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EXHIBIT 10.2
LOAN AGREEMENT
THIS LOAN AGREEMENT dated effective as of April 30, 1996, is made by
and among ALLIED MORTGAGE CORPORATION, a Texas corporation (the "Company"),
ALLIED MORTGAGE CAPITAL CORPORATION, a Texas corporation ("Capital") (the
Company and Capital being called collectively, the "Borrowers" and
individually, "Borrower") and COASTAL BANC ssb (herein called "Lender");
WITNESSETH:
This Loan Agreement, as it may hereafter be supplemented, amended,
modified, or restated by one or more written agreements is called the Agreement
and amends and restates in its entirety that certain Amended and Restated Loan
Agreement dated as of April 29, 1994 by and between the Company and Lender, as
it has been heretofore amended, modified, supplemented, or restated.
ARTICLE 1: DEFINITIONS, GENERAL RULES
Section 1.1. Terms Defined Above. As used in this Agreement, the
terms "Borrower" and "Lender" shall have the meanings respectively indicated in
the opening recitals hereof.
Section 1.2. Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"Advance" means a disbursement by Lender of any sum or sums
lent by Lender to either Borrower pursuant to the terms of this
Agreement.
"Affiliate" of any Person means (i) any other Person which,
directly or indirectly, controls, is controlled by, or is under common
control with, such Person, or (ii) any other Person who is a director,
officer or employee (a) of such Person, or (b) of any Person described
in the preceding clause (i). For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled
by" and "under common control with"), as used with respect to any
Person, shall mean the possession or ownership, directly or indirectly,
of (i) the power to (a) direct or cause the direction of the management
and policies of such Person, whether through the ownership of Voting
Shares or by contract or otherwise, or (b) vote 10% or more of the
Voting Shares of such Person, or (ii) the ownership of 10% or more of
any class of Voting Shares of such Person.
"Aged Mortgage Loan" means a Mortgage Loan which has been a
Pledged Mortgage Loan for more than 90 days.
"Aggregate Advances" means, at the time of any
determination, the outstanding and unpaid principal balances of all
Advances.
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"Appraisal" means, for any Mortgage Loan, a written
statement of the market value of the real property securing it.
"Appraisal Law" means any Governmental Requirement that is
applicable to appraisals of mortgaged-residential property in
connection with transactions involving that property, including,
without limitation, Title XI of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, the Federal Deposit Insurance
Corporation Improvement Act of 1991, 12 C.F.R. Chapter I, Part 34,
Subpart C, 12 C.F.R. Chapter II, Subchapter A, Part 225, Subpart G, and
12 C.F.R. Chapter III, Subchapter B, Part 323.
"Approved Custodian" means a Person acceptable to the Lender
from time to time in its sole discretion, who possesses Mortgage Loans
that secure Mortgaged-backed Securities.
"Assignment" means an assignment of a Mortgage, in form
sufficient under the laws of the United States of America and the state
of jurisdiction where the Mortgage is recorded to give notice to the
world of the assignment of the Mortgage, perfect the assignment and
establish its priority as a first perfected security interest relative
to other transactions in respect of the Mortgage assigned.
"Bailee Letter" has the meaning set forth in Section 2.6
hereof.
"Bailee Pledge Agreement" has the meaning set forth in
Section 2.3 hereof.
"Basic Rate" means, for any day, a variable per annum rate
of interest at all times equal to the LIBOR Rate for that day plus two
and one-half percent (2.50%) per annum.
"Business Day" means a day (other than Saturday, Sunday or a
legal holiday or a day on which Lender is authorized or obligated by
law or executive order to close) on which banks in Houston, Texas are
open for business.
"Cash Equivalents" mean any of the following: (a)
securities with maturities of 180 days or less from the date of
acquisition thereof issued or fully guaranteed or insured as to payment
of principal and interest by the United States of America or any agency
thereof, (b) certificates of deposit with maturities of 180 days or
less from the date of acquisition thereof issued by, in deposit
accounts at, any commercial bank having capital and surplus equal to or
greater than $250,000,000, (c) commercial paper of a domestic issuer
rated at least either A-1 by Standard & Poor's Corporation or P-1 by
Xxxxx'x Investor Service, Inc. with maturities of 180 days or less from
the date of acquisition thereof, and (d) securities of a domestic
municipal issuer rated at least either AAA by Xxxxx'x Investor Service,
Inc. or AAA by Standard & Poor's Corporation with maturities of 180
days or less from the date of acquisition thereof.
"Closing Date" means the date on which all of the conditions
precedent stated in Article 2 hereof have been met to Lender's satisfaction and
the initial Advance hereunder is funded by Lender against the Note.
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"Code" means the Uniform Commercial Code of any relevant
jurisdiction, as amended from time to time.
"Collateral" means, on any day, all Mortgage Loans,
Mortgage-backed Securities and any other Property of each of the
Borrowers heretofore, now or hereafter pledged to secure the
Obligations.
"Collateral Documents" has the meaning set forth in Section
2.3 hereof.
"Collateral Value" means (a) with respect to each Eligible
Mortgage Loan, at the time of any determination, an amount equal to one
hundred percent (100%) of the lesser of (i) the actual out-of-pocket
cost of such Eligible Mortgage Loan to the Borrower that is pledging
such Eligible Mortgage Loan, i.e., the net amount actually funded
against such Eligible Mortgage Loan originated by the applicable
Borrower or the net purchase price of such Eligible Mortgage Loan
purchased by it, (ii) the amount at which an Investor has committed to
purchase the Eligible Mortgage Loan pursuant to a Purchase Commitment,
(iii) the principal balance of the Eligible Mortgage Loan, or (iv) the
Market Value of the Eligible Mortgage Loan; provided, that the
Collateral Value of any Eligible Mortgage Loan originated or acquired
by either Borrower, whether funded as a refinancing of an existing
residential Mortgage Loan or purchased by it for an amount in excess of
Par shall not exceed such Eligible Mortgage Loan's Par, even though the
applicable Borrower funded or paid more than Par for it and even if the
Purchase Commitment covering it specifies a purchase price for it
greater than Par; (b) all Pledged Mortgage Loans which are not or cease
to be Eligible Mortgage Loans shall have a Collateral Value equal to
zero; (c) with respect to Mortgage-backed Securities, an amount equal
to the lesser of (i) the sum of the principal balances of the Mortgage
Loans from which such Mortgage/backed Securities were created or (ii)
the amount which the Investor has committed to pay for such
Mortgage-backed Securities pursuant to a Purchase Commitment.
"Commercial Security Agreement" means the commercial
security agreement dated of even date herewith containing terms and
conditions acceptable to Lender, and otherwise being substantially in
the form of Exhibit "A", executed by the Borrowers to secure the
Obligations as the same may be amended, renewed, extended, increased,
restated, and/or replaced from time to time.
"Commitment" means the obligations of Lender to make
Advances to or for the benefit of each of the Borrowers pursuant to
this Agreement.
"Commitment Limit" means $5,000,000.00.
"Compliance Certificate" means the document in the form of
Exhibit "E" to be completed from time to time by each of the Borrowers
pursuant to this Agreement.
"Contingent Liabilities" means any and all liabilities of a
Person, direct or indirect, for or in connection with the obligations,
stock or dividends of a Person, whether by guaranty, endorsement,
agreement to purchase or repurchase, agreement to lease, agreement to
supply or advance funds (including, without limitation, agreements to
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maintain working capital, solvency or other balance sheet conditions or
agreements to purchase stock or make capital contributions) or
otherwise.
"Conventional Loan" means a conforming loan represented by a
Mortgage Note, the payment of which is not guaranteed by VA or insured
by FHA.
"Correction Period" means ten (10) calendar days for any
Collateral Documents for any Pledged Mortgage Loan shipped under
Section 2.18 of this Agreement for correction.
"Credit Request" means a request for an Advance executed by
a Borrower in substantially the form of Exhibit "B".
"Current Financials" means either (a) the Borrowers'
Financials for the year ended December 31, 1995 and the three months
ended March 31, 1996 or (b) at any time after the Borrowers' monthly
Financials are first delivered under Section 4.1 hereof, the Borrowers'
monthly Financials then most recently delivered to the Lender and annual
Financials then most recently delivered to the Lender.
"Debt" means, with respect to any Person and on any day, the
sum on that day of (a) all of that Person's debt (i) for borrowed
money, (ii) for the deferred purchase price of Property or services, or
(iii) which is evidenced by a bond, debenture, note or other instrument
plus (b) any debt secured by any lien or security interest existing on
any interest of that Person in Property owned subject to such lien
whether or not that Person is liable for the debt secured thereby plus
(c) all of that Person's obligations under all capitalized leases and
(d) all of that Person's obligations under all guaranties, endorsements
and other contingent obligations in respect of or any obligations to
purchase or otherwise acquire Debt of others.
"Debtor Laws" means all applicable liquidation,
conservatorship, bankruptcy, moratorium, arrangement, receivership,
insolvency, reorganization or similar laws from time to time in effect
affecting the rights of creditors generally.
"Default" means the occurrence of any event or existence of
any condition which, but for the giving of notice, the lapse of time,
or both, would constitute an Event of Default.
"Discretionary Advances" has the meaning set forth in
Section 2.16 of this Agreement.
"Dividends" in respect of any corporation, means (a) cash
distributions or any other distributions on, or in respect of, any
class of capital stock of such corporation, except for distributions
made solely in shares of stock of the same class, and (b) any and all
funds, cash or other payments made in respect of the redemption,
repurchase or acquisition of such stock, unless such stock shall be
redeemed or acquired through the exchange of such stock with stock of
the same class.
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"Eligible Mortgage Loans" means, on any day, all fully
amortizing Mortgage Loans (a) which are made payable to the order of
either Borrower or have been endorsed payable to the order of either
Borrower and have been endorsed by such Borrower in blank, and for
which such Borrower holds Purchase Commitments, (b) which have original
terms to their stated maturity of thirty (30) years or less, (c) in
which Lender has been granted and continues to hold an enforceable
perfected first-priority security interest, (d) which are not in
default, (e) which otherwise satisfies all requirements and
representations and warranties of this Agreement, (f) which, conform in
all respects with all the requirements of the Purchase Commitments to
purchase such Mortgage Loans and are valid and enforceable in
accordance with their respective terms, (g) which are eligible either
for guaranty or insurance by the VA or FHA or for insurance (as to the
portion of the Mortgage Loan which initially exceeds an 80%
loan-to-collateral value ratio) by private mortgage insurance by an
insurer rated "A" or better by a nationally recognized rating agency,
or an uninsured conventional mortgage loan conforming to the maximum
loan amount and loan-to-collateral value ratio standards for guaranty
by FNMA or FHLMC and with both an initial and a current
loan-to-collateral value ratio no greater than 80%, (h) otherwise
satisfactory to Lender in its sole good faith discretion in all other
respects, (i) dated not more than thirty (30) days before the date on
which a Borrower has requested the Advance in connection with such
Mortgage Loan, and (j) as to which none of the events or conditions
described in Section 2.15 has occurred.
