$5,000,000 WAREHOUSING LINE REVOLVING
CREDIT AGREEMENT
by and between
WESTMARK MORTGAGE CORPORATION
and
HOUSEHOLD FINANCIAL SERVICES, INC.
Dated as of April 7, 1997
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS; INTERPRETATION ................................... 1
Section 1.1. Definitions ............................................. 1
Section 1.2. Interpretation .......................................... 7
SECTION 2. THE CREDIT ................................................... 7
Section 2.1. The Revolving Credit ................................... 7
Section 2.1. Applicable Interest Rates .............................. 7
Section 2.3. Minimum Borrowing Amounts .............................. 8
Section 2.4. Borrowing Procedures ................................... 8
Section 2.5. Prepayments ............................................ 8
Section 2.6. The Note ............................................... 9
Section 2.7. Commitment Terminations ................................ 9
SECTION 3. FEES AND PAYMENTS ........................................... 9
Section 3.2. Audit Fees ............................................ 9
Section 3.3. Place and Application of Payments .................. 10
SECTION 4. THE COLLATERAL .............................................. 10
Section 4.1. The Collateral ........................................ 10
Section 4.2. Further Assurances .................................... 10
SECTION 5. REPRESENTATIONS AND WARRANTIES ............................. 10
Section 5.1. Organization and Qualification ....................... 10
Section 5.2. Subsidiaries ......................................... 11
Section 5.3. Corporate Authority and Validity of Obligations....... 11
Section 5.4. Use of Proceeds ...................................... 11
Section 5.5. Financial Reports .................................... 11
Section 5.6. No Material Adverse Change ........................... 12
Section 5.7. Full Disclosure ...................................... 12
Section 5.8. Good Title ........................................... 12
Section 5.9. Investment Company ................................... 12
Section 5.10. Litigation and Other Controversies ................... 12
Section 5.11. Taxes ................................................ 12
Section 5.12. Approvals ............................................ 13
Section 5.13. Affiliate Transactions ............................... 13
Section 5.14. ERISA ................................................ 13
Section 5.15. Compliance with Laws ................................. 13
Section 5.16. Other Agreements ..................................... 14
Section 5.17. No Defaults .......................................... 00
-x-
XXXXXXX 0. CONDITIONS PRECEDENT ........................................ 14
Section 6.1. Initial Loan .......................................... 14
Section 6.2. All Loans ............................................. 15
SECTION 7. COVENANTS .................................................. 15
Section 7.1. Maintenance of Business .............................. 15
Section 7.2. Maintenance of Property .............................. 15
Section 7.3. Taxes and Assessments ................................ 15
Section 7.4. Insurance ............................................ 16
Section 7.5. Financial Reports .................................... 16
Section 7.6. Indebtedness for Borrowed Money ...................... 17
Section 7.7. Liens ................................................ 17
Section 7.8. Mergers, Consolidations and Sales .................... 18
Section 7.9. ERISA ................................................ 18
Section 7.10. Compliance with Laws ................................. 19
Section 7.11. Burdensome Contracts with Affiliates ................. 19
Section 7.12. Maintenance of Subsidiaries .......................... 19
Section 7.13. Change in the Nature of Business ..................... 19
SECTION 8. EVENTS OF DEFAULT AND REMEDIES ............................. 19
Section 8.1. Events of Default ..................................... 19
Section 8.2. Remedies Certain Events of Default .................... 21
Section 8.3. Remedies Other Events of Default ...................... 21
Section 8.4. Expenses .............................................. 21
SECTION 9. MISCELLANEOUS............................................... 21
Section 9.1. No Waiver of Rights .................................. 21
Section 9.2. NonBusiness Day ...................................... 22
Section 9.3. Documentary Taxes .................................... 22
Section 9.4. Survival of Representations .......................... 22
Section 9.5. Survival of Indemnities .............................. 22
Section 9.6. Notices .............................................. 22
Section 9.7. Counterparts ......................................... 23
Section 9.9. Successors and Assigns ............................... 23
Section 9.9. Amendments ........................................... 23
Section 9.10. Fees and Indemnification ............................. 23
Section 9.11. Governing Law ........................................ 24
Section 9.12. Headings ............................................. 24
Section 9.13. Entire Agreement ..................................... 24
Section 9.14. Terms of Collateral Documents Not Superseded ......... 24
Section 9.15. Construction ......................................... 24
-ii-
CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of this 7th day of April, 1997 by and
between HOUSEHOLD FINANCIAL SERVICES, INC., a Delaware corporation with its
corporate office at 0000 Xxxxxxx xxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
("Lender") and Westmark Mortgage Corporation, a California corporation with its
principal office at 000 XX 0xx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxx 00000 (the
"Borrower").
RECITALS
WHEREAS, the Borrower has requested the Lender to provide the Borrower
with a revolving warehouse line of credit facility for use by the Borrower in
connection with its acquisition or origination of mortgage loans and, subject to
the terms and conditions set forth herein, the Lender has agreed to provide such
facility.
NOW THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION
Section 1.1. Definitions. The following terms when used herein have the
following meanings:
"Additional Required Documents" shall mean with respect to any
Mortgage Loan, those items listed on Exhibit C-1 hereto.
"Affiliate" means any Person, directly or indirectly controlling or
controlled by, or under direct or indirect common control with, another Person.
A Person shall be deemed to control another Person for the purposes of this
definition if such Person possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
Person, whether through the ownership of voting securities, common directors,
trustees or officers, by contract or otherwise.
"Borrowing Base" means, as of any time it is to be determined, 100% of the
then outstanding unpaid amount of Eligible Mortgage Loans.
"Business Day" means any day other than a Saturday or Sunday on which
banks are not authorized or required to close in Chicago, Illinois.
"Closing Agent" means any title company approved in writing by the Lender.
-1-
"Collateral" means all properties, rights, interests and privileges from
time to time subject to the Liens granted to the Lender or the Collateral Agent
for the benefit of the Lender pursuant to the Collateral Documents.
"Collateral Agent" means First Union Bank of North Carolina and any
successors thereto appointed as Collateral Agent under the Security Agreement
and the other Loan Documents.
"Collateral Documents" means the Security Agreement and all other security
agreements, financing statements and other documents as shall from time to time
secure the Note or any other obligations of the Borrower hereunder or in
connection herewith.
"Commitment" is defined in Section 2.1 hereof.
"Default" means any event or condition the occurrence of which would,
with the passage of time or the giving of notice, or both, constitute an Event
of Default.
"Domestic Rate" means for any day the rate of interest published from time
to time in the Money Rate section of The Wall Street Journal as the prevailing
prime rate of United States' largest banks; or, if The Wall Street Journal shall
cease to publish such a rate, then the rate from time to time announced by
Household Bank, N.A. as its prime commercial rate, with any change in such rate
resulting from a change in the relevant prime rate to be effective as of the
date of the relevant change in such prime rate.
