containing such terms and provisions as may
be acceptable or agreeable to any one of such officers, such
acceptance and agreement to be conclusively evidenced by the
execution and delivery thereof by any one of such officers;
FURTHER RESOLVED, that any one of the above named officers,
acting alone without the joinder of any other officer, is hereby
authorized in the name and on behalf of this Corporation to take
such further action and to do all things that any one of such
officers deems necessary in connection with any (i) increases,
renewals, extensions, rearrangements, retirements or compromises
of any indebtedness, obligations and liabilities owing to Lender
from time to time by this Corporation either directly or by
assignment, and (ii) amendments to any of the provisions
contained in any instruments, documents or agreements evidencing,
securing, governing and/or pertaining to any indebtedness,
obligations and liabilities owing to Lender by this Corporation
from time to time;
FURTHER RESOLVED, that any one of the above named officers,
or any one of the following representatives of this Corporation:
Xxxxxx Xxxxxxxxxx
Xxxxx Xxxxxxx
Xxx Xxxxxxxx
acting alone without the joinder of any other officer or
representative, is hereby authorized in the name and on behalf of
this Corporation to (i) make requests for advances under any
credit facility that this Corporation may have with Lender from
time to time, and (ii) do or cause to be done all such acts or
things and to sign and deliver, or cause to be signed and
delivered, all such instruments, documents, agreements and
certificates (including without limitation, any and all notices
and certificates required or permitted to be given or made to
Lender under the terms of any of the instruments, documents or
agreements executed on behalf of this Corporation in connection
with these resolutions), as any and all of such officers or
representatives may deem necessary, advisable or appropriate to
effectuate and carry out the purposes and intent of the foregoing
resolutions and to perform the obligations of this Corporation
under all instruments, documents and agreements executed on
behalf of this Corporation in connection with any indebtedness,
obligations or liabilities incurred by this Corporation to Lender
from time to time;
FURTHER RESOLVED, that any one of the above named officers,
acting alone without joinder of any other officer or
representative is hereby authorized in the name and on behalf of
this Corporation (i) to sell and transfer notes, securities and
financial instruments of this Corporation to the Lender, from
time to time, in
78
such amounts and on such terms and conditions and in such manner
as any one of such officers may deem necessary or proper and (ii)
in connection therewith, to execute and deliver to the Lender a
master repurchase agreement and such other documents and
agreements containing such terms and provisions as may be
acceptable or agreeable to any one of such officers, such
acceptance and agreement to be conclusively evidenced by the
execution and delivery thereof by any one of such officers;
FURTHER RESOLVED, that all acts, transactions or agreements
with Lender undertaken prior to the adoption of the foregoing
resolutions by any one or more of the officers and/or
representatives of this Corporation in its name and on its behalf
in connection with the foregoing matters are hereby ratified,
confirmed and adopted by this Corporation; and
FURTHER RESOLVED, that each of the officers of this
Corporation is hereby authorized and directed to certify these
resolutions to Lender;
FURTHER RESOLVED, the foregoing resolutions shall continue
in full force and effect, and the Lender is authorized to rely
upon the foregoing resolutions unless and until (i) countermanded
by resolution of the Board of Directors of this Corporation, and
(ii) a copy of such resolution, properly certified by an officer
of this Corporation, has actually been received by Lender."
I further certify that the foregoing resolutions do not conflict with the
Articles of Incorporation or Bylaws of the Corporation, or any amendments
thereto.
I further certify that neither the seal of the Corporation, nor the
attestation by the Secretary, Assistant Secretary or any other officer of the
Corporation, is necessary to make any instruments, documents or agreements
executed by the officers or representatives of this Corporation pursuant to the
foregoing resolutions, enforceable against the Corporation, unless such seal is
affixed to, or such attestation is provided on, such instruments, documents or
agreements.