"Eligible Mortgage Pool" means a pool of Mortgage Loans that
will secure a " mortgage related security", as defined in Section
3(a)(41) of the Exchange Act administered or to be administered by a
trustee acceptable to Lender in its sole discretion where the Mortgage,
Mortgage Note and other documents relating to such Mortgage Loans are
held or to be held by an Approved Custodian.
"ERISA" means the Employee Retirement Income Security Act of
1974 and any successor statute, as amended from time to time, and all
rules and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) which, together with either of the Borrowers would be
treated as a single employer under Section 4001 of ERISA.
"Event of Default" means any of the events or conditions
specified in Section 6.1 of this Agreement, provided that any
requirement for notice or lapse of time or any other condition has been
satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time or any successor statute and all rules and
regulations promulgated under it.
"FHA" means the Federal Housing Administration of the
Department of HUD or its successor.
"FHA Loan" means a loan represented by a Mortgage Note,
payment of which is partially or completely insured by the FHA under
the National Housing Act or Title V
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of the Housing Act of 1949 or with respect to which there is a current,
binding and enforceable commitment for such insurance issued by the
FHA.
"FHLMC" means the Federal Home Loan Mortgage Corporation, a
wholly-owned corporate instrumentality of the United States of America
created pursuant to the Emergency Home Finance Act of 1970, or its
successor.
"Financials" means balance sheets, profit and loss
statements, statements of cash flow, changes in stockholders' equity
and any other financial statements, reports or information requested by
the Lender.
"FNMA" means the Federal National Mortgage Association, or
its successor.
"Funding Account" means the non-interest bearing demand
checking account established by Borrowers at Lender to be used for the
(a) deposit of proceeds of Advances, and (b) the funding of Pledged
Mortgage Loans.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles
Board or by the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently
applied for all periods after the date hereof so as to properly reflect
the financial condition, and the results of operations and changes in
financial position, of a Borrower, except that any accounting principle
or practice required to be changed by the said Accounting Principles
Board or Financial Accounting Standards Board (or other appropriate
board or committee of the said Boards) in order to continue as a
generally accepted accounting principle or practice may so be changed.
"GNMA" means the Governmental National Mortgage Association,
or its successor.
"Governmental Authority" means any foreign governmental
authority, the United States of America, any state of the United States
of America, and any political subdivision of any of them and any
agency, department, commission, board, bureau, court or other tribunal.
"Governmental Requirement" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other
direction or requirement (including, without limitation, any of the
foregoing which relate to environmental standards or controls, energy
regulations and occupational, safety and health standards or controls)
of any (domestic or foreign) federal, state, country, municipal or
other government, department, commission, board, court, agency or any
other instrumentality of any of them, which exercises jurisdiction over
either borrower or any of their Property or Lender.
"Guarantor" means Xxx X. Xxxxx.
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"Guaranty" means an unconditional and irrevocable guaranty
agreement dated of even date herewith executed by the Guarantors in
favor of Lender in form and substance acceptable to Lender, as the same
may be amended, supplemented, modified, restated, and/or replaced from
time to time.
"HUD" means the Housing and Urban Development or its
successor.
"Investor" means any Person approved by Lender in its sole
discretion; provided that at any time thereafter by written notice to
the applicable Borrower, Lender may disapprove any Investor in its sole
discretion for any reason whereupon such Investor shall no longer be
qualified to be an Investor.
"LIBOR Rate" means the rate of interest per annum equal to
either (i) the London Interbank Offered Rate for U.S. Dollar deposits
for an interest period of thirty (30) days as quoted by Telerate,
Bloomberg, or any other rate quoting services or (ii) the published
LIBOR Rate for an interest period of thirty (30) days in the "Money
Rates" column published each day in The Wall Street Journal, either (i)
or (ii) will be selected by Lender, without notice to Borrower, in its
sole discretion. The Lender's determination of the LIBOR Rate for each
day shall be conclusive and binding, absent manifest error. The LIBOR
Rate shall fluctuate upward and downward automatically and concurrently
with day-to-day changes in such rate of interest quoted by the rate
quoting services listed above or published in The Wall Street Journal
as selected by the Lender. If the LIBOR Rate ceases to be quoted or
published altogether, Lender may choose a substitute interest rate
which is based on comparable information.
"Lien" means any lien, mortgage, security interest, tax
lien, pledge or encumbrance, or conditional sale or title retention
agreement, or any other interest in property designed to secure the
repayment of indebtedness, whether arising by agreement or under any
statute or law, or otherwise. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions
and encumbrances affecting Property.
"Loan" means the aggregate principal amount of all Advances
outstanding hereunder.
"Loan Documents" means this Agreement, the Note, the
Assignment, the Security Instruments and any other instruments,
documents and agreements executed and/or delivered pursuant to the
terms of or in connection with this Agreement, together with all
renewals, extensions, modifications, increases, restatements,
replacements, and rearrangements of any of them.
"Margin Stock" has the meaning assigned to that term in
Regulations G and U of the Board of Governors of the Federal Reserve
System as in effect from time to time.
"Market Value" of any Mortgage Loan means at any time the
market value of such Mortgage Loan based upon the then most recent
posted net yield furnished by FNMA and published and distributed by
Telerate Mortgage Services; provided, that if such posted net
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yield is not available from Telerate Mortgage Services, Lender shall
obtain such posted net yield from FNMA.
"Material Adverse Effect" means any material adverse effect
on (a) the validity or enforceability of this Agreement, the Note or
any Security Instrument, (b) the financial condition, the Property or
business operations of either Borrower, (c) the ability of either
Borrower to timely repay its debt or timely fulfill its other
obligations under this Agreement, the Note or any Security Instrument,
(d) any material item or part of the Collateral or its value, or (e)
the priority or perfection of Lender's Liens in any material item or
part of the Collateral.
"Maximum Rate" means the maximum lawful rate of
interest permitted by applicable usury laws now or hereafter enacted,
which interest rate shall change when and as said laws change, to the
extent permitted by said laws, effective on the day such change in
said laws becomes effective, provided, however, that the term "Maximum
Rate" means a rate of interest equal to eighteen percent (18%) per
annum if there is no Maximum Rate.
"Mortgage" means a mortgage, deed of trust, deed to secure
debt or other form of mortgage instrument, appropriate and effective
for the U.S. jurisdiction where the real estate is located to create,
perfect and maintain in full force and effect a first and prior
mortgage lien against it, in form and substance satisfactory to Lender,
securing a Mortgage Note and granting a perfected first-priority lien
on residential real property consisting of land and a one-to-four
family owner-occupied dwelling thereon which is completed and ready for
occupancy.
"Mortgage-backed Security" means FHLMC, GNMA or FNMA
securities that are backed by Mortgage Loans.
"Mortgage Loans" means residential Conventional Loans, FHA
Loans and VA Loans, or any combination of them.
"Mortgage Note" means a promissory note secured by a
Mortgage.
"Mortgage Pool" means a pool of Mortgage Loans that were
warehoused with the Lender, on the basis of which there is to be issued
a Mortgage-backed Security.
"Mortgagee's Title Insurance Policy" means an ALTA, CLTA or
TLTA (extended coverage) form lender's or mortgagee's title insurance
policy, including all of its riders and endorsements and all
endorsements as are required by applicable GNMA, FNMA or FHLMC
guidelines, in an amount at least equal to the face principal amount of
the Mortgage Note insuring its holder that the Mortgage is a valid
first lien on the real property described in the Mortgage, subject only
to (i) liens for real estate taxes and governmental improvements
assessments not delinquent, (ii) easements and restrictions that do not
adversely effect the market ability of title to such real property or
prohibit or interfere with its use as a one, two, three or four family
(whichever the case may be) dwelling, (iii) for real property that is a
unit in a condominium or a horizontal or vertical
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property regime, the provisions of the condominium or other property
regime, (iv) oil, gas or other mineral reservations and exceptions
provided they do not materially alter the contour of the property or
impair its value of usefulness for its intended purpose, (v) agreements
for installation, maintenance or repair of public utilities provided
they do not establish evidence or permit any Person to file or acquire
any Lien against the mortgaged property (unless the lender has
established and maintained an escrow account for the payment of such
Lien), and (vi) such other exceptions (if any) as are acceptable under
applicable GNMA, FNMA, FHLMC or private Investor guidelines.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA that is maintained for employees of the
Company or a Subsidiary of the Company.
"Net Worth" means the excess of a Person's total assets over
that Person's total liabilities as each is determined in accordance
with GAAP.
"Nonusage Fee" has the meaning set forth in Section 2.20
hereof.
"Note" means the promissory note of even date herewith
executed by Borrowers payable to the order of Lender in the original
principal sum of $5,500,000.00 and being substantially in the form of
Exhibit C", together with all renewals, extensions, modifications,
increases, replacements, and rearrangements thereof.
"Obligations" means all present and future indebtedness,
obligations and liabilities of each Borrower to Lender and all
renewals, extensions, increases, rearrangements, replacements, and
modifications thereof or any part thereof arising pursuant to this
Agreement and/or the other Loan Documents and/or represented by the
Note and all interest accruing thereon and all reasonable attorneys'
fees incurred in drafting, negotiating, enforcing or collecting
thereof, regardless of whether such debts, obligations or liabilities
are direct, indirect, fixed, contingent, liquidated, unliquidated,
joint, several or joint and several.
"Par" means (a) in its case of a residential Mortgage Loan
refinanced by either Borrower, an amount equal to the unpaid principal
balance of the residential Mortgage Loan refinanced or (b) in the case
of a purchased residential Mortgage Loan, its unpaid principal balance
on the date of purchase.
"Person" means any individual, corporation, partnership,
joint venture, trust, joint stock company, unincorporated business
entity or governmental department, administrative agency or
instrumentality.
"Plan" has the meaning set forth in Section 3.15 hereof.
"Pledged Mortgage Loans" means, for any day, all Mortgage
Loans pledged by each of the Borrowers to Lender to secure the
Obligations.
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"Power of Attorney" means a power of attorney dated of even date
herewith executed by each Borrower and being in substantially the form of
Exhibit "F" hereto.
"Prior Note" shall have the meaning set forth in Section 2.2 hereof.
"Property" means any interest in any kind of property or assets,
whether real, personal or mixed, or tangible or intangible.
"Purchase Commitment" means a written commitment, in form and
substance satisfactory to the Lender, issued in favor of the Company by an
Investor pursuant to which that Investor commits to purchase Mortgage Loans or
Mortgage-backed Securities.
"Redemption Amount" has the meaning set forth in Section 2.10 hereof.
"Regulation Q" means Regulation Q promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R., Part 17.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Part 221.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Part 224.