"Eligible Mortgage Loan" shall mean any Mortgage Loan having all of the
following characteristics:
(i) is the legal, valid and binding obligation of the maker thereof in
full force and effect and is enforceable in accordance with its terms;
(ii) is either a first or second Mortgage Loan which comports in all
respects in all respects with General Underwriting Guidelines;
(iii) was made or acquired by the Borrower in the ordinary course of the
Borrower's business with the General Underwriting, Guidelines, was in an
original principal amount of not less than $10,000 and not more than $400,000,
such Mortgage Loan was fully funded, the Borrower has no obligation to make
future advances thereunder and the Borrower holds good and indefeasible sole
title to such Mortgage Loan subject to no claims, liens, charges or other rights
of any other Person other than, in the case of a second Mortgage Loan, the
holder of a Permitted First Mortgage Lien;
(iv) no payment under such Mortgage Loan is more than thirty (30) days
past the due date set forth in the underlying promissory note and mortgage (or
deed of trust);
(v) the Collateral Agent has a perfected Lien and security interest in
such Mortgage Loan free and clear of any Liens or claims of any other Person
except, in the case of a second Mortgage Loan, the holder of a Permitted First
Mortgage Lien;
-2-
(vi) such Mortgage Loan has not been included in the Borrowing Base for
more than sixty (60) days;
(vii) such Mortgage Loan contains the entire agreement of the parties
thereto with respect to the subject matter thereof and is not a Rewritten
Mortgage Loan;
(viii) such Mortgage Loan is secured by a valid and subsisting first or
second, as the case may be, mortgage lien of record on the Property covered by
the related mortgage or deed of trust subject only to (1) the Lien of current
real property taxes and assessments not yet due and payable; (2) covenants,
conditions and restrictions, rights of way, easements and other matters of the
public records, as of the date of recording, being acceptable to mortgage
lending institutions generally and specifically referred to in a lender's title
insurance policy delivered to the originator of said Mortgage Loan and (i)
referred to or otherwise considered in the appraisal made for the originator of
said Mortgage Loan or (ii) which do not materially adversely affect the
appraised value of the Property as set forth in such appraisal; (3) other
matters to which like properties are commonly subject which do not materially
interfere with the benefits of the security intended to be provided by said
Mortgage Loan or the use, enjoyment, value or marketability of the related
Property; or (4) in the case of a second Mortgage Loan, a Permitted First
Mortgage Lien;
(ix) such Mortgage Loan is free of any default of any party thereto
(including the Borrower), offsets, defenses or counterclaims to such Mortgage
Loan, including the obligation of the related obligor to pay the unpaid
principal and interest on the underlying promissory note and free from any
rescission, cancellation or avoidance whether by operation of law or otherwise;
(x) either (1) a lender's title insurance policy, issued standard American
Land Title Association form, or such other form reasonably satisfactory to the
Lender by the applicable Closing Agent, in favor of the Borrower and such
Borrower's successors and assigns (or the original lender and such lender's
successors and assigns) in an amount at least equal to the remaining principal
amount of such Mortgage Loan insuring the mortgagee's interest under the related
Mortgage Loan as the holder of a valid first or second mortgage lien of record
on the related Property subject only to exceptions described in clause (vii)
above, was effective on the date of the origination or acquisition, as the case
may be, of such Mortgage Loan, and, such policy will be valid and thereafter
such policy shall continue in full force and effect; or (2) a title opinion was
rendered on the effective date of the origination or acquisition, as the case
may be, of such Mortgage Loan, subject only to exceptions described in clause
(viii) above;
(xi) the Property subject to such Mortgage Loan is Property. which is
zoned and suitable for residential or recreational purposes;
(xii) there is no proceeding pending or threatened for the total or
partial condemnation of the Property subject to such Mortgage Loan, nor is such
a proceeding currently occurring, and each Property is undamaged by waste, fire,
earthquake, earth movement or other casualty;
(xiii) no improvements on adjoining property encroach upon the Property
subject to such Mortgage Loan, and are stated in the title insurance policy and
affirmatively insured and
-3-
such Property constitutes a legally subdivided parcel separate from any real
property not covered by the Mortgage;
(xiv) with respect to each Mortgage Loan secured by a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such deed of trust, and no
fees or expenses are or will become payable by the owners to the trustee under
the deed of trust, except in connection with a trustee's sale after default by
the related mortgagor;
(xv) the mortgage (or deed of trust) securing such Mortgage Loan contains
customary and enforceable provisions which render the rights and remedies of the
holder thereof adequate for the realization against the related Property of the
benefits of the security, including (A) in the case of a deed of trust, by
trustee's sale and (B) otherwise by judicial foreclosure. There is no homestead
or other exemption available which could materially interfere with the right to
sell the related Property at a trustee's sale or the right to foreclose the
related mortgage;
(xvi) if and to the extent called for under the General Underwriting
Guidelines, an appraisal was performed with respect to each Mortgage Loan;
(xvii) the Borrower has no knowledge that there exist on the Property
subject to such Mortgage Loan any hazardous materials, regulated substances,
hazardous substances, hazardous wastes or solid wastes, as such terms are
defined in the Comprehensive Environmental Response Compensation and Liability
Act, the Resource Conservation and Recovery Act of 1996, or other federal,
state or local environmental legislation;
(xviii) such Mortgage Loan shall not be due from an Affiliate, subsidiary,
officer or employee of any Borrower, from the United States or any agency or
department thereof; or from any foreign debtor or borrower;
(xix) such Mortgage Loan is and shall be evidenced by only one original
mortgage note;
(xx) each mortgage (or deed of trust) or an assignment thereof relating to
such Mortgage Loan shall identify the Borrower, as the mortgagee;
(xxi) the Required Documents for said Mortgage Loan have been delivered to
the Collateral Agent or to the applicable Closing Agent which has executed and
delivered an Escrow Agreement satisfactory to the Lender prior to the
inclusion of said Mortgage Loan in the Borrowing Base and, if the Lender or the
Collateral Agent has so requested in writing, the Additional Required Documents
have also been delivered to the Collateral Agent or the applicable Closing Agent
on terms and conditions set forth above;
(xxii) if said Mortgage Loan was not closed and recorded at the date said
Mortgage Loan was first included in the Borrowing Base, said Mortgage Loan was
closed and recorded no later than the second Business Day immediately following
the date first included in the Borrowing Base.
-4-
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.
"Escrow Agreement" means an agreement in the form attached hereto as
Exhibit I or in such other form as is acceptable to the Lender.
"Event of Default" means any event or condition specified in Section 8.1
hereof.
"GAAP" means generally acceptable accounting principles as in effect from
time to time, applied by the Borrower and its Subsidiaries as a basis consistent
with the preparation of the Borrower's most recent financial statements
furnished to the Lender pursuant to Section 5.5 hereof.
"General Underwriting Guidelines" shall mean the general underwriting
guidelines set forth on Exhibit H hereto.
"Indebtedness for Borrowed Money" means for any Person (without
duplication) (i) all indebtedness created, assumed or incurred in any manner by
such Person representing money borrowed (including by the issuance of debt
securities), (ii) all indebtedness for the deferred purchase price of property
or services (other than trade accounts payable arising in the ordinary course of
business), (iii) all indebtedness secured by any Lien upon Property of such
Person, whether or not such Person has assumed or becomes liable for the payment
of such indebtedness, (iv) all Capitalized Lease Obligations of such Person and
(v) all obligations of such Person on or with respect to letters of credit,
bankers' acceptances and other extensions of credit whether or not representing
obligations for borrowed money.
"Lien" means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor under any conditional sale, capital lease or other title
retention arrangement.
"Loans" means and includes loans made under the Revolving Credit, and each
of them singly.
"Loan Documents" means this Agreement, the Note and the Collateral
Documents.
"Material Plan" is defined in Section 8.1(h) hereof.
"Mortgage Loan" shall mean a loan secured by real estate including without
limitation: (i) a promissory note and related mortgage (or deed of trust) and
any other security documents, (ii) all reserves, guaranties and insurance
policies, including without limitation, all mortgage and title insurance
policies and rights of the owner of such loan to retain all or any part of such
reserves or to return premiums or payments with respect thereto and (iii) all
right, title and interest of the owner of such Mortgage Loan in the Property
covered by said mortgage (or deed of trust).
-5-
"Note" is defined in Section 2.6 hereof
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Note, all accrued and unpaid fees and all other obligations of
the Borrower to the Lender or the Collateral Agent arising under the Loan
Documents, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever evidenced,
held or acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.
"Permitted First Mortgage Lien" means any first mortgage lien permitted
under General Underwriting Guidelines.
"Person" means an individual, partnership, corporation, association,
trust, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code and either (i) is maintained by a member of the Controlled Group for
employees of a member of the Controlled Group, (ii) is maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions, or (iii) under which a member of
the Controlled Group has any liability, including any liability by reason of
having been a substantial employer within the meaning of Section 4063 of ERISA
at any time during the preceding five years or by reason of being deemed a
contributing sponsor under Section 4064 of ERISA.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Required Documents" means, with respect to any Mortgage Loan, those
items listed on Exhibit C hereto.
"Revolving Credit" is defined in Section 2.1 hereof.
"Rewritten Mortgage Loan" means any Mortgage Loan in respect of which
(i) the original terms have been rewritten, restructured or otherwise modified
or (ii) forbearance has been granted; provided, however, that a Rewritten
Mortgage Loan shall not include a Mortgage Loan as to which the Borrower has
permitted an assumption or granted a partial release in accordance with its
prior practices and consistent with General Underwriting Guidelines.
"Security Agreement" means that certain Security and Collateral Agency
Agreement dated of even date herewith among the Borrower, the Collateral Agent
and the Lender, as the same may from time to time be amended.
-6-
"Subsidiary" means any corporation or other entity of which more than
fifty percent (50%) of the outstanding voting stock or comparable equity
interests (including interests as a limited partner in a limited partnership) is
at the time directly or indirectly owned by the Borrower, by one or more of its
Subsidiaries, or by the Borrower and one or more of its Subsidiaries.
"Termination Date" shall mean March 31, 1998, or such earlier date on
which the Commitment is terminated in whole pursuant to Sections 2.6, 8.2 or 8.3
hereof.
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which the present value of all vested nonforfeitable
accrued benefits under such Plan exceeds the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plan, but only to the extent that such excess represents
a potential liability of a member of the Controlled Group to the PBGC or the
Plan under Title IV of ERISA.