I further certify that the officers of the Corporation set forth below have
been duly elected and qualified and as of the date hereof hold the specified
offices with the Corporation, that the signature set forth beside each officer's
name is the true signature of such officer, and that the signature set forth
beside the name of each of the representatives specified in the *foregoing
resolutions is the true signature of such representative:
TITLE TYPED NAME SIGNATURE
----- ---------- ---------
President Xxxxxx X. Xxxx --------------------------
Chief Financial Officer Xxx Xxxxxxxxxxx --------------------------
Vice Pres., Lending Services Xxxxxxx X. Xxxx --------------------------
Xxxxxx Xxxxxxxxxx --------------------------
Xxxxx Xxxxxxx --------------------------
Xxx Xxxxxxxx --------------------------
79
IN WITNESS WHEREOF, I hereunto subscribe my name this 8/th/ day of October,
1999.
By:__________________________________
______________, Secretary
STATE OF CALIFORNIA (S)
(S)
COUNTY OF ____________________ (S)
The foregoing instrument was acknowledged before me this 8th day of October,
1999, by Secretary of iOWN, INC., a California corporation, on behalf of said
corporation.
__________________________________
{Seal} NOTARY PUBLIC, STATE OF CALIFORNIA
80
EXHIBIT "K"
BAILEE LETTER
-------------
(Investor Name and Address)
Re: Purchase of Mortgage Loans from iOWN, INC., a California corporation.
Ladies and Gentlemen:
Attached please find those Mortgage Loans listed separately on the attached
schedule, which Mortgage Loans are owned by iOWN, INC., a California corporation
(the "Company") and are, being delivered to you for purchase.
The Mortgage Loans comprise a portion of the Collateral under (and as the
term "Collateral" and capitalized terms not otherwise defined hereunder are
defined in) that certain Warehousing Credit and Security Agreement (Single-
family Mortgage Loans) ("Warehouse Agreement) dated effective as of October 8,
1999, by and between the Company and BANK UNITED, a federal savings bank
("Lender"). Each of the Mortgage Loans is subject to a security interest in
favor of Lender, which security interest shall be automatically released upon
our receipt of the full amount due to the Lender under the Warehouse Agreement
in connection with such Mortgage Loans (as set forth on the schedule attached
hereto) by wire transfer to the following account:
Bank United
Houston, Texas
ABA #000000000
Credit:____________
Account:_________________
Until payment therefor is received, the aforesaid security interest therein
will remain in full force and effect, and you shall hold possession of such
Collateral and the documentation evidencing same as custodian, agent and bailee
for and on behalf of Lender. In the event any Mortgage Loan is unacceptable for
purchase, return the reject item directly to the undersigned at the address set
forth below. In no event shall any Mortgage Loan be returned or sales proceeds
remitted in full no later than thirty (30) days from the date hereof. If you are
unable to comply with the above instructions, please so advise the undersigned
immediately.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS LETTER,
YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR LENDER ON THE TERMS
DESCRIBED IN THIS LETTER. THE UNDERSIGNED REQUESTS THAT YOU ACKNOWLEDGE RECEIPT
OF THE ENCLOSED MORTGAGE LOANS AND THIS LETTER BY SIGNING AND RETURNING THE
ENCLOSED COPY OF
81
THIS LETTER TO THE UNDERSIGNED AT THE FOLLOWING ADDRESS: 0000 Xxxxxxxxx Xxxxxxx,
xxxxx 0000 Xxxxxxx, Xxxxx 00000.
HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.
Sincerely,
BANK UNITED
By:__________________________________________
Name:________________________________________
Title:_______________________________________
IRREVOCABLY ACKNOWLEDGED
AND AGREED TO:
[INVESTOR]
By:____________________________
Name:__________________________
Title:_________________________
82
EXHIBIT "L"
-----------
LIST OF INVESTORS
-----------------
[*]
[*] Confidential Treatment Requested
83
EXHIBIT "M"
-----------
OPINION LETTER
--------------
October 8, 1999
Bank United
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Re: Warehousing Credit and Security Agreement (Single-Family Mortgage
Loans)
Gentlemen:
We have acted as special counsel for iOWN, INC., a California corporation
(the "Company"), in connection with the negotiation and execution of the
following documents (collectively, the "Credit Documents"):
1. the Warehousing Credit and Security Agreement (Single-Family Mortgage
Loans dated effective as of October 8, 1999 (the "Loan Agreement"),
between the Company and Bank United (the "Lender"); and
2. the Note dated effective as of October 8, 1999 (the "Note"), executed
and delivered by the Company.