"Security Instruments" means the Commercial Security Agreement, the
Assignments and the other instruments described in Article 2.7 of this Agreement
and any and all other instruments heretofore, now or hereafter executed in
connection with or as security for the payment of the Note, together with all
renewals, extensions, modifications, increases, restatements, replacements, and
rearrangements of any of them.
"Subsidiary" means any Person (other than a natural person) in which
any other Person (directly or through one or more other Subsidiaries or other
types of intermediaries), owns or controls: (a) more than fifty percent (50%) of
the total voting power or shares of stock entitled to vote in the election of
its directors, managers, or trustees; or (b) more than ninety percent (90%) of
the total assets or more than ninety percent (90%) of the total equity through
the ownership of capital stock (which may be nonvoting) or a similar device or
indicia of equity ownership.
"Termination Date" means the earlier to occur of (i) May 30, 1997 or
(ii) the date that the Commitment is cancelled or terminated in accordance with
this Agreement.
"Trust Receipt" means a Trust Receipt and Agreement executed and
delivered by a Borrower to Lender in substantially the form of Exhibit "G"
hereto.
"VA" means the Department of Veteran Affairs or its successor.
"VA Loan" means a loan represented by a Mortgage Note, payment of
which is partially or completely guaranteed by the VA under the Servicemen's
Readjustment Act
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of 1944 or Chapter 37 of Title 38 of the United States Code or with
respect to which there is a current binding and enforceable commitment
for such a guaranty issued by the VA.
"Warehouse Borrowings" means, at the time of any
determination, all Debt of any Person that is secured by, in whole or
in part, any combination of Mortgage Loans, Mortgage-backed Securities
and other mortgage-backed securities, including, without limitation,
this Loan.
"Warehouse Line Limit", with respect to each Eligible
Mortgage Loan, an amount equal to one hundred percent (100%) of any one
of the following selected by Lender, in its sole and absolute
discretion, at the time of funding the Advance in connection with such
Eligible Mortgage Loan: (a) the amount at which an Investor has
committed to purchase the Eligible Mortgage Loan pursuant to a Purchase
Commitment or (b) the principal balance of the Eligible Mortgage Loan.
"Wet Advance" means an Advance for which all of the
Collateral Documents have not been delivered to the Lender.
ARTICLE 2: COMMITMENT
Section 2.1. Loan. Subject to the terms and conditions and relying on
the representations and warranties contained in this Agreement, Lender agrees
to make Advances to either Borrower at any time, and from time to time, on any
Business Day prior to the Termination Date in such amounts as such Borrower may
request up to but not exceeding the Commitment Limit and each Borrower may
borrow, repay, and reborrow hereunder so long as the Aggregate Advances at any
one time outstanding shall not exceed the lesser of (a) the aggregate Warehouse
Line Limit for all Eligible Mortgage Loans, or (b) Commitment Limit. Lender's
Commitment shall terminate on the Termination Date or such earlier date
pursuant to the terms of this Agreement. All revolving loans made pursuant to
this Section 2.1 and all payments of principal with respect to all loans under
the Commitment shall be evidenced by notations made by Lender in its business
records. The Aggregate Advances reflected by the notations made in Lender's
business records shall be conclusive evidence of the principal amount owing and
unpaid on the Note.
Section 2.2. Note. All Advances hereunder shall be evidenced by the
Note. The principal amount from time to time outstanding on the Note shall bear
interest each day at the lesser of the Basic Rate or the Maximum Rate;
provided, all past due amounts, both principal and accrued and unpaid interest,
shall bear interest at the Maximum Rate from their due dates until paid. The
Note is given in renewal and extension, but not extinguishment, of the
outstanding principal balance of that certain November 7, 1995 promissory note
in the original principal sum of $5,500,000.00 executed by the Company payable
to the order of the Lender ("Prior Note"). Borrowers, jointly and severally,
agree to pay to Lender the note in accordance with its terms. All renewals,
extensions, modifications, increases and rearrangements of the Note, if any,
shall be deemed to be made pursuant to this Agreement and accordingly, shall be
subject to the terms and provisions hereof, and Borrower shall be deemed to
have ratified, as of such renewal, extension, modification, increase or
rearrangement date, all of the representations, warranties and
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agreements set forth herein. All liens, security interests, and assignments
securing the Prior Note are hereby ratified, confirmed, and brought forward as
security for the Note, in addition to and cumulative of all other security.
Section 2.3. Notice and Manner of Obtaining Advances. A Borrower may
obtain an Advance hereunder, subject to the satisfaction of the conditions set
forth in this Section 2.3, Sections 2.4 and 2.5 hereof and Exhibit "D" of this
Agreement, including, without limitation, delivery of all documents and other
items described on Exhibit "D" to the Lender (the "Collateral Documents").
Request for Advances shall be initiated by a Borrower delivering to the Lender
a properly completed and executed Credit Request together with all Collateral
Documents. The Credit Request and the Collateral Documents must be received by
the Lender no later than 2:00 p.m. Houston time in order for funding to occur
the same day. In the case of Wet Advances, Borrower shall comply with the
procedures and, at or prior to the Lender's making of such Wet Advance, must
deliver the documents set forth in Section II of Exhibit "D" together with a
properly completed and executed Bailee Pledge Agreement in the form of Exhibit
"K" hereto (the "Bailee Pledge Agreement"). In the case of Mortgage Loans
financed through a Wet Advance, Borrower shall cause all Collateral Documents
to be delivered to the Lender or its designee within one (1) calendar day after
the date of the Wet Advance relating thereto.
Section 2.4. Conditions Precedent to Initial Advance. The obligation
of Lender to make the initial Advance pursuant to this Agreement is subject to
the following condition precedent that Borrowers shall deliver to Lender all of
the following items, in form and substance satisfactory to Lender, shall have
been received by Lender:
(a) Note. The Note duly and validly issued, executed and
delivered by Borrowers.
(b) Agreement. This Agreement duly and validly issued,
executed and delivered by Borrowers.
(c) Commercial Security Agreement, Financing Statement, and
Guaranty. The Commercial Security Agreement, the UCC1 Financing
Statements, in form and substance acceptable to the Lender, and the
Powers of Attorney duly and validly issued, executed and delivered by
Borrowers. The Guaranty duly and validly issued, executed and delivery
by the Guarantors.
(d) Company Documents. A copy of (i) Company's articles or
certificates of incorporation and bylaws, including all amendments
thereto, all certified, in the case of the articles or certificates of
incorporation by the Secretary of State of Company's state of
incorporation and in the case of bylaws and other documents, by the
chief executive officer or Vice President and the Secretary or an
Assistant Secretary of Company as being in full force and effect on
the Closing Date, (ii) certificates of existence and good standing, or
equivalent, if any, issued by the Secretary of State and the
Comptroller of Public Accounts of the state of Company's
incorporation, (iii) a schedule listing, by state, all certificates of
authority and good standing issued by the appropriate Governmental
Authority in each state in which Company does business and where either
Company is authorized to do business or where doing business without
being duly authorized would
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potentially subject Company to a Material Adverse Effect, and (iv)
all other documents Lender may request relating to the existence,
qualification and good standing of Company.
(e) Resolutions of Company. A copy of the resolution or
resolutions passed by the Board of Directors of Company, certified by
the chief executive officer or Vice President and the Secretary or an
Assistant Secretary of Company as being in full force and effect on
the Closing Date, each of which corporate resolutions authorizing the
borrowings provided for herein and the execution, delivery and
performance of this Agreement, the Note, and the other Loan Documents,
and any other instrument or agreement required hereunder from such
Person, as the case may be, and providing as to the incumbency, and
containing the specimen signature or signatures, of the person or
persons authorized to execute and deliver this Agreement, the Note,
and the other Loan Documents and any other instrument or agreement
required hereunder.
(f) Capital Documents. A copy of (i) Capital's articles or
certificates of incorporation and bylaws, including all amendments
thereto, all certified, in the case of the articles or certificates of
incorporation by the Secretary of State of Capital's state of
incorporation and in the case of bylaws and other documents, by the
chief executive officer or Vice President and the Secretary or an
Assistant Secretary of Capital as being in full force and effect on
the Closing Date, (ii) certificates of existence and good standing, or
equivalent, if any, issued by the Secretary of State and the
Comptroller of Public Accounts of the state of Capital's
incorporation, (iii) a schedule listing, by state, all certificates of
authority and good standing issued by the appropriate Governmental
Authority in each state in which Capital does business and where
either Capital is authorized to do business or where doing business
without being duly authorized would potentially subject Capital to a
Material Adverse Effect, and (iv) all other documents Lender may
request relating to the existence, qualification and good standing of
Capital.
(g) Resolutions of Capital. A copy of the resolution or
resolutions passed by the Board of Directors of Capital, certified by
the chief executive officer or Vice President and the Secretary or an
Assistant Secretary of Capital as being in full force and effect on
the Closing Date, each of which corporate resolutions authorizing the
borrowings provided for herein and the execution, delivery and
performance of this Agreement, the Note, and the other Loan Documents,
and any other instrument or agreement required hereunder from such
Person, as the case may be, and providing as to the incumbency, and
containing the specimen signature or signatures, of the person or
persons authorized to execute and deliver this Agreement, the Note,
and the other Loan Documents and any other instrument or agreement
required hereunder.
(h) Legal Opinion. Written opinion or opinions, dated as of
the date hereof, of counsel for Borrower, in form and substance
satisfactory to Lender covering all such matters as Lender may
require.
(i) Tax, Lien and Judgment Search. A favorable tax, lien and
judgment search of the appropriate public records for the Borrower,
including a search of Code financing statements, which search shall
not have disclosed the existence of any prior Lien on the Collateral
other than in favor of the Lender or as permitted hereunder.
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(j) Other Evidence. Such other evidence as Lender may
reasonably request to establish the consummation of the transactions
contemplated hereby, the taking of all proceedings in connection
herewith and compliance with the conditions set forth in this
Agreement.
Section 2.5. Conditions Precedent to All Advances. The obligation of
Lender to make each Advance pursuant to this Agreement (including the Initial
Advance) in connection with any Mortgage Loan or Loans is subject to the
following further conditions precedent:
(a) Prior to 2:00 p.m. (Houston, Texas time) on the day of
the requested funding, Borrower shall have delivered a Credit Request
duly executed on behalf of Borrower and complied with the procedures
set forth in Exhibit "D" hereto.
(b) The representations and warranties of Borrower contained
in this Agreement or any Security Instrument shall be true and correct
in all material respects on and as of the date of such Advance.
(c) No Default or Event of Default shall have occurred and be
continuing as of the date of such Advance.
(d) There shall have been, in the sole opinion of Lender, no
Material Adverse Effect since the date of this Agreement.
(e) All legal matters incident to the transactions herein
contemplated shall be satisfactory to legal counsel to Lender.
(f) Borrower shall have paid to Lender the fees due and
payable pursuant to Sections 2.20 and 2.21 hereof.