"Welfare Plan" means a "welfare plan," as defined in Section 3(l) of
ERISA.
"Wholly-Owned" means a Subsidiary of which all of the issued and
outstanding shares of stock (other than directors' qualifying shares as required
by law) or other comparable equity interests shall be owned by the Borrower
and/or one or more of its Wholly-Owned Subsidiaries.
Section 1.2. Interpretation. The foregoing definitions are equally
applicable to both the singular and plural forms of the terms defined. All
references to times of day herein are references to Chicago, Illinois time
unless otherwise specifically provided. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP
except where such principles are inconsistent with the specific provisions of
this Agreement.
SECTION 2. THE CREDIT
Section 2.1. The Revolving Credit. Subject to the terms and conditions
hereof, the Lender agrees to extend a revolving credit (the "Revolving Credit")
to the Borrower in an aggregate principal amount at any one time outstanding not
to exceed the lesser of (i) $5,000,000 (the "Commitment") (subject to any
reductions thereof pursuant to the terms hereof) or (ii) the Borrowing Base as
then determined and computed, which may be availed of by the Borrower in its
discretion from time to time, be repaid and used again, to and including the
Termination Date.
Section 2.1. Applicable Interest Rates. (a) Pre-Default Rate. Each Loan
made by the Lender shall bear interest (computed on the basis of a year of 360
days and actual days elapsed) on the unpaid principal amount thereof from the
date such Loan is made until maturity (whether by acceleration or otherwise) at
a rate per annum determined by adding two percent (2%) to the Domestic Rate from
time to time in effect, payable on the earlier of (i) the prepayment thereof
-7-
in accordance with Section 2.5(b) hereof or (ii) sixty (60) days from the date
such Loan was made pursuant hereto and at maturity (whether by acceleration or
otherwise).
(b) Default Rate. If any payment (including any required prepayment) of
principal on any Loan is not made when due (whether by acceleration or
otherwise), such Loan shall bear interest (computed on the basis of a year of
360 days and actual days elapsed) from the date such payment was due until paid
in full, payable on demand, at a rate per annum equal to the sum of six percent
(6%) plus the Domestic Rate from time to time in effect.
Section 2.3. Minimum Borrowing Amounts. Each Loan shall be in an amount
not less than $10,000.
Section 2.4. Borrowing Procedures. (a) Notice to the Lender. The Borrower
shall give telephonic or telecopy notice to the Lender (which notice shall be
irrevocable once given and, if by telephone, shall be promptly confirmed in
writing) by no later than 12:00 noon (Chicago time) on the date of any requested
Loan. Each such notice shall specify the date of the requested Loan (which shall
be a Business Day) and the amount of the requested Loan. The Borrower agrees
that the Lender may rely on any such telephonic or telecopy notice given by any
person the Lender in good faith believes is authorized to request loans on
behalf of the Borrower without the necessity of independent investigation and in
the event any notice by such means conflicts with the written confirmation, such
notice shall govern if the Lender has acted in reliance thereon.
(b) Disbursement of Loans. Subject to Section 6 hereof, the Lender shall
make the proceeds of each Loan available to the Borrower at the Lender's
principal office in Xx. Xxxxxxxx, Xxxxxxxx not later than close of business on
the date of such borrowing provided that Borrower hereby directs the Lender
(unless Borrower notifies the Lender to the contrary in writing in connection
with a Loan request hereunder) to wire transfer the proceeds (of each Loan
hereunder) to the Closing Agent in accordance with the relevant Escrow
Agreement.
Section 2.5. Prepayments. (a) Voluntary. The Borrower may prepay on any
Business Day without premium or penalty and in whole or in part (but, if in
part, then in an amount not less than $10,000) any Loans at any time on one
Business Day's prior notice to the Lender by no later than 1:00 p.m. (Chicago
time), such prepayment to be made by the payment of the principal amount to be
prepaid together with accrued interest thereon.
(b) Mandatory. (i) Concurrently with each reduction of the Commitment
(whether voluntarily pursuant to Section 2.7 or otherwise) the Borrower shall
prepay the Note by the amount, if any, necessary so that the aggregate
outstanding principal balance of the Note shall not exceed the Commitment as so
reduced, each such prepayment to be made by the payment of the principal amount
to be prepaid plus accrued interest thereon.
(ii) The Borrower covenants and agrees that in the event that the
outstanding principal amount of the Note shall at any time and for any reason
exceed the Borrowing Base as then determined and computed, the Borrower shall
immediately without notice or demand pay over the amount of the excess to the
Lender as and for a mandatory prepayment on the Note.
-8-
(c) Reborrowings. Any amount paid or prepaid on the Loans on or before the
Termination Date may, subject to the terms and conditions of this Agreement, be
borrowed, repaid and borrowed again.
Section 2.6. The Note. (a) The Loans made to the Borrower by the under
shall be evidenced by a promissory note of the Borrower in the form of Exhibit A
hereto (such promissory note, as the same may from time to time be amended,
together with any notes executed in replacement thereof are hereinafter referred
to as the "Note"). Such Note shall be dated the date of issuance thereof and be
payable to the order of the Lender in the principal amount of its Commitment.
(b) The Lender shall record on its books or records or on a schedule to
the Note held by it the amount of each Loan made by it to the Borrower, and all
payments of principal and interest and the principal balance from time to time
outstanding thereon; provided that prior to the transfer of any Note all such
amounts shall be recorded on a schedule to such Note. The record thereof,
whether shown on such books or records of the Lender or on a schedule to any
Note, shall be prima facie evidence as to all such amounts; provided, however,
that the failure of the Lender to record any of the foregoing or any error in
any such record shall not limit or otherwise affect the obligation of the
Borrower to repay all Loans made to it hereunder together with accrued interest
thereon.
Section 2.7. Commitment Terminations. The Borrower shall have the right at
any time and from time to time, upon three (3) Business Days' prior written
notice to the Lender to terminate without premium or penalty, in whole or in
part, the Commitment, any partial termination to be in an amount not less than
$1,000,000 or any larger amount that is an integral multiple of $1,000,000,
provided that, the Commitment may not be reduced to an amount less than the
aggregate principal amount of Loans then outstanding. Any termination of
Commitment pursuant to this Section 2.7 may not be reinstated.
SECTION 3. FEES AND PAYMENTS
(a) The Borrower shall pay to the Lender a transaction fee for each Loan
requested hereunder in an amount equal to the amount specified on the fee
schedule dated __________, 1997 furnished by Lender to Borrower. Such fee to be
due and payable on the date each such Loan is made pursuant hereto.
(b) The Borrower shall also pay to the Lender such wire transfer,
processing fees and other charges as the Lender from time to time customarily
imposes in connection with the disbursement and administration of Loans
hereunder, such fees to be paid in accordance with the standard and customary
practices of the Lender.
(c) The Borrower shall also pay to the Lender a custody fee in the amount
of $75.00 for each Loan made hereunder, such fee to be due and payable on the
date each such Loan is made hereunder provided however, that the amount of such
fee shall be subject to increases at any time in the event the fee payable by
Lender to the Collateral Agent is increased by the Collateral Agent, the Lender
agreeing to notify the Borrower of any such increase in writing.
-9-
Section 3.2. Audit Fees. The Borrower shall pay to the Lender the Lender's
costs and expenses in connection with audits of the Collateral performed by the
Lender or its agents or representatives; provided, however, that in the absence
of any Default or Event of Default, the Borrower shall not be required to
reimburse the Lender for more than two (2) such audit(s) per calendar year.
Section 3.3. Place and Application of Payments. All payments of principal
and interest on the Loans and all payments of fees and all other amounts payable
under this Agreement shall be made to the Lender by no later than 1:00 p.m.
(Chicago time) at the principal office of the Lender in Prospect Heights,
Illinois (or such other location as the Lender may designate to the Borrower).
Any payments received after such time shall be deemed to have been received by
the Lender on the next Business Day. All such payments shall be made in lawful
money of the United States of America, in immediately available funds at the
place of payment, without setoff or counterclaim.
Anything contained herein to the contrary notwithstanding, all payments
and collections received in respect of the indebtendess evidenced by the Note
and all proceeds of collateral received, in each instance, by the Lender after
the occurrence of an Event of Default shall be applied as follows:
(a) first to the payment of any outstanding costs and expenses
incurred by the lender or the collateral Agent in monitoring, verifying,
protecting, preserving or enforcing any liens on the Collateral or in
protecting, preserving or enforcing rights hereunder or under any other
Loan document, and in any event including all costs and expenses of a
character which the Borrower has agreed to pay under Section 9.10 hereof;
(b) second to the payment of any outstanding interest or other fees
or amounts due hereunder, under the Note or any other Loan Document other
than for principal;
(c) third to the payment of principal owing on the Note; and
(d) fourth to the Borrower or whomever may be lawfully entitled
thereto.
