EXHIBIT 10.4
SUBSIDIARY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of January 30, 1998, made by National
Mortgage Sales Corporation ("NMSC" or the "Grantor"), a Colorado corporation, a
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subsidiary of National Mortgage Corporation ("NMC" or the "Borrower"), in favor
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of Greenwich Capital Financial Products, Inc. ("GCFP"), a Delaware corporation,
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Greenwich Capital Markets, Inc. ("GCM"), a Delaware corporation, and ContiTrade
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Services, L.L.C. ("CTS"), a Delaware limited liability company (each one, a
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"Lender" and, collectively, the "Lenders") parties to the various Financing
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Agreements as referred to below.
RECITALS
Reference is made to the following agreements (collectively, the
"Financing Agreements"):
(i) The Amended and Restated Loan and Security Agreement, dated as
of June 30, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Warehouse Agreement"), by and between the Borrower and GCFP,
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(in such capacity, the "Warehouse Lender");
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(ii) The Amended and Restated Custodial Agreement, dated as of June
30, 1997 (as amended, supplemented or otherwise modified from time to time,
the "Custodial Agreement"), by and among the Borrower, Chase Bank of Texas,
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N.A. (formerly Texas Commerce Bank National Association), as custodian for
the Lender pursuant to the Warehouse Agreement (in such capacity, the
"Custodian"), and GCFP (in such capacity, the "Warehouse Lender");
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(iii) The Residual and Working Capital Financing Agreement, dated as
of June 30, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Residual Agreement") by and among the Borrower, CTS, as the
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agent and a lender, (in such capacity, a "Residual Lender") and GCM (in
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such capacity, a "Residual Lender") (collectively, the "Residual Lenders");
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(iv) The Subordinated Debt Agreement, dated as of June 30, 1997 (as
amended, supplemented or otherwise modified from time to time, the
"Subordinated Debt Agreement") by and between the Borrower and CTS (in such
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capacity, the "Subordinated Debt Lender"); and
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(v) The Intercreditor and Subordination Agreement, dated as of June
30, 1997 (as amended, supplemented or otherwise modified from time to time,
the "Intercreditor Agreement) among the Borrower, CTS, as a lender, and
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GCM, as a lender, (together with CTS and GCFP, the "Lenders").
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The Borrower and the Warehouse Lender are parties to the Warehouse
Agreement, pursuant to which the Borrower has obtained financing from the
Warehouse Lender to provide interim funding for the origination and acquisition
of certain Mortgage Loans (as defined therein), which Mortgage Loans secure
Advances (as so defined).
The Borrower has created a subsidiary, NMSC, ninety-five percent of
the common stock of which is owned by the Borrower and which has entered into
the Mortgage Loan Flow Contribution and Subservicing Agreement (the
"Contribution Agreement"), dated as of January 30, 1998, between the Borrower
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and NMSC, pursuant to which the Borrower shall make a capital contribution of
certain of the Mortgage Loans it currently holds to NMSC and shall continue to
make such capital contributions from time to time of certain of the Mortgage
Loans it hereafter acquires, through origination or otherwise.
It is the intent of the Borrower and the Warehouse Lender that the
Mortgage Loans remain subject to a security interest in favor of the Warehouse
Lender and continue to be used in the calculation of the Borrowing Base (as
defined in the Warehouse Agreement), and that such Mortgage Loans constitute
Primary Warehouse Loan Collateral (as defined in the Intercreditor Agreement)
notwithstanding the transfer of such Mortgage Loans to NMSC. Further, the
Lenders agree that any recovery under this Guarantee that is not deemed Primary
Warehouse Loan Collateral shall be distributed as Primary Residual Loan
Collateral, according to the Intercreditor Agreement, and each Lender shall have
the right to demand contribution from the other Lenders to the extent permitted
under the Intercreditor Agreement.
To induce the Lenders to amend the Intercreditor Agreement, and to
induce the Warehouse Lender to amend the Warehouse Agreement and the Custodial
Agreement (as defined in the Warehouse Agreement) in each case to permit the
transfer of Mortgage Loans to NMSC subject to the terms of the Warehouse
Agreement and the Intercreditor Agreement, (i) NMSC shall execute a Security
Agreement whereby it pledges all of its interests in all Mortgage Loans to the
Warehouse Lender, (ii) NMSC shall execute a Guarantee whereby it guarantees the
borrowings of the Borrower under the Financing Agreements, as defined below and
(iii) the Borrower and the Individual Pledgor shall execute the Pledge
Agreement.