(g) Each Mortgage Loan or Loans to which the Credit Request
relates is an Eligible Mortgage Loan.
(h) The Lender shall have received evidence satisfactory to
it as to the making and/or continuation of any book entry or the due
filing and recording in all appropriate offices of all financing
statements and other instruments as may be necessary to perfect the
security interest of the Lender in the Collateral under the Code.
(i) All other conditions precedent have been satisfied
including, without limitation, the conditions set forth in Section 2.4
hereof.
Each Credit Request shall be deemed to constitute a representation and warranty
by the applicable Borrower on the date of the requested Advance as to the facts
specified in Subsections (b) and (c) of this Section 2.5. Lender may reject, at
any time and from time to time, any Mortgage Loan or Loans and the Collateral
Documents delivered in connection therewith borrowed against hereunder as
unacceptable and ineligible and Borrowers shall pay to Lender in immediately
available funds an amount equal to the aggregate amount of all Advances made
hereunder against such Mortgage Loan or Loans designated by Lender as
unacceptable and ineligible. All other
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original documents executed in connection with each Mortgage Loan and not
delivered to Lender shall be held in trust by such Borrower for the benefit of
Lender and Lender and such Borrower shall specifically identify such items in
the Credit Request and upon request of Lender shall immediately deliver to
Lender such items. Neither failure to exercise nor delay in exercising on the
part of Lender, of its right to reject or designate any Mortgage Loan or any
Collateral Documents as unacceptable and ineligible shall operate as a waiver of
such right or Lender's right to exercise such right at any time. Each condition
precedent in this Agreement is material to the transactions contemplated in this
Agreement and time is of the essence in respect of each thereof. Lender may make
any Advance without all conditions being satisfied, but, to the extent permitted
by law, the same shall not be deemed a waiver of the requirement that each such
condition precedent be satisfied as a prerequisite for any subsequent Advance.
Section 2.6. Mandatory Prepayments. Without the prior written consent
of Lender, if at any time the outstanding principal balance of the Note exceeds
the aggregate Collateral Value of all Eligible Mortgage Loans then Borrower
shall forthwith prepay the amount of such excess for application towards
reduction of the outstanding principal balance of the Note.
Section 2.7. Optional Prepayments. Each Borrower, at its option,
without notice, premium or penalty (except as otherwise provided in the next
sentence of this section), may prepay the Note in full at any time or from time
to time in part; provided, however, that because the Note is a master revolving
credit note, the Note shall remain in full force and effect until terminated as
provided therein or until, at a time when no amounts, principal, interest or
otherwise, are then owing, Borrowers release Lender from any obligation to make
loans pursuant thereto.
Section 2.8. Security Interest in Mortgage-backed Securities. The
Company's ability to convert Mortgage Loans that are within the Collateral to
Mortgage-backed Securities are subject to the following conditions:
(a) Pledged Mortgages that are to be transferred to a pool
custodian in connection with the issuance of Mortgage-backed
Securities, shall be released from the Lender's security interest only
against payment to the Lender of the amount due the Lender in
connection with such Pledged Mortgages as determined in accordance with
Section 2.10 of this Agreement or against the issuance of such
Mortgage-backed Securities and the continuation of the Lender's first
priority, perfected security interest in such Mortgage-backed
Securities and the proceeds thereof until payment due the Lender in
respect of said Pledged Mortgages is made to the Lender.
(b) In the case of Mortgage-backed Securities created from
Pledged Mortgages, the Lender shall have the exclusive right to the
possession of the Mortgage-backed Securities or, if the
Mortgage-backed Securities are not to be issued in certificated form,
shall have the right to have the book entries for the Mortgage-backed
Securities issued in the Lender's name or the name or names of its
designees. Lender shall cause delivery of the Mortgage-backed
Securities to be made to the Investor or the book entries registered
in the name of the Investor or the Investor's designee only against
payment therefor. The Company acknowledges that the Lender may enter
into one or more standing arrangements with other financial
institutions for the issuance of Mortgage-backed
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Securities in book entry form in the name of such other financial
institutions, as agent for the Lender, and the Company agrees upon
request of the Lender, to execute and deliver to such other financial
institutions the Company's written concurrence in any such standing
arrangements.
Section 2.9. Delivery of Collateral Documents. The Lender or its
designee exclusively shall deliver Pledged Mortgages or Pledged Securities to
(a) an Investor that has issued a Purchase Commitment with respect thereto for
its examination and purchase, or (b) an Approved Custodian for purposes of
examination or delivery in connection with the issuance of Mortgage-backed
Securities. In such cases where the Lender must deliver documents to an Investor
or Approved Custodian, the Lender must receive signed shipping instructions (in
the form of Exhibit "I" attached hereto), no later than 2:00 p.m. Houston, Texas
time one (1) Business Day prior to the expiration of the appended Purchase
Commitment, in addition to any other documents listed in Section III of Exhibit
"D" in respect of the issuance of Mortgage-backed Securities. If shipping
instructions are received by Lender before 2:00 p.m. Houston, Texas time of any
Business Day, Lender will ship the documents together with the appropriate
bailee letter in form of Exhibit "J-1" or "J-2" ("Bailee Letter") to the
Investor or Approved Custodian on the same Business Day, otherwise Lender will
ship the documents the next Business Day following receipt of shipping
instructions. In any case in which an Advance has been made hereunder against
Pledged Mortgages, based on the existence of a Purchase Commitment covering such
Pledged Mortgages, the Company agrees that such Pledged Mortgages will not be
placed in any mortgage pool other than an Eligible Mortgage Pool, unless such
Pledged Mortgages have been redeemed from pledge as permitted hereunder or other
arrangements, satisfactory to the Lender in its sole discretion, have been made
for the redemption of such Pledged Mortgages from pledge hereunder. The Lender
may deliver any document relating to the Collateral to the Company for
correction or completion against a Trust Receipt in the form of Exhibit "G"
attached hereto executed by the Company. The Company hereby represents and
warrants to the Lender that any request by the Company for release of the
Collateral consisting of or relating to Mortgage Loans to the Company shall be
solely for the purposes of correcting clerical or non-substantial documentation
problems in preparation for returning such Collateral to the Lender for ultimate
sale or exchange; the Company shall request such release in compliance with all
of the terms and conditions of such release set forth herein; and the Company
will return to the Lender such documentation released to the Company pursuant to
Section 2.18 within ten (10) calendar days after such delivery.
Section 2.10. Right of Redemption from Pledge. So long as no Default
or Event of Default has occurred, the Company may redeem a Mortgage Loan or
Mortgage-backed Security by notifying the Lender of its intention to redeem such
Mortgage Loan or Mortgage-backed Security from pledge and by paying, or causing
an Investor to pay, to the Lender, for application to prepayment of the
principal balance of the Note, an amount (the "Redemption Amount") equal to the
amount of the Advances made with respect to or relating to such Mortgage Loan or
Mortgage-backed Security to be released as of the date of such application.
Section 2.11. Payments.
(a) All payments of principal of and interest on the Note
shall be made to Lender at its xxxxxx xx Xxxxx Xxxxxxxx Xxxxx, Xxxxx
0000, Xxxxxxx, Xxxxx 00000.
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(b) Whenever any payment of principal of or interest on the
Note shall be due on a day which is not a Business Day, the date for
payment thereof shall be extended to the next succeeding Business Day
and interest shall be payable for such extended time at the rate of
interest with-respect thereto in effect at the due date.
Section 2.12. Computation of Interest. Subject to the provisions of
Section 7.11 hereof, interest on the unpaid principal amount of the Note from
time to time outstanding shall be computed on the basis of a year of three
hundred sixty (360) days and paid for the actual number of days elapsed.
Borrowers will not be required to maintain any deposit with Lender as a
condition for the borrowings hereunder.
Section 2.13. Security. Payment of the Note and the Obligations and
the performance of the covenants set forth in this Agreement will be secured,
directly or indirectly, by a first priority perfected security interest,
mortgage, assignment or lien, as the case may be, in and upon the Collateral,
as more particularly described in the Commercial Security Agreement.
Each of the Borrowers agrees to execute, acknowledge and deliver to
Lender such instruments, mortgages, chattel mortgages, deeds of trust, security
agreements, security agreement-pledges, guaranty agreements, statements,
assignments and financing statements, in form and substance acceptable to
Lender as in the good faith and discretion of counsel for Lender may be
necessary to enforce, grant to Lender and perfect in the United States the
security interests, liens, assignments and mortgages on the Collateral.
Section 2.14. No Default. Lender may, but shall not be required to,
make or continue any Advance if an event has occurred and is continuing which
constitutes a Default or breach of a covenant under this Agreement or any other
Loan Document.
Section 2.15. Ineligible Collateral. If any of the following events
shall occur or apply to any Pledged Mortgage Loan at any time then (i) such
Mortgage Loan shall no longer be an Eligible Mortgage Loan and (ii) Borrowers,
jointly and severally, agree to pay to Lender as a mandatory prepayment against
the Note, in immediately available funds, an amount equal to the Aggregate
Advances made hereunder against such Mortgage Loan:
(a) if it has become an Aged Mortgage Loan;
(b) twenty-one (21) days shall have lapsed from the date a
Mortgage Loan or a Mortgage-backed Security was delivered to an
Investor for examination and purchase, without the purchase being made
and its proceeds paid to Lender;
(c) a Mortgage Loan shall cease to be fully covered by a
Purchase Commitment or shall be ineligible for purchase pursuant to a
Purchase Commitment;
(d) ten (10) days shall have lapsed from the date any Basic
Mortgage Loan Document was delivered to either Borrower, as the case
may be, for correction or completion, without its having been returned
to Lender;
(e) a Mortgage Loan shall be in default;
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(f) Lender's security interest in such Pledged Mortgage Loan
shall have become other than first priority or shall have become
unenforceable or otherwise impaired; or
(g) any of the representations or warranties made in Section
3.10 shall be false in any material respect with respect to such
Pledged Mortgage Loan or Borrowers shall default in the performance of
or compliance with any covenant contained in this Agreement with
respect to such Pledged Mortgage Loan.