SECTION 4. THE COLLATERAL
Section 4.1. The Collateral. The Note and the other obligations of the
Borrower hereunder and under the other Loan Documents shall be secured by valid
and perfected first priority Liens pursuant to the Security Agreement in favor
of the Collateral Agent for the benefit of the Lender on all of the Borrower's
now existing and hereafter arising or acquired Mortgage Loans which are
transferred to the custody and control of the Collateral Agent and all
accounts, general intangibles, instruments, documents, records and other rights
and properties related to such Mortgage Loans (as more fully described in the
Security Agreement) together with all proceeds relating thereto. The Borrower
covenants and agrees that it will comply with all terms and conditions of each
of the Collateral Documents and that it will at any time and from time to time
at the request of the Collateral Agent or the Lender, execute and deliver such
instruments and documents and do such acts and things as the Collateral Agent
or the Lender may reasonably
-10-
request in order to provide for or protect or perfect the Lien of the Collateral
Agent in the Collateral for the benefit of the Lender.
Section 4.2. Further Assurances. The Borrower covenants and agrees that
it will comply with all terms and conditions of each of the Collateral
Documents and that it will, at any time, and from time to time as requested by
the Collateral Agent or the Lender, execute and deliver such further
instruments and agreements and do such acts and things as the Collateral Agent
or the Lender may deem necessary or appropriate to provide for or protect or
perfect the lien of the Collateral Agent or Lender in the Collateral.
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1. Organization and Qualification. The Borrower is duly
organized, validly existing and in good standing under the laws of the State of
California, has full and adequate corporate power to own its Property and to
carry on its business as now conducted, and is duly licensed or qualified and in
good standing in each jurisdiction in which the nature of its business
conducted by it or the nature of the Property owned or leased by it makes such
licensing or qualification necessary, including without limitation, the states
listed on Exhibit B hereto except as otherwise disclosed in writing to the under
and except for those jurisdictions in which the failure to so qualify would not
have a material adverse effect on the operations of the Borrower or its
Subsidiaries taken as a whole unless such failure would affect the ability of
the Borrower to enforce payment of any part of the Collateral. Exhibit B
contains a listing of all states in which the Borrower is duly qualified and
licensed to do business as of the date hereof.
Section 5.2. Subsidiaries. Each Subsidiary is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it was
incorporated or organized, as the case may be, has full and adequate power to
own its Property and carry on its business as conducted, and is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of its
business as now conducted or proposed to be conducted by it or the nature of
the Property owned or leased by it makes such licensing or qualification
necessary except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the operations of the Borrower or
its Subsidiaries taken as a whole unless such failure would affect the ability
of the Borrower to enforce payment of any part of the Collateral. Exhibit D
hereto identifies each Subsidiary, the jurisdiction of its incorporation or
organization, as the case may be, the percentage of issued and outstanding
shares of each class of its capital stock or other equity interests owned by the
Borrower and the Subsidiaries and, if such percentage is not 100% (excluding
directors' qualifying shares as required by law), a description of each class of
its authorized capital stock and other equity interests and the number of
shares of each class issued and outstanding. All of the issued and outstanding
shares of capital stock and other equity interests of each Subsidiary are
validly issued and outstanding and fully paid and nonassessable and all such
shares and other equity interests indicated on Exhibit D as owned by the
Borrower or a Subsidiary are owned, beneficially and of record, by the Borrower
or such subsidiary, free and clear of all Liens. There are no outstanding
commitments or other obligations of any Subsidiary to issue, and no options,
warrants or other rights of any Person to acquire, any shares of any class of
capital stock or other equity interests of any Subsidiary.
-11-
Section 5.3. Corporate Authority and Validity of Obligations. The Borrower
has full right and authority to enter into the Loan Documents to make the
borrowings herein provided for, to grant to the Collateral Agent for the benefit
of the Lender the Liens described in the Collateral Documents, to issue its Note
and to perform all of its obligations hereunder and under the other Loan
Documents. The Loan Documents have been duly authorized, executed and delivered
by the Borrower and constitute valid and binding obligations of the Borrower
enforceable in accordance with their terms and the Loan Documents do not, nor
does the performance or observance by the Borrower of any of the matters or
things herein or therein provided for, contravene any provision of law or
any judgment, injunction, order or decree binding upon the Borrower or any
Subsidiary or any charter or by-law provision of the Borrower or any Subsidiary
or any covenant, indenture or agreement of or affecting the Borrower or any
Subsidiary or any of their respective Properties, or result in the creation or
imposition of any Lien on any Property of the Borrower or any Subsidiary.
Section 5.4. Use of Proceeds. The Loans hereunder shall be used by the
Borrower solely for the purchase or funding by it of Eligible Mortgage Loans.
Section 5.5. Financial Report. The balance sheet of the Borrower as at
December 31, 1995 and the related consolidated statements of income, retained
earnings and cash flows of the Borrower for the fiscal year then ended and
accompanying notes thereto, which financial statements are accompanied by the
report of Xxxxxxxx & Company, independent public accountants, and the unaudited
balance sheet of the Borrower as at December 31, 1996 and the related
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the twelve (12) months then ended, heretofore
furnished to the Lender, fairly present the financial condition of the Borrower
as at such dates and the results of its operations and cash flows for the
periods then ended in conformity with generally accepted accounting principles
applied on a consistent basis; provided that the unaudited financial statements
remain subject to normal year end adjustments.
Section 5.6. No Material Adverse Change. Since December 31, 1996, there
has been no change in the condition, financial or otherwise, of the Borrower and
its subsidiaries, taken as a whole, except changes in the ordinary course of
business, none of which individually or in the aggregate have been materially
adverse.
Section 5.7. Full Disclosure. The statements and information furnished to
the Lender in connection with the negotiation of this Agreement and the
commitment by the Lender to provide the financing contemplated hereby do not
contain any untrue statements of a material fact or omit a material fact
necessary to make the material statements contained therein or herein not
misleading, the Lender acknowledging that as to any projections furnished to the
Lender, the Borrower does not warrant their accuracy, but only represents that
the same were prepared on the basis of information and estimates the Borrower
believed to be reasonable at the time such projections were prepared.
Section 5.8 Good Title. The Borrower and its subsidiaries have good and
defensible title to their respective assets as reflected on the most recent
consolidated balance sheet of the Borrower and its subsidiaries furnished to the
Lender (except for sales of assets by the Borrower
-12-
and its subsidiaries in the ordinary course of their respective business),
subject to no Liens other than such thereof as are permitted by Section 7.7
hereof.
Section 5.9. Investment Company. Neither the Borrower nor any Subsidiary
is an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
Section 5.10. Litigation and Other Controversies. Except as heretofore
disclosed in writing to the Lender with respect to litigation or other
controversies pending as of the date hereof, there is no litigation or
governmental proceeding or labor controversy pending, nor to the knowledge of
the Borrower threatened, against the Borrower or any Subsidiary which either (a)
involves a claim for $100,000 or more or (b) if adversely determined would (a)
impair, the validity or enforceability of, or impair the ability of the Borrower
to perform its obligations under this Agreement or any other Loan Document or
(b) result in any material adverse change in the financial condition or
Property, business or operations of the Borrower and its Subsidiaries taken as a
whole.
Section 5.11. Taxes. All tax returns required to be filed by the Borrower
or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental charges upon the Borrower or any
Subsidiary or upon any of their respective Properties, income or franchises,
which are shown to be due and payable in such returns have been paid except as
otherwise disclosed in writing to the Lender and except where such taxes are
being contested in good faith and appropriate reserves have been established
therefor. The Borrower does not know of any proposed additional tax assessment
against it or its Subsidiaries for which adequate provision in accordance with
GAAP has not been made on its accounts except as otherwise disclosed in writing
to the Lender. Adequate provisions in accordance with GAAP for taxes on the
books of the Borrower and each Subsidiary have been made for all open years, and
for its current fiscal period.
Section 5.12. Approvals. No authorization, consent, license, exemption,
filing (except for the filing of financing statements as herein contemplated) or
registration with any court or governmental department, agency or
instrumentality, nor any approval or consent of the stockholders of the Borrower
or any other Person, is or will be necessary to the valid execution, delivery or
performance by the Borrower of this Agreement or any other Loan Document.
Section 5.13. Affiliate Transactions. Neither the Borrower nor any
Subsidiary is a party to any contracts or agreements with any of its Affiliates
(other than with Wholly-Owned Subsidiaries) on terms and conditions which are
less favorable to the Borrower or such Subsidiary than would be usual and
customary in similar contracts or agreements between Persons not affiliated
with each other.