NOW, THEREFORE, in consideration of the premises recited above and to
protect the security interests granted pursuant to the Financing Agreements, the
Grantor hereby agrees with the Warehouse Lender, for the ratable benefit of the
Lenders, as follows:
1. DEFINED TERMS. (a) Unless otherwise defined herein, capitalized
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terms which are defined in the Warehouse Agreement and used herein shall have
the meanings given to them in the Warehouse Agreement; the following terms which
are defined in the Uniform Commercial Code in effect in the State of New York on
the date hereof are used herein as so defined: Documents, General Intangibles,
Instruments, Inventory and Proceeds; and the following terms shall have the
following meanings:
"Collateral" shall mean the Primary Warehouse Loan Collateral, as set
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forth in Section 2(b) of this Security Agreement and the Borrower Collateral, as
set forth in Section 2(c) of this Security Agreement.
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"Security Agreement" shall mean this Security Agreement, as amended,
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supplemented or otherwise modified from time to time.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Security Agreement shall refer to this Security
Agreement as a whole and not to any particular provision of this Security
Agreement, and Section, Schedule, Annex, and Exhibit references are to this
Security Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.
2. GRANT OF SECURITY INTEREST.
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(a) Pursuant to the Custodial Agreement, the Custodian shall hold the
Mortgage Loan Documents as exclusive bailee and agent for the Warehouse Lender
pursuant to the terms of the Custodial Agreement and shall deliver Trust
Receipts (as defined therein) to the Warehouse Lender each to the effect that it
has reviewed such Mortgage Loan Documents in the manner and to the extent
required by the Custodial Agreement and identifying any exceptions in such
Mortgage Loan Documents as so reviewed in Exception Reports.
(b) All of the Grantor's right, title and interest in, to and under
each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, is hereinafter
referred to as the "Primary Warehouse Loan Collateral":
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(i) all Mortgage Loans identified on a Notice of Borrowing and
Pledge delivered by the Borrower to the Warehouse Lender and the Custodian
from time to time and thereafter transferred to the Grantor ("Grantor
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Pledged Mortgage Loans");
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(ii) all Mortgage Loan Documents, including without limitation all
promissory notes, and all Servicing Records, Servicing Agreements and any
other collateral pledged or otherwise relating to such Grantor Pledged
Mortgage Loans, together with all files, documents, instruments, surveys,
certificates, correspondence, appraisals, computer programs, computer
storage media, accounting records and other books and records relating
thereto;
(iii) all mortgage guaranties and insurance relating to such Grantor
Pledged Mortgage Loans (issued by governmental agencies or otherwise) and
any mortgage insurance certificate or other document evidencing such
mortgage guaranties or insurance relating to such Grantor Pledged Mortgage
Loans and all claims and payments thereunder;
(iv) all other insurance policies and insurance proceeds relating to
any Grantor Pledged Mortgage Loan or the related Mortgaged Property;
(v) all purchase or take-out commitments relating to such Grantor
Pledged Mortgage Loans;
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(vi) all Interest Rate Protection Agreements, if any, relating to
such Grantor Pledged Mortgage Loans;
(vii) the Trust Account, the Paydown Account and the balance from
time to time standing to the credit of the Trust Account and the Paydown
Account and all rights with respect thereto;
(viii) all Insured Closing Letters relating to any Grantor Pledged
Mortgage Loans;
(ix) all "general intangibles" as defined in the Uniform Commercial
Code relating to or constituting any and all of the foregoing; and
(x) any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
(c) All of the Grantor's right, title and interest in, to and under
each of the following items of property, whether now or hereafter acquired, now
existing or hereafter created and wherever located, is hereinafter referred to
as the "Grantor Collateral":
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(i) all mortgage loans, home improvement loans, home equity line of
credit loans, and other loans originated or purchased by the Grantor;
(ii) all of the Grantor's rights to service or subservice mortgage
loans, home improvement loans, home equity line of credit loans, and other
loans;
(iii) all certificates, residual or otherwise, issued to the Grantor
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in connection with any securitization, including, without limitation, any
securitization involving a REMIC;
(iv) all securities held by the Grantor, including, without
limitation, the securities of any subsidiary of the Grantor;
(v) all equipment in all of its forms, wherever located, including,
without limitation, all furniture, furnishings, fixtures, office supplies