Section 2.16. Discretionary Advances. Notwithstanding the Commitment
Limit, the Lender shall have the right, but shall not be obligated, to make
Advances requested by either Borrower, which when added to all Aggregate
Advances as of the date of any request are in excess of the Commitment Limit,
in such amounts as such Borrower may request prior to the Termination Date up
to the maximum amount hereinafter stated and each Borrower may borrow, pay,
prepay, in whole or in part, and reborrow in respect thereof, provided, however,
the aggregate principal amount of all such discretionary Advances shall not
exceed at any one time outstanding the sum of $500,000.00 ("Discretionary
Advances"). Any request for an Advance hereunder by either Borrower, which when
added to all Aggregate Advances as of the date of such request is in excess of
the Line of Credit Commitment, shall be deemed to be a request for a
Discretionary Advance. Each request for a Discretionary Advance made by either
Borrower may be approved or denied, with or without cause, by the Lender in its
sole and absolute discretion. Lender's approval of any request for a
Discretionary Advance shall not be deemed to be a waiver of its right to deny
any subsequent request for a Discretionary Advance, with or without cause,
regardless of whether or not the same circumstances and factors which existed
at the time of Lender's approval of any previous request exist at the time of
any subsequent request. Each Discretionary Advance and all Mortgage Loans
pledged in connection therewith shall be subject to all terms, conditions,
representations, warranties, covenants, and agreements contained in this
Agreement applicable to any Advance hereunder and any Mortgage Loan pledged to
secure the Obligations. Discretionary Advances, and interest thereon, shall be
evidenced by the Note and shall be due and payable in accordance with the Loan
Documents. Discretionary Advances shall be secured by the Security Instruments
and any and all Collateral heretofore, now or hereafter given by the Borrowers
to secure any of the Obligations.
Section 2.17. Bailee. Lender appoints Borrower - and Borrower shall
act - as its (a) special agent for the sole and limited purpose of obtaining
and maintaining Appraisals for Pledged Mortgage Loans and (b) bailee to (i)
hold in trust for Lender (A) the original recorded copy of the mortgage, deed
of trust, or trust deed securing each Pledged Mortgage Loan, (B) a mortgagee
policy of title insurance (or binding unexpired and unconditional commitment to
issue such insurance if the policy has not yet been delivered to Borrower)
insuring the Borrower's perfected, first priority Lien created by that
mortgage, deed of trust, or trust deed, (C) the original insurance policies for
each Pledged Mortgage Loan as required hereunder, and (D) all other original
documents, including any undelivered Forward Sale Commitments, promissory
notes, and Mortgage-Backed Securities, and (ii) deliver to Lender any of the
foregoing items as soon as reasonably practicable upon Lender's request.
Section 2.18. Shipment for Correction. If no Default or Event of
Default exists or occurs as a result of the shipment and if shipment would not
result in any collateral documents for
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Pledged Mortgage Loans with more than a total face amount of $500,000.00 being
outstanding for correction, then Borrower may - by a Trust Receipt delivered to
Lender - request that Lender ship to Borrower the entire mortgage loan file of
Collateral Documents for any Pledged Mortgage Loan pledged by it so that
certain of those Collateral Documents may be corrected or replaced for clerical
or other non-substantive mistakes. If Lender has no actual knowledge that any
of the above conditions have not been satisfied, then and subject to the
limitations below, then Lender shall ship to Borrower the entire mortgage loan
file of Collateral Documents to be corrected or replaced. Borrower shall
redeliver to Lender the corrected Collateral Documents before the expiration of
the Correction Period for that Collateral. Collateral shipped under this
section, unless returned to Lender ceases to be Eligible Mortgage Loans (a) to
the extent that Collateral Documents for Pledged Mortgage Loans with more than
a total face amount of $500,000.00 are outstanding for correction at any time
and (b) upon the expiration of the Correction Period for that Collateral. The
Lender Liens on any Collateral shipped under this section continue in full
force and effect.
Section 2.19. Expiration of Commitment. Unless extended or terminated
earlier as permitted hereunder, the Commitment shall expire of its own term,
and without the necessity of action by the Lender, at the close of business on
the Termination Date. However, the remainder of this Agreement shall remain in
full force and effect until all amounts due on the Obligations have been paid
in full. The Lender has not made, and does not hereby make, any commitment to
renew, extend, rearrange or otherwise refinance the outstanding and unpaid
principal of the Note or accrued interest thereon. In the event, however, the
Lender from time to time renews, extends, rearranges, increases and/or
otherwise refinances any portion or all of any Obligation and any accrued
interest thereon at any time, such refinancing shall be evidenced by an
appropriate promissory note in form and substance satisfactory to the Lender
and, unless otherwise noted or modified at such time or times by the terms of
such promissory note or any agreements executed in connection therewith, any
such promissory note or notes and refinancing evidenced thereby shall be
governed in all respects by the terms of this Agreement.
Section 2.20. Non-Usage Fee. At the end of each month during the term
of this Agreement (i.e., from its effective date through the Termination Date),
the Lender shall determine average usage of the Commitment by calculating the
arithmetic daily average of the outstanding balance of Advances in that month.
The Lender shall then subtract the average usage (the "Used Portion") from the
Commitment (the result being called the "Unused Portion") and the Company shall
pay in arrears (without duplication of payment), on or before five (5) days
after the later of (a) the end of each month or (b) the Company's receipt of the
Lender's xxxx for such monthly period, a Non-Usage Fee equal to 0.125% per annum
on the total amount of the Unused Portion of the Commitment, as compensation to
the Lender for its agreement to make the Commitment available to the Company
during that month and not as compensation for the use, forbearance or detention
of money as a "true commitment fee" under Texas law); provided that such fee
shall be waived for any month if the Unused Portion for such month is equal to
or less than $2,000,000.00. Each calculation by the Lender of the amount of any
Non-Usage Fee shall be conclusive and binding on the Company, absent manifest
error.
Section 2.21. Miscellaneous Charges. At the end of each month during
the term of this Agreement, the Company shall pay to the Lender in arrears on or
before five (5) days after the later of (a) the end of each calendar month or
(b) the Company's receipt of the Lender's xxxx for
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such monthly period, a transaction fee equal to $25.00 per Pledged Mortgage
Loan held by Lender during such month and for which Lender has not previously
received a transaction fee, for the handling and administration of Advances and
Collateral. For the purposes hereof, each Borrower shall, at its sole cost and
expense, pay all miscellaneous charges and expenses such as charges for
security delivery fees and charges for overnight delivery of Collateral to
Investors. Miscellaneous charges are due when incurred, but shall not be
delinquent if paid within ten (10) days after receipt of an invoice or an
account analysis statement from the Lender.
ARTICLE 3: REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement and to make
Advances hereunder, each of the Borrowers represents and warrants to Lender
(which representations and warranties will survive the delivery of the Note and
the making of Advances hereunder against the Note):
Section 3.1. Organization, Standing, Qualification, Etc. of the
Borrowers. Each of the Borrowers:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas;
(b) has all requisite power and authority and all necessary
consents, approvals, licenses, permits, franchises and other
authorizations (i) to own and operate its properties and assets, (ii)
to carry on its business as now conducted and as presently proposed to
be conducted, (iii) to create and issue the Note and to execute and
deliver this Agreement, the Security Instruments and all other
documents and agreements referred to or mentioned herein or therein to
which it is a party, and (iv) to carry out and comply with the terms
of this Agreement, the Note, the Security Instruments and all other
instruments referred to or mentioned herein or therein to which it is
a party; and
(c) is duly qualified and authorized to transact business and
is in good standing as a foreign corporation in all jurisdictions
wherein the Property owned or the business transacted by it makes such
qualification necessary.
Section 3.2. Binding Obligation. All action on the part of each
Borrower or any other Person requisite for the due creation, issuance and
delivery of this Agreement, the Note, the Security Instruments and all other
instruments executed by each Borrower or any other Person in connection
herewith or therewith has been duly and effectively taken. This Agreement does,
and the Note, the Security Instruments and all other instruments to be executed
by each Borrower or any other Person in connection herewith or therewith when
executed and delivered will, constitute legal, valid and binding obligations of
each of the Borrowers and such Persons, enforceable in accordance with their
terms, except as enforceability may be limited by applicable Debtor Laws and
general principles of equity.
Section 3.3. No Conflicts or Consents. Neither the execution and
delivery of this Agreement, the Note or the Security Instruments, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or with the terms and
provisions thereof, will materially contravene or conflict with any provision
of law,
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statute or regulation to which either or both Borrowers are subject or any
judgment, license, order or permit applicable to either or both Borrowers, or
any indenture, mortgage, deed of trust, or other agreement or instrument to
which either or both Borrowers are a party or by which either or both Borrowers
may be bound, or to which either or both Borrowers may be subject, or violate
any provision of the Articles of Incorporation or Bylaws of either Borrower or
contravene or conflict with any Governmental Requirement.
Section 3.4. Priority of Liens. All Collateral and all Purchase
Commitments applicable to the Collateral have been duly authorized and validly
issued to the applicable Borrower, as the case may be, comply with all
requirements of this Agreement and have been and will continue to be validly
pledged or assigned to Lender. Lender shall have and will continue to have
valid, enforceable, perfected, first priority liens and security interests in
such Collateral.
Section 3.5. No Liens. All Collateral is free and clear of all Liens
and other adverse claims of any nature other than Lender's Liens. The
applicable Borrower, as the case may be, has good and indefeasible title to the
Collateral.
Section 3.6. Financial Condition. The Current Financials were
prepared in accordance with GAAP and present fairly, in all material respects,
the financial condition, results of operations, and cash flows of the Borrowers
as of, and for the portion of the fiscal year ending on their date or dates
(subject only to normal year-end adjustments). All material liabilities of the
Borrowers as of the date or dates of the Current Financials are reflected in
them or notes to them. Except for transactions directly related to, or
specifically contemplated by, the Loan Documents, no subsequent material
adverse changes have occurred in the financial condition of the Borrowers from
that shown in the Current Financials, nor has any Borrower incurred any
subsequent material liability.
Section 3.7. Full Disclosure. There is no material fact that either
Borrower has not disclosed to Lender which could adversely affect the
properties, business, prospects or condition (financial or otherwise) of either
Borrower or could adversely affect the Collateral. Neither the financial
statements referred to in Section 3.6 hereof, nor any certificate or statement
delivered herewith or heretofore by either or both Borrowers to Lender in
connection with this Agreement and the other Loan Documents, contains any
untrue statement of material fact.
Section 3.8. No Litigation. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrowers threatened, against either or both Borrowers.
Section 3.9. Taxes. All tax returns required to be filed by Borrowers
in any jurisdiction have been filed and all taxes, assessments, fees and other
governmental charges upon Borrowers or upon any of their properties, income or
franchises have been paid prior to the time that such taxes could give rise to
a lien thereon, unless protested in good faith by appropriate proceedings. To
the best of Borrowers' knowledge, there is no proposed tax assessment against
either Borrower.
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Section 3.10. Special Representations Concerning Collateral. As to
each Pledged Mortgage Loan:
(a) All of Basic Mortgage Loan Documents are genuine, duly
executed by a borrower of legal capacity, and properly completed, and
are legal, valid and binding obligations of the maker thereof,
enforceable in accordance with their terms; and all documents,
including documents pertaining to underwriting, with respect to such
Mortgage Loan which are required by the Investors, FHA, VA or any
private mortgage insurer ("PMI") to be in the loan files related to
such Mortgage Loan are contained therein and have been properly
completed and, where applicable, executed, attested and notarized.