Section 5.14. ERISA. The Borrower and each Subsidiary are in compliance in
all material respects with ERISA to the extent applicable to them and have
received no notice to the contrary from the PBGC or any other governmental
entity or agency. As of December 31, 1996, the liability of the Borrower and its
Subsidiaries to PBGC in respect of Unfunded Vested Liabilities would not have
been in excess of $_____ if all employee pension benefit plans maintained by the
Borrower and its Subsidiaries had been terminated as of such date. No
-13-
condition exists or event or transaction has occurred with respect to any Plan
which could reasonably be expected to result in the incurrence by the Borrower
or any Subsidiary of any material liability, fine or penalty under ERISA or the
Code or in connection with any Plan. Neither the Borrower nor any Subsidiary
has any contingent liability with respect to any post-retirement benefits under
a Welfare Plan, other than liability for continuation coverage described in
Part 6 of Title I of ERISA and liability for post-retirement medical and life
insurance benefits.
Section 5.15. Compliance with Laws. The Borrower and its Subsidiaries are
in compliance in all material respects with the requirements of all federal,
state and local laws, rules and regulations applicable to or pertaining to the
Properties or business operations of the Borrower or any Subsidiary (including,
without limitation, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Federal Trade Commission Act, the
Xxxxxxxx-Xxxx Warranty Act, the Federal Reserve Board's Regulations "B" and "Z",
the Soldiers, and Sailors' Civil Relief Act of 1940, and any other federal,
state and local laws relating to interest, usury, consumer credit, equal credit
opportunity, fair credit reporting, privacy, consumer protection, false or
deceptive trade practices and disclosure, the Occupational Safety and Health Act
of 1970, the Americans with Disabilities Act of 1990, and laws and regulations
establishing quality criteria and standards for air, water, land and toxic or
hazardous wastes or substances), non-compliance with which could have a material
adverse effect on the financial condition, Properties, business or operations of
the Borrower and its Subsidiaries, taken as a whole. Neither the Borrower nor
any Subsidiary has received notice to the effect that its operations are not in
compliance with any of the requirements of applicable federal, state or local
environmental, health and safety statutes and regulations or are the subject of
any governmental investigation evaluating whether any remedial action is needed
to respond to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could have a material
adverse effect on the financial condition, Properties, business or operations
of the Borrower or any Subsidiary.
Section 5.16. Other Agreements. Except as disclosed in writing to the
Lender with respect to certain defaults existing as of the date hereof, neither
the Borrower nor any Subsidiary is in default under the terms of any covenant,
indenture or agreement of or affecting the Borrower, any Subsidiary or any of
their Properties.
Section 5.17. No Defaults. No Default or Event of Default has occurred
and is continuing.
SECTION 6. CONDITIONS PRECEDENT
The obligation of the Lender to make any Loan or any other financial
accommodation hereunder shall be subject to the following conditions precedent:
Section 6.1. Initial Loan. Prior to the making of the initial Loan
hereunder:
(a) The Lender shall have received the favorable written opinion of Xxxxx
Xxxxxxxx, Esq., counsel to the Borrower, in form and substance satisfactory to
the Lender;
-14-
(b) The Lender shall have received (i) certified copies of resolutions of
the Board of Directors of the Borrower, authorizing the execution and delivery
of this Agreement and the other Loan Documents, indicating the authorized
signers of this Agreement and the other Loan Documents and all other documents
relating thereto, the persons authorized to request Loans hereunder and the
specimen signatures of such signers, and (ii) copies of certificates of good
standing certified by the appropriate governmental officer in the jurisdiction
of the Borrower's incorporation and in each state in which it is authorized to
do business as a foreign corporation;
(c) The Lender shall have received this Agreement, the Note and the other
Loan Documents, together with any financing statements and amendments to
existing financing statements requested by the Lender or the Collateral Agent in
connection therewith;
(d) The Lender shall have received copies (executed or certified, as may
be appropriate) of all legal documents or proceedings taken in connection with
the execution and delivery of this Agreement and the other Loan Documents;
(e) The Lender shall have received certified copies of the Borrower's
articles of incorporation and by-laws and all amendments thereto throuch the
date hereof.
(f) The Lender shall have received evidence satisfactory to it of the
accuracy of the representations contained in Section 5.15 hereof.
Section 6.2. All Loans. As of the time of the making of each Loan
(including the initial Borrowing):
(a) The Lender shall have received the notice required by Section 2.4
hereof and a fully executed Escrow Agreement.
(b) Each of the representations and warranties, of the Borrower set forth
in Section 6 hereof shall be true and correct as of said time, except to the
extent that any such representation or warranty relates solely to an earlier
date;
(c) The Borrower shall be in fall compliance with all of the terms and
conditions of this Agreement and of the other Loan Documents, and no Default or
Event of Default shall have occurred and be continuing or would occur as a
result of making such Borrowing;
(d) After giving effect to the Loan, the aggregate principal amount of all
Loans hereunder shall not exceed the lesser of (i) the Borrowing Base and (ii)
the Commitment; and
(e) Such Loan shall not violate any order, judgment or decree of any court
or other authority or any provision of law or regulation applicable to the
Lender.
Each request for a Loan hereunder shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to the facts
specified in this Section 6.2.
-15-
SECTION 7. COVENANTS
The Borrower agrees that, so long as any Commitment is available to or any
Obligations are outstanding hereunder, except to the extent compliance in any
case or cases is waived in writing by the Lender:
Section 7.1. Maintenance of Business. The Borrower shall, and shall cause
each Subsidiary to, preserve and keep in force and effect its corporate
existence and all licenses, permits and franchises necessary to the proper
conduct of its business.
Section 7.2. Maintenance of Property. The Borrower will maintain, preserve
and keep its Properties in good repair, working order and condition (ordinary
wear and tear excepted), and will from time to time make all needful and proper
repairs, renewals, replacements, additions and betterments thereto so that at
all times the efficiency thereof shall be fully preserved and maintained, and
will cause each Subsidiary to do so in respect of Property owned or used by it.
Section 7.3. Taxes and Assessments. The Borrower will duly pay and
discharge, and will cause each Subsidiary to duly pay and discharge, all taxes,
rates, assessments, fees and governmental charges upon or against it or its
Properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves are provided therefor.
Section 7.4. Insurance. The Borrower will insure and keep insured, and
will cause each Subsidiary to insure and keep insured, with good and responsible
insurance companies, all insurable Property owned by it which is of a character
usually insured by Persons similarly situated and operating like Properties
against loss or damage from such hazards and risks, and in such amounts, as are
insured by Persons similarly situated and operating like Properties; and the
Borrower will insure, and cause each Subsidiary to insure, such other hazards
and risks (including employers' and public liability risks) with good and
responsible insurance companies as and to the extent usually insured by Persons
similarly situated and conducting similar businesses. The Borrower shall in any
event maintain insurance on the Collateral to the extent required by the
Collateral Documents. The Borrower will upon request of the Lender furnish a
certificate setting forth in summary form the nature and extent of the
insurance maintained pursuant to this Section.