and all other similar types of tangible personal property and all parts
thereof and all accessions thereto, together with all parts, fittings,
alterations, substitutions, additions, accessories, replacements and
accessions thereto (any and all such equipment, parts and accessions being
the "Equipment");
(vi) all approvals, permits, licenses, franchises, certificates that
are, by their terms or pursuant to applicable Law, assignable without the
consent of the Governmental Authority or the counterparty thereto, as the
case may be;
(vii) all contracts or agreements to which the Grantor is a party;
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(viii) all general intangibles relating to or constituting any of the
foregoing, including, but not limited to, good will and tax refunds;
(ix) all bank accounts now or hereafter held by the Grantor and all
funds in such accounts together with all monies (other than monies used to
pay taxes), proceeds or sums due or to become due thereon or therefrom (all
such bank accounts, the "Bank Accounts"), and all documents or instruments
(including, but not limited to, passbooks, certificates of deposits and
receipts necessary to be presented to withdraw funds or investments held in
the Bank Accounts (the "Account Documents"); and
(x) all proceeds of any and all of the foregoing Grantor Collateral
(including, without limitation, proceeds which constitute property of the
types described in any of the paragraphs of this Section 2(c) and, to the
extent not otherwise included, all payments under insurance (whether or not
a Lender is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect
to any of the foregoing Grantor Collateral;
provided, however, that "Grantor Collateral" shall not include (i) any assets as
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to which the Lenders have released their liens pursuant to Section 5.04 of the
Residual Agreement and the Subordinated Debt Agreement, (ii) any mortgage loans
and the related servicing rights sold, if such mortgage loans are sold
servicing-released, or securitized by the Borrower, (iii) those FNMA servicing
rights that have been pledged and those mortgage loans (together with the
related servicing rights and proceeds of such mortgage loans, including any
accounts related thereto)that have been or may be pledged to Residential Funding
Corporation under the Warehousing Credit and Security Agreement (Single-Family
Mortgage Loans), dated as of January 19, 1996, between the Borrower and
Residential Funding Corporation, as amended, (iv) any assets pledged under the
debt agreements listed on Schedule IV to the Residual Agreement or the
Subordinated Debt Agreement and (v) any equipment subject to the leases listed
on Schedule V attached to the Residual Agreement or the Subordinated Debt
Agreement.
(d) The Grantor hereby assigns, pledges and grants a security
interest in the Collateral to the Lenders to secure the following obligations
now existing or hereafter incurred:
(i) the Secured Obligations as defined in the Warehouse Agreement;
(ii) the repayment of principal and interest on any Residual Advance
(as defined in the Residual Agreement) and all other amounts owing to the
Lenders pursuant to the Residual Agreement with respect to Residual
Advances;
(iii) the repayment of principal and interest on any Working Capital
Advance (as defined in the Residual Agreement) and all other amounts owing
to the Lenders pursuant to the Residual Agreement with respect to Working
Capital Advances; and
(iv) the repayment of principal and interest on any amounts
outstanding under the Subordinated Debt Agreement and all other amounts
owing to the lender of Subordinated Debt Agreement pursuant to the
Subordinated Debt Agreement
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(collectively, the "Secured Obligations"). The Grantor agrees to xxxx its
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computer records and tapes to evidence the interests granted to the Lenders
hereunder. The Collateral granted hereunder shall be subject to the
Intercreditor Agreement for all purposes.
(e) The Primary Warehouse Loan Collateral pledged hereunder shall
be included in the description of "Collateral" in the Warehouse Agreement
pursuant to Section 4.01(b)(x) thereof.
(f) The Lenders acknowledge that ownership of the Grantor Pledged
Mortgage Loans has been transferred by the Borrower to the Guarantor pursuant to
the Contribution Agreement; provided, however, that if ownership is deemed to
have not been transferred, the Borrower has nonetheless granted a security
interest in these Mortgage Loans.
3. REPRESENTATIONS AND WARRANTIES. The Grantor hereby represents
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and warrants that:
(a) Corporate Existence; Compliance with Law. The Grantor (a) is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado, (b) has the corporate power and authority, and has all
governmental licenses, authorizations, consents and approvals necessary, to own
and operate its property, to lease the property it operates as lessee and to
carry on its business as now being conducted, (c) is duly qualified to do
business and is in good standing under the laws of each jurisdiction in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify should be reasonably expected (either
individually or in the aggregate) to have a Material Adverse Effect, and (d) is
in compliance in all material respects with all Requirements of Law.