(b) Each Mortgage securing each Mortgage Loan is a valid
first Lien on the property described in such Mortgage and is
enforceable in accordance with its terms and the laws of the
jurisdiction in which the property is located.
(c) The unpaid balance of the Mortgage Loan is as stated in
the records disclosed or delivered to Lender; no payment of principal
or interest on the Mortgage Loan has or will be forgiven, suspended or
rescheduled and no waiver, alteration or modification has been or will
be made to the terms or provisions of the Mortgage Note evidencing the
Mortgage Loan without Lender or Investor written approval, to the
extent such Investor approval is required; without Investor written
approval, no party responsible for payment in whole or in part has
been released in whole or in part and no part of the mortgaged
property has been or will be released; the full original principal
amount of the Mortgage Note evidencing the Mortgage Loan will be
advanced to the mortgagor or paid to third parties on his behalf in
accordance with Investor guidelines, regulations and requirements.
(d) Each Mortgage Loan is and will remain covered by an FHA
insurance certificate, VA guaranty certificate, or policy of PMI, as
required by the terms of any agreement or any Governmental Requirement
applicable to such Mortgage Loan; the applicable Borrower will comply
with all applicable provisions of the insurance or guaranty contract
or policy and all laws and regulations related thereto. With respect
to Mortgage Loans not yet endorsed by FHA for insurance and Mortgage
Loans for which the Borrower which pledged such Mortgage Loan has not
yet obtained evidence of guaranty from VA or insurance from FHA, the
applicable Borrower shall proceed diligently and promptly to comply
with the documentation requirements and all other applicable
requirements in order to procure the endorsement for insurance of or
evidence of guaranty by VA or insurance from FHA, as the case may be
and, in the event that the applicable Borrower ever has reason to
believe that any such endorsement or evidence will not be forthcoming,
Borrowers shall promptly notify Lender and withdraw the related FHA
Mortgage Loan or VA Mortgage Loan as Collateral, either replacing it
with other collateral which qualifies as Eligible Collateral or paying
down the Aggregate Advances in an appropriate amount.
(e) All fire, casualty, hazard, flood and other insurance
policies and guaranties required by an Investor, FHA, VA or PMI to be
maintained have been issued and are in full force and effect, and the
premium therefor has been paid, and such policies presently
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name and will continue to name the applicable Borrower, as the case
may be, as the insured under a standard mortgagee clause or for newly
purchased Mortgage Loans, a notice for endorsement changing the named
mortgagee has been submitted to the carrier and will be diligently
pursued until issued and there does not exist any event or condition
which could result in the revocation of any such policy or otherwise
impair the enforcement of such insurance or guarantee.
(f) There are no uninsured casualty losses or casualty losses
where coinsurance has been, or Borrowers have reason to believe it
will be, claimed by the insurance company or where the loss, exclusive
of contents, is greater than the net recovery from the fire insurance
carrier; casualty insurance proceeds have been used to reduce the
Mortgage Loan balance or as otherwise allowed by the Investor; all
damages with respect to which casualty insurance proceeds have been
received by or through the applicable Borrower, as the case may be,
have been properly repaired or are in the process of such repair with
such proceeds in accordance with Investor requirements and regulations
and guidelines.
(g) Each Mortgage Loan meets, or is exempt from applicable
state or federal laws, regulations and other requirements pertaining
to usury and no Mortgage Loan is usurious.
(h) All Pledged Mortgage Loans (i) have been originated in
conformity with the requirements of all applicable Governmental
Requirements including without limitation Real Estate Settlement
Procedures Act, the Equal Credit Opportunity Act and the Federal
Truth-in-Lending Act and Investor guidelines and requirements, (ii)
are and will continue to comply with the terms of this Agreement and
the Purchase Commitment, (iii) have not been modified or amended nor
have any requirements of them been waived, and (iv) are and will
continue to be valid and enforceable in accordance with their terms,
without defense or offset.
(i) Neither Borrowers have any knowledge of damage to the
property covered by any Mortgage securing any Mortgage Loan by fire,
windstorm or other casualty, or any other circumstances or conditions
which would cause any Mortgage Loan to become delinquent, or
materially adversely affect the value or marketability of the Mortgage
Loan; provided, however, that if timely repair is presently being
undertaken with casualty insurance proceeds or an insurance claim is
being processed with the insurance company, no breach of this warranty
shall occur as long as there will be no diminution in the collateral
value of the repaired property securing a Mortgage from the value it
had prior to the casualty loss.
(j) Each Mortgage Loan has not been originated in violation
of any applicable rules, regulations, requirements or underwriting
guidelines of the Investor or PMI which insures such Mortgage Loan,
FHA/VA or any regulatory agency having jurisdiction, the effect of
which violation, whether by act or omission, would: (1) impair,
invalidate, or reduce (i) any Investor approvals, (ii) any private
mortgage insurance, FHA insurance or VA guaranty or commitment of any
private mortgage insurer or FHA to insure or VA to guaranty, (iii) any
title insurance policy, (iv) any hazard insurance policy, (v) any
flood
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insurance policy required by the National Flood Insurance Act of 1968
as amended, or (vi) any fidelity bond, direct surety bond, or errors or
omissions insurance required by FHA/VA, any PMI, or any Investors; or
(2) result in Lender, or its permitted assigns, having to repurchase or
incur curtailment of full reimbursement or enter into any form of
indemnification agreement with respect to such Mortgage Loan, or pay a
fine.
(k) Neither Borrower has been informed that any property
subject to any Mortgage securing any Mortgage Loan has been or will be
condemned, except if such condemnation will not have a material
adverse effect on the value of such property or its status as security
for the Mortgage Loan.
(l) There are no properties securing any Mortgage Loan which
are subject to any homeowner's assessment which impairs or could
impair the applicable Borrower's, as the case may be, first lien
priority on such properties.
(m) Where applicable law requires the payment of interest on
escrow accounts, all such interest has been either properly paid or
credited to the mortgagor's account.
(n) Each Mortgage Loan and each Mortgage-backed Security
included in the Collateral meet all applicable requirements of a
Purchase Commitment and at all times there are and will continuously
be adequate and sufficient Purchase Commitments to cover one hundred
percent (100%) of all Mortgage Loans and Mortgage-backed Securities
which are pledged as Collateral from time to time. Each of the
Borrowers shall assure that Mortgage Loans pledged pursuant to this
Agreement and intended to be used in the formation of Mortgage-backed
Securities shall comply, before the formation of any such
Mortgage-backed Security, with the requirements of the governmental
instrumentality, department or agency (whether GNMA, FNMA, FHLMC or
another Person) which is contemplated to guaranty such Mortgage-backed
Security when issued.
(o) Upon delivery to Lender or its bailee of each Mortgage
Note evidencing a Mortgage Loan included in the Collateral, Lender
shall have valid, enforceable, perfected, first priority security
interest as Liens therein. Upon delivery to Lender or its bailee of
each Mortgage-backed Security in certificated form, Lender shall have
valid, enforceable, perfected, first priority Liens as security
interests in each Mortgage-backed Security. Upon completion of the
steps set forth in Section 2.5(b)(iv), Lender shall have valid,
enforceable, perfected, first priority Liens as security interest in
each such Mortgage-backed Security.
(p) Each Pledged Mortgage Loan meets the requirements of an
Eligible Mortgage Loans.
Section 3.11. Survival of Representations. All representations and
warranties by each of the Borrowers herein shall survive delivery of the Note
and the making of the Advances, and any investigation at any time made by or on
behalf of Lender shall not diminish Lender's right to rely thereon.
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Section 3.12. No Event of Default. No Default or Event of Default has
occurred and is continuing.
Section 3.13. Use of Proceeds; Business Loans. The proceeds of the
Advances will be used by each Borrower for the funding of each Borrower's
originations or purchases from others of Mortgage Loans which are Eligible
Mortgage Loans and for no other purpose. All loans evidenced by the Note are
and shall be "business loans", as such term is used in the Depository
Institutions Deregulation and Monetary Control Act of 1980, as amended, and
such loans are for business or commercial purposes and not primarily for
personal, family, household or agricultural use, as such terms are used or
defined in Texas Revised Civil Statutes, Article 5069-1.04, Texas Credit code,
Regulation Z promulgated by the Board of Governors of the Federal Reserve
System, and Titles I and V of the Consumer Credit Protection Act.
Section 3.14. Subsidiaries and Trade Names. Company has no
Subsidiaries or investments in any Person, other than Capital. Capital has no
Subsidiaries or investments in any Person. No Borrower has used or transacted
business under any other corporate or trade name in the six-month period
preceding the date of this Agreement.
Section 3.15. ERISA. All plans ("Plans") of a type described in
Section 3(3) of ERISA in respect of which the Company or any Subsidiary of the
Company is an "Employer," as defined in Section 3(5) of ERISA, are in
substantial compliance with ERISA, and none of such Plans is insolvent or in
reorganization, has an accumulated or waived funding deficiency within the
meaning of Section 412 of the Internal Revenue Code, and neither the Company
nor any Subsidiary of the Company has incurred any material liability
(including any material contingent liability) to or on account of any such Plan
pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA; and no
proceedings have been instituted to terminate any such Plan, and no condition
exists which presents a material risk to the Company or a Subsidiary of the
Company of incurring a liability to or on account of any such Plan pursuant to
any of the foregoing Sections of ERISA. No Plan or trust forming a part thereof
has been terminated since December 1, 1974.
Section 3.16. Solvency. Each of the Borrowers (a) is solvent, (b) is
able to and anticipate that it will be able to meet its debts as they mature,
(c) have adequate capital to conduct the businesses in which it is engaged,
and (d) own and will own property having a value, both at fair valuation and at
present fair saleable value, greater than the amount required to pay its debts
and obligations.
Section 3.17. Investment Company Act. Neither Borrower is subject to
regulation under the Investment Company Act of 1940, as amended, or the Public
Utility Holding Company Act of 1935, as amended.
Section 3.18. Appraisals. With respect to the property the subject of
any Mortgage Loan, the applicable Borrower, as the case may be, has obtained
Appraisals in material compliance with all Appraisal Laws.
Section 3.19. Eligibility. The Company has all requisite corporate
power and authority and all necessary licenses, permits, franchises and other
authorizations to own and operate its property and to carry on its business as
now conducted. If approved now or hereafter as a lender
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or seller/servicer for any one or more of the governmental agencies as set
forth below, the Company will remain at all times approved and qualified and in
good standing and meet all requirements applicable to such status:
(a) FNMA, approved seller/servicer of Mortgage Loans,
eligible to originate, purchase, hold, sell, and service Mortgage
Loans to be sold to FNMA.
(b) FHLMC approved seller/servicer of Mortgage Loans,
eligible to originate, purchase, hold, sell, and service Mortgage
Loans to be sold to FHLMC.
(c) GNMA approved seller/servicer of Mortgage Loans, eligible
to originate, purchase, hold, sell, and service Mortgage Loans to be
sold to GNMA.