Unless otherwise provided herein, terms used herein which are defined in
the Credit Documents (including schedules and exhibits thereto) and not defined
herein shall have the meanings attributed thereto in the Credit Documents.
A. Basis of Opinion.
----------------
As the basis for the conclusions expressed in this opinion letter, we have
examined, considered and relied upon the following:
(1) A copy of each of the Credit Documents executed by the Company;
(2) Recent Certificates of Domestic Status of the Company issued by
the Secretary of State of the State of California;
(3) A copy of the Articles of Incorporation and amendments thereto,
and a copy of the Bylaws of the Company, in each case as certified to us by the
Company Certificate;
(4) Such other documents and records as we have deemed relevant,
necessary or appropriate in connection with or as a basis for the opinions
hereafter set forth; and
(5) Such matters of law as we have considered necessary or
appropriate for the expression of the opinions contained herein.
For the purposes of this opinion letter, the documents and information-
referred to in this Section A are herein collectively referred to as the
"Documents".
B. Opinions.
--------
Based upon our examination and consideration of the foregoing Documents,
and subject to the comments, assumptions, exceptions, qualifications and
limitations set forth in Section C below, we arc of the opinion that:
84
EXHIBIT "M"
-----------
OPINION LETTER
--------------
October 8, 1999
Bank United
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Re: Warehousing Credit and Security Agreement (Single-Family Mortgage
Loans)
Gentlemen:
We have acted as special counsel for iOWN, INC., a California corporation
(the "Company"), in connection with the negotiation and execution of the
following documents (collectively, the "Credit Documents"):
1. the Warehousing Credit and Security Agreement (Single-Family Mortgage
Loans dated effective as of October 8, 1999 (the "Loan Agreement"),
between the Company and Bank United (the "Lender"); and
2. the Note dated effective as of October 8, 1999 (the "Note"), executed
and delivered by the Company.
Unless otherwise provided herein, terms used herein which are defined in
the Credit Documents (including schedules and exhibits thereto) and not defined
herein shall have the meanings attributed thereto in the Credit Documents.
A. Basis of Opinion.
----------------
As the basis for the conclusions expressed in this opinion letter, we have
examined, considered and relied upon the following:
(1) A copy of each of the Credit Documents executed by the Company;
(2) Recent Certificates of Domestic Status of the Company issued by
the Secretary of State of the State of California;
(3) A copy of the Articles of Incorporation and amendments thereto,
and a copy of the Bylaws of the Company, in each case as certified to us by the
Company Certificate;
(4) Such other documents and records as we have deemed relevant,
necessary or appropriate in connection with or as a basis for the opinions
hereafter set forth; and
(5) Such matters of law as we have considered necessary or
appropriate for the expression of the opinions contained herein.
For the purposes of this opinion letter, the documents and information-
referred to in this Section A are herein collectively referred to as the
"Documents".
B. Opinions.
--------
Based upon our examination and consideration of the foregoing Documents,
and subject to the comments, assumptions, exceptions, qualifications and
limitations set forth in Section C below, we arc of the opinion that:
84
EXHIBIT "N"
-----------
PROMISSORY NOTE
---------------
$10,000,000.00 Houston, Texas October 8, 1999
FOR VALUE RECEIVED, the undersigned, iOWN, INC., a California corporation
(herein called the "Borrower"), hereby promises to pay to the order of BANK
UNITED, a federal savings bank (the "Lender" or, together with its successors
and assigns, the "Holder") whose principal place of business is 0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, or at such other place as the Holder
may designate from time to time, the principal sum of TEN MILLION AND NO/100
DOLLARS ($ 10,000,000.00) or so much thereof as may be outstanding from time to
time pursuant to the Warehousing Credit and Security Agreement (the "Agreement
dated the date hereof between the Borrower and the Lender, as the same may be
amended or supplemented from time to time, and to pay interest on said principal
sum or such part thereof as shall remain unpaid from time to time, from the date
of each Advance until repaid in full, and all other fees and charges due under
the Agreement, at the rate and at the times set forth in the Agreement. All
payments hereunder shall be made in lawful money of the United States and in
immediately available funds.