(b) Corporate Power; Authorization; Enforceable Obligations.
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(i) The Grantor has the corporate power and authority, and the
legal right, to make, deliver and perform this Security Agreement and each
other Loan Document to which it is a party, and to grant Liens hereunder,
and has taken all necessary corporate action to authorize the granting of
Liens on the terms and conditions of this Security Agreement and any other
Loan Document to which it is a party, and the execution, delivery and
performance of this Security Agreement and any other Loan Document.
(ii) No consent or authorization of, approval by, notice to, filing
with or other act by or in respect of, any Governmental Authority or any
other Person is required or necessary in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of this Security Agreement or any other Loan Document to
which the Grantor is a party, except (i) for filings and recordings in
respect of the Liens created pursuant to this Security Agreement, and (ii)
as previously obtained and currently in full force and effect.
(iii) This Security Agreement has been duly and validly executed and
delivered by the Grantor and constitutes, and any Loan Document when
executed and delivered on behalf of the Grantor will constitute, a legal,
valid and binding obligation of the Grantor,
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enforceable against the Grantor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
(c) Collateral; Collateral Security.
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(i) The Grantor has not assigned, pledged, or otherwise conveyed or
encumbered any of the Collateral to any Person other than the Warehouse
Lender, other than the security interest in favor of ContiTrade Services
L.L.C. and Greenwich Capital Markets, Inc. pursuant to the Significant
Documents, and immediately prior to or concurrently with the pledge of such
Collateral, the Grantor was the sole owner of the Collateral and had good
and marketable title thereto, free and clear of all Liens, in each case
except for the Liens of the Lenders and Liens that have been released or
are to be released simultaneously with the Liens granted in favor of the
Lenders hereunder.
(ii) The provisions of this Security Agreement are effective to
create in favor of the Lenders a valid security interest in all right,
title and interest of the Grantor in, to and under the Collateral.
(iii) Upon receipt by the Custodian of each Mortgage Note (or, in the
case of a Wet-Ink Mortgage Loan, upon notice to the related Settlement
Agent of the security interest of the Warehouse Lender in such Wet-Ink
Mortgage Loan and the funding thereof by the Warehouse Lender), and the
filing of financing statements on Form UCC-1 naming each Lender as "Secured
Party" and the Grantor as "Debtor", and describing the Collateral, in the
jurisdictions and recording offices listed on Schedule 2 attached hereto,
the security interests granted hereunder in the Collateral will constitute
fully perfected security interests under the Uniform Commercial Code in all
items of Collateral a security interest in which can be perfected by such
filing (and of first priority, except for other Liens on the Collateral
contemplated by the Significant Documents and except for those subsequent
liens which, by operation of law, take priority over a previously perfected
security interest) in all right, title and interest of the Grantor in, to
and under such Collateral.
(d) No Adverse Selection. The Grantor used no selection procedures
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that identified the Mortgage Loans as being less desirable or valuable than
other comparable Mortgage Loans owned by the Grantor.
(e) Grantor Solvent; Fraudulent Conveyance. As of the date hereof
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and immediately after the contribution of any Mortgage Loan to the Grantor and
giving effect to each Advance, the fair value of the assets of the Grantor is
greater than the fair value of the liabilities (including, without limitation,
contingent liabilities if and to the extent required to be recorded as a
liability on the financial statements of the Grantor in accordance with GAAP) of
the Grantor and the Grantor is and will be solvent, is and will be able to pay
its debts as they mature and does not and will not have an unreasonably small
capital to engage in the business in which it is engaged. Grantor does not
intend to incur, or believe that it has incurred, debts beyond its ability
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to pay such debts as they mature, taking into account the expected probability
of the Grantor having to make payments under the Guarantee. Grantor is not
contemplating the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of Grantor or any of its
assets. Grantor is not transferring any Mortgage Loans with any intent to
hinder, delay or defraud any of its creditors.