Section 7.5. Financial Reports. The Borrower will maintain a standard
system of accounting in accordance with GAAP and will furnish to the Lender and
its duly authorized representatives such information (including financial
statements) respecting the business and financial condition of the Borrower and
its Subsidiaries as the Lender may reasonably request; and without any request,
will furnish to the Lender and, in the case of the Borrowing Base certificate
called for by clause (a) and notices called for by clause (h)(ii) below, to the
Collateral Agent:
(a) as soon as available, and in any event within fifteen (15) days after
the end of each calendar month, a borrowing base certificate in the form
attached hereto as Exhibit E
-16-
showing the computation of the Borrowing Base in reasonable detail as of the
close of such monthly period, certified to by the chief financial officer of the
Borrower;
(b) as soon as available, and in any event within thirty (30) days after
the end of each calendar month, a copy of the consolidated balance sheet and
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for such period, all in reasonable detail showing
in comparative form the figures for the corresponding date and period in the
previous fiscal year, prepared by the Borrower in accordance with GAAP, together
with a report on the aging of Mortgage Loans and a report of charge-offs,
recoveries and repossession of collateral with respect to Mortgage Loans all in
reasonable detail prepared by the Borrower, and in each case certified to by the
chief financial officer of the Borrower;
(c) as soon as available, and in any event within one hundred and twenty
(120) days after the close of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and its Subsidiaries as of the close
of such fiscal year and the consolidated statements of income, retained earnings
and cash flows of the Borrower and its Subsidiaries for such period, and
accompanying notes thereto, all in reasonable detail showing in comparative form
the figures for the previous fiscal year, accompanied by an unqualified opinion
thereon of Xxxxxxxx & Company or another firm of independent public accountants
of recognized standing, selected by the Borrower and satisfactory to the Lender,
to the effect that the financial statements have been prepared in accordance
with GAAP and present fairly in accordance with GAAP the consolidated financial
condition of the Borrower and its Subsidiaries as of the close of such fiscal
year and the results of their operations and cash flows for the fiscal year then
ended and that an examination of such accounts in connection with such
financial statements has been made in accordance with generally accepted
auditing standards and, accordingly, such examination included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances;
(d) not later than five (5) business days after receipt by the Borrower
thereof, a copy of any management letters on internal accounting controls of the
Borrower or any Subsidiary prepared by its independent public accountants;
(e) not later than five (5) business days after receipt by the Borrower
thereof, a copy of any internal audit reports (with responses, when available)
with respect to the Borrower or any Subsidiary prepared by its controller's
office or other in-house staff accountants;
(f) not later than five (5) business days after receipt by the Borrower
thereof, a copy of each audit made by any regulatory agency of the books and
records of the Borrower or any of its Subsidiaries; and
(g) promptly after knowledge thereof shall have come to the attention of
any of (i) any threatened or pending litigation or officer of the Borrower,
written notice which responsible governmental proceeding or labor controversy
against the Borrower or any Subsidiary involves an amount of $100,000 or more or
which, if adversely determined, would have a material adverse effect the
financial condition, Properties, business or operations of the Borrower and its
Subsidiaries, taken as a whole, or of the occurrence of any Default or Event of
Default hereunder and (ii) any material dispute or claim relating to any
Eligible Mortgage Loan.
-17-
Each of the financial statements ftm-@shed to the Lender pursuant to
clauses (b) and (c) of this Section shall be accompanied by a written
certificate in the form attached hereto as Exhibit F signed by the chief
financial officer of the Borrower to the effect that to the best of the chief
financial officer's knowledge and belief no Default or Event of Default has
occurred during the period covered by such statements or, if any such Default or
Event of Default has occurred during such period, setting forth a description of
such Default or Event of Default and specifying the action, if any, taken by the
Borrower to remedy the same.
Section 7.6. Indebtedness for Borrowed Money. The Borrower will not, nor
will it permit any Subsidiary to, issue, incur, assume, create or have
outstanding any Indebtedness for Borrowed Money; provided, however, that the
foregoing provisions shall not restrict nor operate to prevent:
(a) the indebtedness of the Borrower owing to the Lender hereunder; and
(b) the indebtedness of the Borrower to other lenders not exceeding
$15,000,000 in aggregate principal amount from time to time incurred to fund the
purchase by the Borrower or any of its Subsidiaries of mortgaae loans which are
pledged to and in the possession of such lenders (or an agent or bailee acting
on their behalf) to secure repayment of such indebtedness.
Section 7.7. Liens. The Borrower will not, nor will it pen-nit any
Subsidiary to, create, incur or permit to exist any Lien of any kind on any
Property owned by the Borrower or any Subsidiary; provided, however, that this
Section shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's compensation,
unemployment insurance, old age benefits, social security obligations, taxes,
assessments, statutory obligations or other similar charges, good faith cash
deposits in connection with tenders, contracts or leases to which the Borrower
or any Subsidiary is a party or other cash deposits required to be made in the
ordinary course of business, provided in each case that the obligation is not
for borrowed money and that the obligation secured is not overdue or, if
overdue, is beina contested in good faith by appropriate proceedings which
prevent enforcement of the matter under contest and adequate reserves have been
established therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers', or other
similar Liens arising in the ordinary course of business with respect to
obligations which are not due or which are being contested in good faith by
appropriate proceedings which prevent enforcement of the matter under contest;
(c) the pledge of assets for the purpose of securing an appeal, stay or
discharge in the course of any legal proceeding, provided that the aggregate
amount of liabilities of the Borrower and its Subsidiaries secured by a pledge
of assets permitted under this clause, including interest and penalties thereon,
if any, shall not be in excess of $100,000 at any one time outstanding;
(d) the Liens granted in favor of the Collateral Agent for the benefit of
the Lender by the Collateral Documents; and
-18-
(e) Liens on mortgace loans and related assets securing indebtedness
permitted by Section 7.6(b) hereof.
Section 7.8. Mergers, Consolidations and Sales. The Borrower will not, nor
will it permit any Subsidiary to, be a party to any merger or consolidation, or
sell, transfer, lease or otherwise dispose of all or any substantial part of its
Property, or in any event sell or discount (with or without recourse) any of its
notes or accounts receivable (other than sales of mortgages not constituting
Collateral in the ordinary course of business and sales of Collateral permitted
under the Security Agreement). The sale, lease, transfer or other disposition of
5% of the assets of the Borrower or any Subsidiary shall be deemed substantial
for the foregoing purposes.
Section 7.9. ERISA. The Borrower will, and will cause each Subsidiary to,
promptly pay and discharge all obligations and liabilities arising under ERISA
of a character which if unpaid or unperformed might result in the imposition of
a Lien against any of its Properties. The Borrower will, and will cause each
Subsidiary to, promptly notify the Lender of (i) the occurrence of any
reportable event (as defined in ERISA) with respect to a Plan, (ii) receipt of
any notice from the PBGC of its intention to seek termination of any Plan or
appointment of a trustee therefor, (iii) its intention to terminate or withdraw
from any Plan, and (iv) the occurrence of any event with respect to any Plan
which would result in the incurrence by the Borrower or any Subsidiary of any
material liability, fine or penalty, or any material increase in the contingent
liability of the Borrower or any Subsidiary with respect to any post-retirement
Welfare Plan benefit.
Section 7.10. Compliance ii,ith Lmvs. The Borrower will, and will cause
each Subsidiary to, comply in all material respects with the requirements of all
federal, state and local laws, rules, regulations, ordinances and orders
applicable to or pertaining to the Collateral, Properties or business operations
of the Borrower or any Subsidiary, non-compliance with which could have a
material adverse effect on the financial condition, Properties, business or
operations of the Borrower or any Subsidiary or could result in a Lien upon any
of their Property. The Borrower agrees, at intervals reasonably acceptable to
the Lenders, to make periodic inspections of the documentation relating to
mortgage loans made or acquired by it to monitor compliance of the same with
applicable law and to provide the Collateral Azent and the Lenders with the
results of such inspections.
Section 7.11. Burdensome Contracts ivith Affiliates. The Borrower will
not, nor will it permit any Subsidiary to, enter into any contract, agreement or
business arrangement with any of its Affiliates (other than with Wholly-Owned
Subsidiaries) on ten-ns and conditions which are less favorable to the Borrower
or such Subsidiary than would be usual and customary in similar contracts,
agreements or business arrangements between Persons not affiliated with each
other.
Section 7.12. Maintenance of Subsidiaries. 'ne Borrower will not assign,
sell or transfer, or permit any Subsidiary to issue, assign, sell or transfer,
any Voting Stock of a Subsidiary, provided that the foregoing shall not operate
to prevent the issuance, sale and transfer to any person of any voting stock of
a Subsidiary solely for the purpose of qualifying, and to the extent legally
necessary to qualify, such person as a director of such Subsidiary.