(d) HUD approved lender, eligible to originate, purchase,
hold, sell and service FHA-insured Mortgage Loans.
Section 3.20. Place of Business. The principal place of business of
the Borrowers is 00000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, and the
chief executive office of the Borrowers and the office where each keeps its
respective financial books and records relating to its property and all
contracts relating thereto and all accounts arising therefrom is located at the
address set forth in Section 7.1 hereof
ARTICLE 4: COVENANTS
So long as the Commitment shall remain available to Borrowers, and
until the payment in full of the Note unless Lender shall otherwise consent in
writing, each of the Borrowers agrees that:
Section 4.1. Business and Financial Information. Each of the
Borrowers will promptly furnish to Lender from time to time such information
regarding the business and affairs and financial condition of each of the
Borrowers as Lender may reasonably request, and will furnish Lender:
(a) Monthly Financials of Borrowers. As soon as available but
in any event within twenty (20) days after the end of each calendar
month, Financials of each of the Borrowers as of the close of such
calendar month setting forth, in each case in comparative form, the
figures for the corresponding periods in the previous fiscal year as
well as year-to-date figures, all in such detail as Lender may
reasonably request and accompanied by (i) a statement of the President
or the principal financial officer of the applicable Borrower, as the
case may be, certifying that such statements present fairly the
financial position of the applicable Borrower at the close of such
period and the results of its operations for such period and (ii) a
Compliance Certificate.
(b) Annual Financials of Borrowers. As soon as available but
in any event within ninety (90) days after the close of each fiscal
year of each Borrower, the annual audited Financials of such Borrower
as at the end of such fiscal year setting forth, in each case in
comparative form, the figures for the previous fiscal year and
accompanied by (i)
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the report thereon of independent certified public accountants acceptable to
Lender, which report shall state that such financial statements have been
prepared in accordance with GAAP consistently applied and that the audit by
such accountants in connection with such financial statements has been made in
accordance with GAAP and (ii) a Compliance Certificate.
(c) Guarantor Financial Statements. Promptly when available
but at least within 90 days of each calendar year, financial
statements and statements of income and cash flow for Guarantor
prepared as of the end of the previous calendar year in form and
detail reasonably acceptable to the Lender.
(d) Notices. Immediately upon becoming aware of the existence
of (i) any Default under this Agreement, a written notice specifying
the nature and period of existence thereof and what action Borrowers
are taking or propose to take with respect thereto, or (ii) the
institution or threat of any action, suit or proceeding by or against
either or both of the Borrowers in or before any Governmental
Authority (excluding routine HUD or VA audits not undertaken for
cause), a written notice specifying the action, suit or proceeding,
the Governmental Authority involved, and what action Borrowers are
taking or propose to take with respect thereto.
(e) Mortgage Loans. As soon as available but in any event
within five (5) Business Days after the close of each calendar month
during the term of this Agreement, a schedule, certified as complete
and correct by the President or a principal financial officer of each
Borrower, listing each Pledged Mortgage Loan as of the end of such
calendar month and setting forth with respect to each such Pledged
Mortgage Loan (i) the number of days such Mortgage Loan has been
included in the Collateral, and (ii) the correct status of the
Purchase Commitment issued in connection with such Pledged Mortgage
Loan.
(f) Certificate of Warehouse Borrowings. Promptly and in any
event within fifteen (15) days after the request of Lender at any time
and from time to time, a certificate, executed by the president or
chief financial officer of Company, setting forth all of Company's
warehouse borrowings.
(g) Governmental Reporting. Copies of all regular or periodic
financial and other reports, if any (including any warranty or
indemnity claim reports), which either Borrower shall file with GNMA,
FNMA, FHLMC, HUD, VA or any other Governmental Authority, in such
detail and when and as Lender may request from time to time.
(h) Other Information. Such other information concerning the
business, properties or financial condition of either Borrower as
Lender may request.
Section 4.2. Pledged Mortgage Loans. Each of the Borrowers will
immediately notify Lender in writing of any of the following:
(a) upon the occurrence of any event or condition which
constitutes a default or an event of default under any Pledged
Mortgage Loan;
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(b) upon the purchase or payment of any Pledged Mortgage Loan
pursuant to the terms of a Purchase Commitment or otherwise;
(c) upon any prepayment, whether in whole or in part, of any
of the Pledged Mortgage Loans;
(d) upon default by any Investor in the performance and/or
observance of any of its obligations under a Purchase Commitment
relating to a Pledged Mortgage Loan or Loans; or
(e) any Purchase Commitment relating to a Pledged Mortgage
Loan or Loans ceases to be in full force and effect.
Section 4.3. Further Assurances. Each of the Borrowers will promptly
cure any defects in the creation and issuance of the Note and the execution and
delivery of this Agreement, the Security Instruments or any other instruments
referred to or mentioned herein or therein and do, execute, acknowledge and
deliver all such further acts, documents and assurances as Lender in its
discretion shall request or require to more fully, completely or effectively
evidence or effect the pledge and assignment to Lender of the Mortgage Loans
intended by this Agreement to be pledged and assigned or for carrying out the
intention or facilitating the performance of the terms of this Agreement and the
other Loan Documents. Each of the Borrowers will do all acts and things, and
will execute and file or record, all instruments requested by Lender, to
establish, perfect, maintain and continue first priority perfected security
interests in and upon the Collateral. Each of the Borrowers will pay the costs
and expenses of all filings and recordings and all searches deemed necessary by
Lender to establish and determine the validity and the priority of the Liens
created or intended to be created by the Security Instruments; and each of the
Borrowers will satisfy all other claims and charges which in the opinion of
Lender might prejudice, impair or otherwise affect any of the Collateral or
Lender's Lien thereon.
Section 4.4. Reimbursement of Expenses. Each of the Borrowers, jointly
and severally, agree to pay to Lender, upon demand, all expenses of the Lender
(including, without limitation, reasonable fees, expenses, and disbursements of
counsel for the Lender) in connection with the preparation, negotiation,
enforcement, operation, or administration of this Agreement, the Note, the other
Loan Documents or any documents executed in connection therewith or any waiver,
modification, or amendment of any provision hereof or thereof. Each of the
Borrowers, jointly and severally, agrees, upon demand, promptly to reimburse the
Lender for all amounts expended, advanced, or incurred by the Lender to satisfy
any obligation of either or both of the Borrowers under this Agreement or any of
the other Loan Documents, or to protect the Collateral, or to collect the Note,
or to enforce the rights of the Lender under this Agreement, the Security
Instruments, or any other instrument referred to or mentioned herein or therein
or executed in connection herewith or therewith, which amounts will include,
without limitation, all court costs, reasonable attorneys fees, fees of auditors
and accountants and investigation expenses reasonably incurred by the Lender in
connection with such matters. Such sums shall be due and payable upon demand
together with interest at the Maximum Rate on each such amount from the date
that the same is expended, advanced, or incurred by the Lender until the date it
is repaid. In addition to and not in substitution of any other rights, remedies,
and recourses of the Lender hereunder, under the other Loan Documents, at law or
in equity, if Borrowers fail to pay any of the sums
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due and payable under this Section 4.4 hereof, upon demand, the Lender is
hereby authorized, at any time and from time to time, without notice to the
Borrowers (any such notice being expressly waived by each of the Borrowers) and
regardless of the existence of an Event of Default or Default or whether or not
the Obligations have matured, to offset and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender to or for the credit or the
account of either or both of the Borrowers against any and all of the amounts
due and payable pursuant to this Section 4.4 hereof.
Section 4.5. Inspection. At any and all reasonable times, upon the
request of Lender, each of the Borrowers will permit Lender or any agents or
representatives designated by Lender:
(a) to examine the books of accounts, records, reports and
other papers of such Borrower (and to make copies and extracts
therefrom);
(b) to audit such Borrower's books and records pertaining to
the Mortgage Loans;
(c) to inspect any Property of such Borrower; and
(d) to discuss the business and affairs of such Borrower with
its officers and its independent certified public accountants.
Section 4.6. Maintenance. Each of the Borrowers shall (a) maintain its
existence in good standing and all of its rights, privileges, licenses and
franchises; and (b) observe and comply in all material respects with all
Governmental Requirements.
Section 4.7. Insurance. Each of the Borrowers shall maintain with
financially sound and reputable insurers, insurance with respect to its
Properties and business against such liabilities, casualties, risks and
contingencies and in such types and amounts as is customary in the case of
Persons engaged in the same or similar businesses and similarly situated but in
no event less than what is necessary to satisfy prevailing GNMA, FNMA, FHLMC,
FHA and VA requirements, including, without limitation, errors and omissions
insurance or mortgage impairment insurance and a fidelity bond or bonds, in
form and with coverage and with companies satisfactory to Lender. Upon request
of Lender, each of the Borrowers shall furnish or cause to be furnished to
Lender from time to time a summary of the insurance coverage of Borrowers in
form and substance satisfactory to Lender and if requested shall furnish lender
copies of the applicable policies.
Section 4.8. Accounts and Records. Each of the Borrowers shall keep
books of record and account in which full, true and correct entries will be
made of all dealings or transactions in relation to its business and
activities, in accordance with GAAP.
Section 4.9. Payment of Other Loan Obligations. Each of the Borrowers
shall pay and perform all obligations under the terms of each loan, credit or
similar agreement, promissory note, mortgage, security agreement, indenture or
other debt or security instrument by which each of the Borrowers is bound or to
which it or any of its Property is subject, if failure to perform
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such obligations could reasonably be expected to have a Material Adverse Effect
(either by itself or in combination with other existing or reasonably
anticipated circumstances).
Section 4.10. Use of Proceeds; Margin Stock. The proceeds of the
Advances shall be used by each of the Borrowers for the funding of its
originations and purchases from others of Mortgage Loans which are Eligible
Mortgage Loans and none other. None of such proceeds shall be used for the
purpose of purchasing or carrying any "margin stock" as defined in Regulation
U, or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning
of such Regulation U. Neither of the Borrowers shall take any action in
violation of Regulation U or Regulation X or shall violate the Exchange Act or
any rule or regulation thereunder, in each case as now in effect or as the same
may hereinafter be in effect.
Section 4.11. Payment of Debt, Taxes, etc. Each of the Borrowers
agrees to pay when due and before delinquency (a) all taxes and other
governmental charges or levies imposed on its income or profits or any of its
Property, (b) all lawful claims for labor, materials and supplies which, if
unpaid, might become a Lien upon any of its Properties, and (c) all Debts,
accounts, liabilities, debts and charges now or hereafter owing by it. Each of
the Borrowers agrees to maintain appropriate accruals and reserves for all
Debts and all other liabilities, debts, and charges in a timely fashion in
accordance with GAAP. Provided, each of the Borrowers may delay paying any such
taxes, levies, claims, accounts, Debts or other liabilities, debts and charges
(excluding those owing to Lender, all of which must be paid when due) if, to
the extent that and for so long as (i) it is contesting their validity
diligently, in good faith and by appropriate proceedings, (ii) it has posted
such bond or other security as shall be fully effective to prevent or stay any
attachment, garnishment, sequestration or seizure of any of its Property during
the pendency of such proceedings, (iii) it has set aside on its books adequate
reserves in accordance with GAAP, and (iv) it pays such taxes, levies, claims,
accounts, Debts or other liabilities, debts and charges before any of its
Property can lawfully and effectively be garnisheed, attached or sold to secure
or satisfy them and before any judgment in respect of them against it or any of
its Property becomes final.