(f) True Disclosure. The information, reports, financial statements,
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exhibits and schedules furnished in writing by or on behalf of the Grantor to
the Lenders in connection with the negotiation, preparation or delivery of this
Security Agreement and the other Guarantor Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole, do not
contain any untrue statement of material fact. All written information
furnished after the date hereof by or on behalf of the Grantor to the Lenders in
connection with this Security Agreement and the Guarantee and the transactions
contemplated hereby and thereby will be true, correct and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to a Responsible Officer of the Grantor that, after due inquiry,
should reasonably be expected to have a Material Adverse Effect that has not
been disclosed herein, in the other Guarantor Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lenders for use in connection with the transactions
contemplated hereby or thereby.
(g) Licenses. No Lender will be required as a result of taking a
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pledge of the Mortgage Loans to be licensed, registered or approved or to obtain
permits or otherwise qualify (i) to do business in any state in which it
currently so required or (ii) under any state consumer lending, fair debt
collection or other applicable state statute or regulation.
4. COVENANTS. (a) Further Documentation. At any time and from
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time to time, upon the written request of any Lender, and at the sole expense of
the Grantor, the Grantor will promptly and duly execute and deliver, or will
promptly cause to be executed and delivered, such further instruments and
documents and take such further action as such Lender may reasonably request for
the purpose of obtaining or preserving the full benefits of this Security
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the Liens
created hereby. The Grantor also hereby authorizes the Lenders to file any such
financing or continuation statement with respect to the Collateral without the
signature of the Grantor to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Security Agreement shall be
sufficient as a financing statement for filing in any jurisdiction.
(b) Changes in Locations, Name, etc. The Grantor shall not (i)
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change the location of its chief executive office/chief place of business from
that specified in Section 12 hereof or (ii) change its name, identity or
corporate structure (or the equivalent) or change the location where it
maintains its records with respect to the Collateral unless it shall have given
the Lenders at least 30 days prior written notice thereof and shall have
delivered to the Lenders all Uniform Commercial Code financing statements and
amendments thereto as the Lenders shall
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request and taken all other actions deemed necessary by the Lenders to continue
its perfected status in the Collateral with the same or better priority.
(c) Other Information. The Grantor shall furnish to the Lenders, as
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soon as available, copies of any and all proxy statements, financial statements
and reports which the Grantor sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements filed
with the Securities and Exchange Commission, any Governmental Authority which
supervises the issuance of securities by the Grantor.
(d) Further Identification of Collateral. The Grantor will furnish
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to the Lenders from time to time statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as the Lenders may reasonably request, all in reasonable detail.
(e) Notice if Mortgage Loan is Found Defective. Upon discovery by
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the Grantor of any breach of any representation or warranty listed on Schedule 1
to the Warehouse Agreement applicable to any Mortgage Loan, the Grantor shall
promptly give notice of such discovery to the Borrower, who shall then notify
the Warehouse Lender pursuant to Section 7.07 of the Warehouse Agreement.
(f) Responsibilities under the Warehouse Agreement. The Grantor
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acknowledges that, by virtue of section 7.20 of the Warehouse Agreement, as
amended, sections 7.03(a) and (b), 7.13, 7.16, 7.19, 11.15 and 11.18 of the
Warehouse Agreement shall apply, mutatis mutandi, to the Grantor to the same
extent as such apply to the Borrower, and the Grantor hereby covenants to
perform in accordance therewith.
(g) Responsibilities Under the Residual Agreement. The Grantor
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acknowledges that Section 4.01(b), (g)-(1) and (q) and Section 4.02(a)-(3), (h),
(i) (except for subclause (iv) thereof), (j), (i), (m) and (q)-(s) of the
Residual Agreement shall apply, mutatis mutandi, to the Grantor to the same
extent as such apply to the Borrower, and the Grantor hereby covenants to
perform in accordance therewith; provided, however, that the Grantor's entry
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into and performance under the Guarantee, the Grantor's assumption of certain of
the Borrower's obligations under the Warehousing Credit and Security Agreement
(the "RFC Warehouse Agreement"), dated as of January 19, 1996, as amended,
between the Borrower and Residential Funding Corporation ("RFC"), and the
Grantor's pledge to RFC of all mortgage loans contributed to the Grantor which
are subject to the RFC Agreement, and the proceeds thereof (including accounts
in which such proceeds are held), and related servicing rights, shall in no
event be considered to violate or breach any representation, warranty, covenant,
or other term of the Residual Agreement and; provided, further, that the
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definition of "Material Adverse Effect" in such agreement shall remain
unchanged.