-19-
Section 7.13. Change in the Nature of Business. The Borrower will not, and
will not permit any Subsidiary to, engage in any business or activity if as a
result the general nature of the business of the Borrower or any Subsidiary
would be changed in any material respect from the general nature of the business
engaged in by the Borrower or any Subsidiary on the date of this Agreement.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default. Any one or more of the following shall
constitute an Event of Default hereunder:
(a) default in the payment when due of all or any part of the principal of
or interest on the Note (whether at the stated maturity thereof or at any other
time provided for in this Atzreement) or of any fee or other amount payable by
the Borrower hereunder or by the Borrower under any other Loan Document and, in
the case of any such interest payment or fee, non-payment thereof shall have
continued for three (3) Business Days after the same shall have become due; or
(b) default in the observance or performance of any covenant set forth
in Sections 8.5, 8.8, 8.9 or 8.13 hereof; or
(c) default in the observance or performance of any other provision
hereof or of any other Loan Document which is not remedied within thirty (30)
days after the earlier to occur of (i) the date on which such failure shall
first become known to any officer of the Borrower or (ii) the date on which
written notice thereof is given to the Borrower by the Lender; or
(d) any representation or warranty made by the Borrower herein or in any
other Loan Document, or in any statement or certificate ftimished by it pursuant
hereto or thereto, or in connection with any Loan made hereunder, proves untrue
in any material respect as of the date of the issuance or making thereof; or
(e) any event occurs or condition exists (other than those described in
clauses (a) through (d) above) which is specified as an Event of Default under
any Loan Document, or any Loan Document shall for any reason not be or shall
cease to be in full force and effect, or any Loan Document is declared to be
null and void; or
(f) default shall occur under any evidence of Indebtedness for Borrowed
Money issued, assumed or guaranteed by the Borrower in an amount equal to or in
excess of $100,000 or under any indenture, agreement or other instrument under
which the same may be issued, and such default shall continue for a period of
time sufficient to permit the acceleration of the maturity of any such
Indebtedness for Borrowed Money (whether or not such maturity is in fact
accelerated) or any such Indebtedness for Borrowed Money shall not be paid when
due (whether by lapse of time, acceleration or otherwise); or
(g) any judgment or judgments, writ or writs, or warrant or warrants of
attachment, or any similar process or processes in an aggregate amount in excess
of $100,000 shall be entered or filed against the Borrower or any of its
Subsidiaries or against any of their Property,
-20-
and in each case which remains unvacated, unbonded, unstayed or unsatisfied for
a period of thirty (30) days; or
(h) the Borrower or any member of its Controlled Group shall fail to pay
when due an amount or amounts aggregating in excess $100,000 which it shall have
become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice
of intent to terrninate a Plan or Plans having aggregate Unfunded Vested
Liabilities in excess of $500,000 (collectively, a "Material Plan" shall be
filed under Title IV of ERISA by the Borrower or any other member of its
Controlled Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate or to
cause a tnistee to be appointed to administer any Material Plan or a proceeding
shall be instituted by a fiduciary of any Material Plan against the Borrower or
any member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA
and such proceeding shall not have been dismissed within thirty (30) days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or
(i) the Borrower or any Subsidiary shall (i) have entered involuntarily
against it an s Bankruptcy Code, as amended, (ii) not pay, or admit in order for
relief under the United State due, (iii) make an assigrunent for writing its
inability to pay, its debts generally as they become the benefit of creditors,
(iv) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any substantial part of its Property, (v) institute any proceeding seeking to
have entered against it an order for relief under the United States Bankruptcy
Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition of it or
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, or (vi) fail to
contest in good faith any appointment or proceeding described in Section 8.1(j)
hereof; or
(j) a custodian, receiver, trustee, examiner, liquidator or similar
official shall be f its Subsidiaries or any substantial part of any of their
appointed for the Borrower or any o Section 8. l(i)(v) shall be instituted
auainst the Borrower Property, or a proceeding described in or any of its
Subsidiaries, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of thirty (30) days.
Section 8.2. Remedies - Certain Events of Defaiilt. When any Event of
Default described in clauses (a) through (h), both inclusive, of Section 8.1 has
occurred and is continuing, the Lender may take either or both of the following
actions:
(a) terminate the obligation Of the Lender to extend any further credit
hereunder on the date (which may be the date thereof) stated in such notice;
(b) declare the principal of and the accrued interest on the Note to be
forthwith due and payable and thereupon the Note, including both principal and
interest and all fees, charges and other amounts payable hereunder and under the
other Loan Documents, shall be and become immediately due and payable without
further demand, presentment, protest or notice of any kind.
-21-
The Lender, after giving notice to the Borrower pursuant to this Section
8.2, shall also promptly send a copy of such notice to the Collateral Agent, but
the failure to do so shall not impair or annul the effect of such notice.
Section 8.3. Remedies - Other Events of Default. When any Event of Default
described in clauses (i) or (j) of Section 8.2 has occurred and is continuing,
then the Note, includin- both principal and interest, and all fees, charges and
other amounts payable hereunder and under the other Loan Documents, shall
immediately become due and payable without presentment, demand, protest or
notice of any kind, and the obligations of the Lender to extend further credit
pursuant to any of the terms hereof shall immediately terminate.
Section 8.4. Fxpenses. The Borrower agrees to pay to the Lender, or any
other holder of the Note, all costs and expenses incurred or paid by the Lender
or any such holder, including reasonable attorneys' fees and court costs, in
connection with any Default or Event of Default by the Borrower hereunder or in
connection with the enforcement of any of the terms hereof or of the other Loan
Documents.
SECTION 9. MISCELLANEOUS
Section 9.1. No Waiver of Rights. No delay or failure on the part of the
Lender or on the part of the holder or holders of the Note in the exercise of
any power or richt shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any sincle or partial exercise thereof preclude any other
or further exercise of any other power or right, and the rights and remedies
hereunder of the Lender and of the holder or holders of the Note are cumulative
to, and not exclusive of, any rights or remedies which any of them would
otherwise have.
Section 9.2. Non-Business Day. If any payment of principal or interest on
any Loan or of any fee hereunder shall fall due on a day which is not a Business
Day, interest at the rate such principal bears for the period prior to maturity
or at the rate such fee accrues shall continue to accrue from the stated due
date thereof to and including the next succeeding Business Day, on which the
same shall be payable.
Section 9.3. Documentary Ta'ces. The Borrower agrees that it will pay any
documentary, stamp or similar taxes payable in respect to this Agreement, the
Note or any other Loan Document, including interest and penalties, in the event
any such taxes are assessed irrespective of when such assessment is made and
whether or not any credit is then in use or available hereunder.
Section 9.4. Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and of the Note, and shall continue
in full force and effect with respect to the date as of which they were made as
long as any credit is in use or available hereunder.
Section 9.5. Survival of Indemnities. All indemnities with respect to the
Loans shall survive the termination of this Agreement and the payment of the
Loans and the Note.
-22-
Section 9.6. Notices. Except as otherwise specified herein, all notices
hereunder shall be in writing (including cable, telecopy or telex) and shall be
given to the relevant party at its address or telecopier number set forth below
or such other address, telecopier number or telex number as such party may
hereafter specify by notice to the other, given by United States certified or
registered mail, by telecopy or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices hereunder
shall be addressed to:
If to the.Borrower:
-------------------
Westmark Mortgage Corporation
000 XX 0xx Xxxxxx, Xxxxx 0
Xxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx
Telephone: (000) 000-0000 (Ext. 31)
Telecopy: (000) 000-0000
If to the Lender:
-----------------
Household Financial Services, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxx, XX 00000
Attention:
Telephone: (--)
Telecopy: C-)
Each such notice, request or other communication shall be effective (i) if
given by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section and a confirmation of such telecopy has been received
by the sender, (ii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the addresses specified in this Section; provided that any notice given
pursuant to Section 2 hereof shall be effective only upon receipt.
Section 9.7. Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties on different counterparts, each of
which when executed shall be deemed an original but all such counterparts taken
together shall constitute one and the same instrument.
Section 9.8 SuccessorsandAssigns. ThisAgreementshallbebindinguponthe
Borrower and its s@4@@essors and assi-ns, and shall inure to the benefit of the
Lender and its t' successors and assigns, including any subsequent holder of the
Note; provided, however, that the Borrower may not assign any of its rights or
obligations hereunder without the written consent of the Lender.
-23-
Section 9.9. Amendments. Any provision of this Agreement, the Note or the
other Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Lender.
Section 9.10. Fees and Indemnification. (a) The Borrower agrees to pay
the reasonable fees and disbursements of counsel to the Lender, in connection
with the preparation and execution of this Agreement and the other Loan
Documents, and any recording or filing of any of the foregoing, and any
amendment, waiver or consent related hereto, whether or not the transactions
contemplated herein are consummated.
(b) The Borrower further agrees to indemnify the Lender, its directors,
officers and employees against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitations, all
reasonable expenses of litigation or preparation therefor whether or not the
Lender is a party thereto) which any of them may pay or incur arising out of or
relating to this Agreement, any other Loan Document, the Collateral (including
without limitation any environmental claims or liabilities related to any
property siibject to a Mortgage Loan) the transactions contemplated hereby or
thereby or the direct or indirect application or proposed application of the
proceeds of any Loan hereunder, other than those which arise from the gross
negligence or willful misconduct of the party claiming indemnification. The
obligations of the Borrower under this Section shall survive the termination of
this Agreement.
Section 9. 11. Governing L@ov. This Agreement and the Note, and the rights
and duties of the parties hereto and thereto, shall be construed and determined
in accordance with the laws of the State of Illinois, without regard to the
internal laws thereof with respect to conflicts of law.
Section 9.12. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
on 9.13. Entire Agreement. This Agreement constitutes the entire
understandinof the parties hereto with respect to the subject matter hereof and
any prior or contemporaneous agreements, whether written or oral, with respect
thereto are superseded hereby.