This Note is given to evidence an actual warehouse line of credit in the
above amount and is the Note referred to in the Agreement and is entitled to the
benefits thereof Reference is hereby made to the Agreement (which is
incorporated herein by reference as fully and with the same effect as if set
forth herein at length) for a description of the Collateral, a statement of the
covenants and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms used
herein, unless otherwise defined herein, shall have the meanings given them in
the Agreement.
The entire unpaid principal balance of this Note plus all accrued and
unpaid interest shall be due and payable in [*].
This Note may be prepaid in whole or in part at any time without premium or
penalty.
Should this Note be placed in the hands of attorneys for collection, the
Borrower agrees to pay, in addition to principal and interest, fees and charges
due under the Agreement, and all costs of collecting this Note, including
reasonable attorneys' fees and expenses.
This Note shall be construed and enforced in accordance with the laws of
the State of Texas, without reference to its principles of conflicts of law, and
applicable federal laws of the United States of America.
This Note is secured by all security agreements, collateral assignments,
deeds of trust and lien instruments executed by the Borrower in favor of Lender,
or executed by any other Person as security for this Note, including any
executed prior to, simultaneously with, or after the date of this Note.
[*] Confidential Treatment Requested
86
The Borrower and any and each co-maker, guarantor, accommodation party,
endorser or other Person liable for the payment or collection of this Note
expressly waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, bringing of suit, and diligence in
taking any action to collect amounts called for hereunder and in the handling of
Collateral at any time existing as security in connection herewith, and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder or in
connection with any Lien at any time had or existing as security for any amount
called for hereunder.
It is the intention of the parties hereto to conform strictly to usury laws
applicable to the Lender. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law (including the laws of the United States
of America and the State of Texas), then, in that event notwithstanding anything
to the contrary herein or in the Agreement or in any other Loan Document or
agreement entered into in connection with or as security for this Note, it is
agreed as follows: (i) the aggregate of all consideration which constitutes
interest under law applicable to the Lender that is contracted for, taken,
reserved, charged, or received herein or under the Agreement or under any of the
other aforesaid Loan Documents or agreements or otherwise in connection herewith
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be credited by the Lender on the principal
amount of the Obligations (or, if the principal amount of the Obligations shall
have been paid in fall, refunded by the Lender to the Borrower, as required);
and (ii) in the event that the maturity of this Note is accelerated by reason of
an election of the Lender resulting from any Event of Default under the
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to the
Lender may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in the Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Obligations (or, if the principal amount of the
Obligations shall have been paid in full, refunded by the Lender to the
Borrower, as required). Without limiting the foregoing, all calculations of the
rate of interest taken, reserved, contracted for, charged, received or provided
for under this Note or any of the Loan Documents which are made for the purpose
of determining whether the interest rate exceeds the Maximum Rate shall be made,
to the extent allowed by law, by amortizing, prorating, allocating and spreading
in equal parts during the period of the full stated term of the loan evidenced
hereby, all interest at any time taken, reserved, contracted for, charged,
received, or provided for under this Note of any of the Loan Documents. To the
extent that Chapter 303 of the Texas Finance Code is relevant for purposes of
determining the Maximum Rate, the Lender hereby elects to determine the
applicable rate ceiling under such statute by the weekly rate ceiling from time
to time in effect, subject to the Lender's right subsequently to change such
method in accordance with applicable law.
BORROWER:
---------
87
iOWN, INC., a California corporation
By:__________________________________________
Name:________________________________________
Title:_______________________________________
88
EXHIBIT "A"
-----------
{See Attached}
89
EXHIBIT "B"
-----------
{See Attached}
90