(h) Responsibilities Under the Subordinated Debt Agreement. The
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Grantor acknowledges that Section 4.01(b), (g)-(l), (n), (o) and (r) and Section
4.02(a)-(e), (h), (i) (except for subclause (iv) thereof), (j), (i), (m) and
(p)-(r) of the Subordinated Debt Agreement shall apply, mutatis mutandi, to the
Grantor to the same extent as such apply to the Borrower, and the Grantor hereby
covenants to perform in accordance therewith; provided, however, that the
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Grantor's entry into and performance uner the Guarantee, the Grantor's
assumption of certain of the Borrower's obligations under the RFC Warehouse
Agreement, and the Grantor's pledge to RFC of all mortgage loans contributed to
the Grantor which are subject to the RFC Warehouse Agreement, and the proceeds
thereof (including accounts in which such proceeds are held), and related
servicing rights, shall in no event be considered to violate or breach any
representation, warranty, covenant, or other term of the Subordinated Debt
Agreement and; provided, further, that the definition of "Material Adverse
Effect" in such agreement shall remain unchanged.
5. APPOINTMENT AS ATTORNEY-IN-FACT OF WAREHOUSE LENDER AND CTS.
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(a) The Grantor hereby irrevocably constitutes and appoints the Warehouse Lender
with regard to the Primary Warehouse Loan Collateral and CTS with regard to the
Grantor Collateral (not including any Grantor Collateral included in the Primary
Warehouse Loan Collateral, the "Non-Warehouse Grantor Collateral") and any
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officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Grantor and in the name of the Grantor or in its own name, from
time to time in such Lender's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement, and, without
limiting the generality of the foregoing, the Grantor hereby gives the Warehouse
Lender with respect to the Primary Warehouse Loan Collateral and CTS with
respect to Non-Warehouse Grantor Collateral the power and right, on behalf of
the Grantor, without assent by, but with notice to, the Grantor, if an Event of
Default shall have occurred and be continuing, to do the following:
(i) in the name of the Grantor or its own name, or otherwise, to
take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
mortgage insurance with respect to Pledged Mortgage Loans or with respect
to any other Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise deemed appropriate
by the Warehouse Lender with respect to the Primary Warehouse Loan
Collateral and CTS with respect to Non-Warehouse Grantor Collateral for the
purpose of collecting any and all such moneys due under any such mortgage
insurance or with respect to any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Warehouse Lender with respect to the Primary
Warehouse Loan Collateral and CTS with respect to Non-Warehouse Grantor
Collateral or as such Lender shall direct; (B) to ask or demand for,
collect, receive payment of and receipt for, any and all moneys, claims and
other amounts due or to become due at any time in respect of or arising out
of any Collateral; (C) to sign and endorse any invoices, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (D) to commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction
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to collect the Collateral or any thereof and to enforce any other right in
respect of any Collateral; (E) to defend any suit, action or proceeding
brought against the Grantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described in clause (E)
above and, in connection therewith, to give such discharges or releases as
such Lender may deem appropriate; and (G) generally, to sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of
the Collateral as fully and completely as though such Lender were the
absolute owner thereof for all purposes, and to do, at such Lender's option
and the Grantor's expense, at any time, and from time to time, all acts and
things which such Lender deems necessary to protect, preserve or realize
upon the Collateral and such Lender's Liens thereon and to effect the
intent of this Security Agreement, all as fully and effectively as the
Grantor might do.
(b) The Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. This power of attorney is a
power coupled with an interest and shall be irrevocable.
(c) The Grantor also authorizes the Warehouse Lender and CTS, at any
time and from time to time, to execute, in connection with any sale provided for
in Section 4.07 of the Warehouse Agreement and Section 7.02(d) of the Residual
Agreement, respectively, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(d) The powers conferred on the Lenders are solely to protect the
Lenders interests in the Collateral and shall not impose any duty upon the
Lenders to exercise any such powers. The Lenders shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and none of the Lenders nor any of their respective officers, directors, or
employees shall be responsible to the Grantor for any act or failure to act
hereunder, except for its own gross negligence or willful misconduct.