Section 9.14. Terms of Collateral Documents Not Stiperseded. Nothing
contained herein shall be deemed or construed to permit any act or omission
which is prohibited by the terms of any Collateral Document, the covenants and
agreements contained herein being in addition to and not in substitution for the
covenants and agreements contained in the Collateral Documents.
Section 9.15. Construction. The parties hereto acknowledge and agree that
this Agreement shall not be construed more in favor of one than the other based
upon which party drafted the same, it being acknowledged that all parties hereto
contributed substantially to the negotiation and preparation of this Agreement.
-24-
Upon execution hereof by all the parties, this Agreement shall be a
contract among the parties for the purposes hereinabove set forth.
Dated as of April 7, 1997.
WESTMARK MORTGAGE CORPORATION
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------
Its: Xxxx Xxxxxxxxxx
President (type or Print Name)
-25-
Accepted and Agreed to as of the day and year last above written.
HOUSEHOLD FINANCIAL SERVICES, INC.
By:
------------------------------
Its:
----------------------------
(Type or Print Name)
-26-
EXHIBIT A
REVOLVING CREDIT NOTE
$5,000,000 April 7, 1997
FOR VALUE RECEIVED, the undersigned, WESTMARK MORTGAGE CORPORATION, a
________________________ California corporation (the ""Borrower", promises to
pay to the order of HOUSEHOLD FINANCIAL SERVICES, INC. (the "Lender") on the
Termination Date of the hereinafter defined Credit Agreement, at the principal
office of the Lender in Prospect Heights, Illinois, in immediately available
funds, the principal sum of the Lender in Prospect Heights, Illinois, in
immediately available funds, the principal sum of Five Million dollars
($5,000,000) or, if less, the aggregate unpaid principal amount of all Loans
made by the Lender to the Borrower under the Revloving Credit pursuant to such
Credit Agreement and with each such Loan to mature and become payable as
provided in such Credit Agreement, together with interest on the principal
amount of each such Loan from time to time outstanding hereunder at the rates,
and payable in the manner and on the dates, specified in the Credit Agreement.
The Lender shall record on its books or records or on a schedule attached
to this Note, each Loan made by it pursuant to its Commitment, together with all
payments of principal and interest and the principal balances from time to time
outstanding hereon, provided that prior to the transfer of this Note all such
amounts shall be recorded on a schedule attached to this Note. The record
thereof, whether shown on such books or records or on the schedule to this Note,
shall be prima facie evidence of the same, provided, however, that the failure
of the Lender to record any of the foregoing or any error in any such record
shall not limit or otherwise affect the obligation of the Borrower to repay all
Loans made to it under the Revolving Credit pursuant to the Credit Agreement
together with accrued interest thereon.
This Note is the Note referred to in the Credit Agreement bearing even
date herewith, between the Borrower and the Lender (such Credit Agreement as the
same may from time to time be amended or restated being referred to as the
"Credit Agreement") and payment hereof is secured by the Collateral Documents,
and this Note and the holder hereof are entitled to all the benefits provided
for thereby or referred to therein, to which Credit Agreement and Collateral
Documents reference is hereby made for a statement thereof. All defined terms
used in this Note, except terms otherwise defined herein, shall have the same
meaning as in the Credit Ageeement.
Prepayments may be made hereon, certain prepayments are required to be
made hereon and this Note may be declared due prior to the expressed maturity
hereof, all in the events, on the terms and the manner as provided for in the
Credit Agreement and Collateral Documents.
-27-
The Borrower hereby waives demand, presentment, protest or notice of any
kind hereunder.
This Note shall be governed by and construed in accordance with the laws
of the State of Illinois.
WESTMARK MORTGAGE CORPORATION
By: /s/ Xxxx Xxxxxxxxxx
--------------------------------
Its:Xxxx Xxxxxxxxxx
President (type or Print Name)
EXHIBIT B
States in which the Borrower Is Qualified to
Conduct Business as of Closing
Alabama
Arizona
California
Colorado
Florida
Georgia
Hawaii
Idaho
Indiana
Kansas
Kentucky
Mississippi
Missouri
Montana
Nevada
Ohio
Oregon
Utah
Washington
Wyoming
EXHIBIT C
REQUIRED DOCUMENTS
1. Mortgage note executed by a third party in favor of the Borrower
(properly endorsed or assigned to the Borrower if purchased by the Borrower) and
endorsed by the Borrower in blank.
2. Mortgage or deed of trust securing above mortgage note. In lieu of
executed, original recorded documents, the Collateral Lender will accept a copy
which has been stamped as having been recorded by the appropriate recorders
office or, in the case of Mortgage Loans constitutin- less than 5% of the
aggregate Elioible Mortgage Loans, a copy of said mortgage or deed of trust
accompanied by a transmittal letter to the appropriate recording office so long
as the original recorded mortgage or a copy thereof indicating the original has
been recorded from the appropriate recorder's office is delivered to the
Collateral Lender within 60 days from the date the Borrower funded such Mortgage
Loan or the date the Borrower acquired such MortgaLe Loan, as appropriate.
3. Assignment of the mortgage or deed of trust by the Borrower in blank
and in recordable form and the original or a duly certified copy of a proper
assignment or assignments of the related mortgage or deed of trust from the
original holder, thrOU2h and subsequent transferees to the Borrower duly
recorded. The assignment by the Borrower to the Collateral Lender shall not be
filed for record unless the Lender shall reasonably determine that it is
necessary to do so in connection with the perfection of the security interest
therein, such recordation to be at the Borrower's expense.
4. Either an appraisal or a statement from the Borrower that no appraisal
was required under the General Underwriting Guidelines.
5. A policy of title insurance written by a title company insurin(T the
mortlyaize or deed of tnist as a first lien on the Property and in amount and
containing exceptions satisfactory to the Collateral Lender.
EXHIBIT C-1
ADDITIONAL REQUIRED DOCUMENTS
1. Other documentation as the Lender or the Collateral Agent may
reasonably deem appropriate, as well as documentation necessary to falfill
requirements of take-out commitments.
2. The Borrower will execute at any time such additional documents as may
be necessary in the opinion of the Lender or the Collateral to transfer to the
Collateral Lender, for the benefit of the Lender, the title to any Collateral
pledged and/or hypothecated pursuant to the Security Agreement.
EXHIBIT D
SUBSIDIAREES OF WESTMARK MORTGAGE CORPORATION
NAME JURISDICTION OF PERCENTAGE
---- INCORPORATION OF OWNERSHIP
--------------- ------------
Exhibit E
Borrowing Base Certiricate
To: Household Financial Services, Inc.
Pursuant to the terms of the Credit Agreement dated as of April 7, 1997
between us (the "Credit Agreement"), we submit this Borrowing Base Certificate
to you and certify that the information set forth below and on any attachments
to this Certificate is true, correct and complete as of the date of this
Certificate.
A. Borrowing Base
1. Gross Mortgage Loans =========
A1
2. Less:
(a) Owed by an account debtor who
is an Affiliate, Shareholder, or Employee ________
(b) Owed by an account debtor who
is in an insolvency or reorganization ________
proceeding
(c) Unpaid more than ____ days ________
(d) Subject to claims, offsets or
defenses ________
(e) Rewritten or otherwise
non-performing ________
(f) Included in Borrowing Base
for more than ___ days ________
(g) Otherwise Ineligible ________
Sum of Lines A2(a)-A2(g) =========
A2
3. Eligible Mortgage Loans (line A1 minus =========
(A2) A3
4. Borrowing Base (line A3 x 100%) _________
A4
B. Revolving Credit Loans _________
B
C. Unused Availability =========
(line A4 minus B)
Dated as of this ___________________ day of ________________, 19__.
Westmark Mortgage Corporation
By:
-----------------------------
Its:
-----------------------------
EXHIBIT F
COMPLIANCE CERTIFICATE
To: Household Financial Services, Inc.
This Compliance Certificate is furnished to you pursuant to the
requirements of Section 1997 (the "Credit Agreement"), by and 7.5 of that
certain Credit Agreement dated as of April 7, 1997 (the "Credit Agreement"), by
and between Westmark Mortgage Corporation (the "Borrower") and you (the
"Lender"). Unless otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Credit Agreement.
The Undersi-xxx hereby certifies that:
1. I am the duly elected __________________________________________ of the
Borrower;
2. I have reviewed the terms of the Credit Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or the occurrence of any event
which constitutes a Default or Event of Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth below; and
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
__________________________________________________
The foregoing certifications, together with the computations set forth in
the Attachment hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this _________________ day
of __________________________ 19__.
---------------------------------------------
--------------------------, -----------------
(Type or Print Name) (Title)
EXHIBIT G
PENDING LITIGATION
EXHIBIT H
UNDERWRITING GUIDELINES
EXHIBIT I
ESCROW AGREEMENT