6. PERFORMANCE BY THE LENDERS OF BORROWER'S OR GRANTOR'S
-----------------------------------------------------
OBLIGATIONS. If either the Borrower or the Grantor fails to perform or comply
-----------
with any of its agreements contained in the Loan Documents or the Guarantor
Documents and the Warehouse Lender (with respect to the Warehouse Agreement) or
CTS (with respect to the Residual Agreement) may itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the reasonable
expenses of such Lender incurred in connection with such performance or
compliance, together with interest thereon at a rate per annum equal to the
Post-Default Rate, shall be payable by the Grantor to such Lender on demand and
shall constitute Secured Obligations.
7. PROCEEDS. If an Event of Default shall occur and be continuing,
--------
(a) all proceeds of Collateral received by the Grantor consisting of cash,
checks and other near-cash items shall be held by the Grantor in trust for the
Lenders, segregated from other funds of the Grantor, and shall forthwith upon
receipt by the Grantor be turned over to the Lenders in the exact form received
by the Grantor (duly endorsed by the Grantor to the Lenders, if required) and
(b) any and all such proceeds received by the Lenders (whether from the Grantor
or otherwise)
D-11
may, in the sole discretion of the Lenders, be held by the Lenders as collateral
security for, and/or then or at any time thereafter may be applied by the
Lenders against, the Secured Obligations (whether matured or unmatured), such
application to be in such order as the Lenders shall elect, subject to the
Intercreditor Agreement. All distributions and actions with respect to the
Collateral under this Security Agreement shall be undertaken by the Lenders as
set forth in the Warehouse Agreement and the Residual Agreement, subject to the
terms of the Intercreditor Agreement regarding "Primary Warehouse Loan
Collateral" and "Primary Residual Loan Collateral." Any balance of such proceeds
remaining after the Secured Obligations shall have been paid in full and this
Security Agreement shall have been terminated shall be paid over to the Grantor
or to whomsoever may be lawfully entitled to receive the same pursuant to the
Intercreditor Agreement. For purposes hereof, proceeds shall include, but not be
limited to, all principal and interest payments, all prepayments and payoffs,
insurance claims, condemnation awards, sale proceeds, real estate owned rents
and any other income and all other amounts received with respect to the
Collateral.
8. REMEDIES. (a) If an Event of Default shall occur and be
--------
continuing, the Lenders may exercise, in addition to all other rights and
remedies granted to it in this Security Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, the Lenders without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Grantor or any other Person (each and all of which demands, presentments,
protests, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of such Lender or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Lenders shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Grantor, which right or equity is hereby waived or released.
The Grantor further agrees, at any Lenders' request, to assemble the Collateral
and make it available to such Lender at places which such Lender shall
reasonably select, whether at the Grantor's premises or elsewhere. Such Lender
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Lenders hereunder, including without limitation reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Secured
Obligations, in such order as Lenders may elect, subject to the Intercreditor
Agreement, and only after such application and after the payment by Lenders of
any other amount required or permitted by any provision of law, including
without limitation Section 9-504(1)(c) of the Uniform Commercial Code, need the
Lenders account for the surplus, if any, to the Grantor. To the extent
permitted by applicable law, the Grantor waives all claims, damages and demands
it
D-12
may acquire against the Lenders arising out of the exercise by the Lenders of
any of its rights hereunder, other than those claims, damages and demands
arising from the gross negligence or willful misconduct of the Lenders. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition. The Grantor shall remain liable for
any deficiency (plus accrued interest thereon as contemplated pursuant to
Section 2.05(b) hereof) if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Lenders to collect such
deficiency.
(c) If the Grantor shall default in the payment of any other amount
payable by it hereunder or under any other Guarantor Document, and such default
shall have continued unremedied for three Business Days after receipt of notice
from the Lender of such default, such default shall be an Event of Default.
9. LIMITATION ON DUTIES REGARDING PRESENTATION OF COLLATERAL. The
---------------------------------------------------------
Lenders' duty with respect to the custody, safekeeping and physical preservation
of the Collateral in its possession, under Section 9-207 of the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as
such Lender deals with similar property for its own account. None of the
Lenders nor any of their respective directors, officers or employees shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Grantor or
otherwise.
10. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
11. RELEASE OF SECURITY INTEREST. (a) Upon termination of this
----------------------------
Warehouse Agreement and repayment to the Lenders of all Secured Obligations and
the performance of all obligations under the Loan Documents and under the
Guarantor Documents, the Lenders shall release its security interest in any
remaining Collateral; provided that if any payment, or any part thereof, of any
--------
of the Secured Obligations is rescinded or must otherwise be restored or
returned by the Lenders upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Borrower or the Grantor, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or a
trustee or similar officer for, the Borrower or the Grantor or any substantial
part of the Borrower's or the Grantor's Property, or otherwise, this Security
Agreement, all rights hereunder and the Liens created hereby shall continue to
be effective, or be reinstated, as though such payments had not been made.
D-13
(b) So long as no Event of Default has occurred and is continuing,
upon the repayment in full in immediately available funds of the Advance Balance
with respect to a Pledged Mortgage Loan, together with accrued and unpaid
interest in respect thereof, such Pledged Mortgage Loan and related Primary
Warehouse Loan Collateral shall be automatically released from the Lien of this
Security Agreement, and the Warehouse Lender shall cause the Custodian to
release the related Mortgage File and any other documents held by the Custodian
or the Warehouse Lender with respect to such Mortgage Loan to the Grantor or the
Grantor's designee. In addition, the Warehouse Lender shall execute and deliver
such instruments or other documents reasonably requested by the Grantor that are
prepared by the Grantor in order to effect the release of such Pledged Mortgage
Loan from the Lien of the Warehouse Lender.
12. CHIEF EXECUTIVE OFFICE. The Grantor's chief executive office on
----------------------
the Effective Date is located at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx 000-X, Xxxxxxxxx,
XX 00000.
13. LOCATION OF BOOKS AND RECORDS. The location where the Grantor
-----------------------------
keeps its books and records, including all computer tapes and records relating
to the collateral is its chief executive office.
14. PAYMENT OF OBLIGATIONS. The Grantor will pay promptly when due
----------------------
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if (i) the validity thereof is being contested in good faith
by appropriate proceedings, (ii) such proceedings do not involve any material
danger of the sale, forfeiture or loss of any of the Collateral or any interest
therein and (iii) such charge is adequately reserved against on the Grantor's
books in accordance with GAAP.
15. AUTHORITY OF THE LENDERS. The Grantor acknowledges that the
------------------------
rights and responsibilities of the Lenders under this Security Agreement with
respect to any action taken by the Lenders or the exercise or non-exercise by
the Lenders of any option, voting right, request, judgment or other right or
remedy provided for herein or resulting or arising out of this Security
Agreement shall, as between the Lenders, be governed by the Intercreditor
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Warehouse Lender and the Grantor or
between CTS and the Grantor, such Lender shall be conclusively presumed to be
acting as agent for the Lenders with full and valid authority so to act or
refrain from acting, and the Grantor shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.
16. SEVERABILITY. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. HYPOTHECATION OR PLEDGE OF ADVANCES. The Lenders shall have free
-----------------------------------
and unrestricted use of all Collateral and nothing in this Security Agreement
shall preclude the
D-14
Lenders from engaging in repurchase transactions with the Collateral or
otherwise pledging, repledging, transferring, hypothecating or rehypothecating
the Collateral. Nothing contained in this Security Agreement shall obligate the
Lenders to segregate any Collateral delivered to the Lenders by the Grantor.
18. PARAGRAPH HEADINGS. The paragraph headings used in this Security
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
19. NO WAIVER; CUMULATIVE REMEDIES. None of the Lenders shall by any
------------------------------
act (except by a written instrument pursuant to Section 18 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by any Lender of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which such Lender would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
20. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW.
-------------------------------------------------------------
None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Grantor and the Lenders, provided that any provision of this
Security Agreement may be waived by the Lenders in a written instrument executed
by the Lenders. This Security Agreement shall be binding upon the successors
and assigns of the Grantor and shall inure to the benefit of the Lenders and
their respective successors and assigns. This Security Agreement shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
[SIGNATURE PAGE FOLLOWS]
D-15
IN WITNESS WHEREOF, the parties hereto have caused this Security
Agreement to be duly executed and delivered as of the date first above written.
NATIONAL MORTGAGE SALES CORPORATION
By:__________________________________
Name:
Title:
ACKNOWLEDGED BY:
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:_____________________________
Name:
Title:
GREENWICH CAPITAL MARKETS, INC.
By:_____________________________
Name:
Title:
CONTITRADE SERVICES, L.L.C.
By:_____________________________
Name:
Title:
CONTITRADE SERVICES, L.L.C.
By:_____________________________
Name:
Title:
D-16