Section 4.12. Covenants Concerning Collateral. Each of the Borrowers
agrees to:
(a) service all Pledged Mortgage Loans which such Borrower
has the right or obligation to service in accordance with standard
industry requirements and all applicable GNMA, FNMA, FHLMC, FHA and VA
requirements, including taking all actions necessary to enforce the
obligations or the obligors under such Pledged Mortgage Loans;
(b) timely comply in all material respects with all terms and
conditions of all Purchase Commitments covering Pledged Mortgage Loans
(and all renewals, extensions or modifications of them or
substitutions of them), and cause the Pledged Mortgage Loans covered
by and intended to be sold under each Purchase Commitment to be
delivered to the Investor who issued the Purchase Commitment before
its expiration in the manner and order contemplated by the Purchase
Commitment;
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(c) warrant and forever defend to Lender, its successors and
assigns (i) title to the Collateral and (ii) the Liens in and upon the
Collateral granted to Lender;
(d) promptly discharge and perform all of such Borrower's, as
the case may be, obligations with respect to any of the Collateral and
all Purchase Commitments relating to Pledged Mortgage Loans; and
(e) execute and deliver to Lender (i) such Code financing
statements, amendments and continuation statements with respect to the
Collateral as Lender may from time to time request and (ii) such
further instruments of sale, pledge or assignment or transfer and such
powers of attorney as Lender may from time to time request, and do or
perform all matters and things necessary or desirable to be done or
observed, for the purpose of effectively creating, maintaining and
preserving the Liens granted to or intended to be granted to Lender
pursuant to the terms and conditions of this Agreement. Lender shall
have all the rights and remedies of a secured party under the Code and
all other applicable governmental requirements in addition to all
rights and remedies provided for in the Loan Documents.
ARTICLE 5: NEGATIVE COVENANTS
Each of the Borrowers shall at all times comply with the covenants
contained in this Article 5, from the date hereof and for so long as any part
of the Obligations or the Commitment of Lender is outstanding:
Section 5.1. No Merger. No Borrower may, without the prior written
consent of Lender, merge or consolidate with or into any corporation, or
acquire by purchase or otherwise all or substantially all of the assets or
capital stock of any Person if, as a result thereof, such Borrower would not be
in compliance with the representations, warranties, and covenants set forth in
this Agreement in all respects or a Material Adverse Effect occurs or will
occur.
Section 5.2. Limitation on Indebtedness. No Borrower may, without the
prior written consent of Lender, incur, create, contract, assume, have
outstanding, guarantee or otherwise be or become, directly or indirectly,
liable in respect of any indebtedness, except (i) the Obligations, (ii) current
liabilities for taxes and assessments, (iii) current amounts payable or accrued
(other than for borrowed funds or purchase money obligations) which have been
incurred in the ordinary course of business; provided that all such
liabilities, accounts and claims shall be promptly paid and discharged when due
or in conformity with customary trade terms, unless the same shall be contested
in good faith by such Borrower, (iv) indebtedness owing to Lender, and (v) any
other indebtedness incurred by any Borrower so long as such Borrower remains at
all times in compliance with the representations, warranties, and covenants set
forth in this Agreement in all respect or no Material Adverse Effect occurs as
a result of incurring any such indebtedness.
Section 5.3. Line of Business. No Borrower may, without the prior
written consent of Lender, directly or indirectly engage in any business other
than that currently engaged in by such Borrower or any other business
customarily engaged in by other Persons in the mortgage banking business. Each
of the Borrowers shall not make or acquire any direct outright ownership
interest participation or other creditor's interest in any commercial real
estate loan, wrap-around real
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estate loan, unimproved real estate loan, personal property loan, oil and gas
loan, commercial loan, acquisition, development or construction loan.
Section 5.4. Liquidations, Mergers, Consolidations and Dispositions of
Substantial Assets. No Borrower may, without the prior written consent of
Lender, dissolve or liquidate or sell, transfer, lease or otherwise dispose of
any material portion of its property or assets or business.
Section 5.5. Actions with Respect to Collateral. No Borrower may,
without the prior written consent of Lender:
(a) Compromise, extend, release, or adjust payments on any
Collateral, accept a conveyance of mortgaged property in full or
partial satisfaction of any Pledged Mortgage Loan or release any
Mortgage securing or underlying any Collateral;
(b) Agree to the amendment or termination of any Purchase
Commitment in which Lender has a security interest or to substitution
of a Purchase Commitment in which Lender has a security interest
hereunder, if such amendment, termination or substitution may
reasonably be expected (as determined by Lender in its reasonable
discretion) to have a Material Adverse Effect;
(c) Transfer, sell, assign or deliver any Collateral pledged
to Lender to any Person other than Lender, except pursuant to Purchase
Commitments; or
(d) Grant, create, incur, permit or suffer to exist any lien
upon any Collateral except for liens granted to Lender to secure the
Note and Obligations and such liens as may be deemed to arise as a
matter of law pursuant to any Purchase Commitment.
Section 5.6. Restrictions on Dividends. Company shall not directly or
indirectly declare or make, or incur any liability to make, any Dividend if, as
a result thereof, Company would not be in compliance with the representations,
warranties, and covenants set forth in this Agreement in all respects or a
Material Adverse Effect occurs or will occur.
Section 5.7. Limitations on Liens. No Borrower may create, assume or
suffer to exist any mortgage, lien, pledge, charge, security interest or other
encumbrance of any kind upon any of its properties or assets, whether now owned
or hereafter acquired except as permitted in writing by Lender, other than the
Lien or Liens granted to Lender hereunder if, as a result thereof, such
Borrower would not be in compliance with the representations, warranties, and
covenants set forth in this Agreement in all respects or a Material Adverse
Effect occurs or will occur.
Section 5.8. Limitations on Contingent Liabilities. No Borrower may
create, assume or suffer to exist any Contingent Liabilities, except (i) as
permitted hereunder, (ii) for endorsements of instruments for collection in the
ordinary course of business, and (iii) any such liability in favor of Lender
if, as a result thereof, such Borrower would not be in compliance with the
representations, warranties, and covenants set forth in this Agreement in all
respects or a Material Adverse Effect occurs or will occur.
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Section 5.9. Loans, Advances and Investments. No Borrower may make or
permit to remain outstanding any advances, loans or extensions of credit to, or
purchase or own any stock, bonds, notes, debentures, or other securities of, or
make any investments in, any Person, except (if and only if the making of an
investment described below would not violate any other provision of this
Agreement or have a Material Adverse Effect on the following) (a) Mortgage
Loans, (b) investments in Cash Equivalents and (c) any acquisition in the
ordinary course of such Borrower's business of (i) servicing portfolios and
related assets, (ii) Mortgage-backed Securities or (iii) Mortgage Loans.
Section 5.10. Subordination of Claims. No Borrower may subordinate or
permit to be subordinated any claim against, or obligation of, another Person
held or owned by it to any other claim against, or obligation of, such other
Person.
Section 5.11. ERISA Compliance. No Borrower may permit at any time any
Plan maintained by it to
(a) engage in any "prohibited transaction", as such term is
defined in Section 4975 of the Code;
(b) incur any "accumulated funding deficiency", as such term
is defined in Section 3.02 of ERISA; or
(c) terminate any such Plan in a manner which could result in
the imposition of a lien on the property of such Borrower pursuant to
Section 4068 of ERISA.
Section 5.12. Transactions with Affiliates and Other Persons. Each of
the Borrowers shall not engage in any transaction with an Affiliate on terms
less favorable to it than would be obtainable at the time in comparable
transactions with Persons not affiliated with such Borrower.
Section 5.13. Net Worth. The Net Worth of the Company may never be
less than $800,000.00.
Section 5.14. Warehouse Borrowings to Net Worth Ratio. The ratio of
the Borrowers' Warehouse Borrowings to the Company's Net Worth may never exceed
11.0 to 1.0.
ARTICLE 6: EVENTS OF DEFAULT
Section 6.1. Events. Any of the following events shall be considered
an "Event of Default" as that term is used herein:
(a) default is made in the payment or prepayment when due of any
installment of principal or interest on the Note or payment of any fee,
expense, or other amount due under any of the Loan Documents and such default
shall continue for a period of five (5) calendar days after written notice of
such default to Borrowers by Lender; or
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(b) default is made in the payment of any mandatory prepayment
required hereunder and such default shall continue for a period of five (5)
calendar days after written notice of such default to Borrowers by Lender; or
(c) any representation or warranty made by either or both of the
Borrowers in this Agreement, the Loan Documents, or in any other document
executed in connection herewith or therewith proves to have been untrue in any
material respect as of the date hereof or thereof; or any representation,
statement (including financial statements), certificate or data furnished or
made by either or both of the Borrowers hereunder or thereunder proves to have
been untrue in any material respect as of the date as of which the facts
therein set forth were stated or certified; or
(d) default is made in the due observance or performance by either or
both of the Borrowers of any of the covenants, terms or agreements contained in
any of the Loan Documents or in any other document or agreement executed in
connection herewith or therewith and such default shall continue for a period
of thirty (30) days after written notice of such default to Borrowers by
Lender; or
(e) Either of the Borrowers dissolves or terminates its existence or
discontinues its usual business; or
(f) any involuntary case or other proceeding is commenced against
either of the Borrowers which seeks liquidation, reorganization or other relief
with respect to it or its debts or other liabilities under any bankruptcy,
insolvency or similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its Property, or an order for relief against either
of the Borrowers is entered in any such case under the Federal Bankruptcy Code;
or
(g) Either of the Borrowers commences a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts or other liabilities under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its Property or consents to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or makes a general assignment for the
benefit of creditors, or fails generally to, or admits in writing its inability
to, pay its debts generally as they become due or takes any corporate action to
authorize or effect any of the foregoing; or
(h) any event or condition occurs which constitutes an Event of
Default under any of the Security Instruments or any other instrument or
agreement executed in connection herewith or therewith; or
(i) Either of the Borrowers defaults in the payment of principal of or
interest on any other Debt beyond the period of grace, if any, provided with
respect thereto or in the performance or observance of any other term, condition
or agreement contained in any
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instrument or agreement evidencing, securing or relating thereto if
the effect of such default is to cause such obligation to become due
prior to its stated maturity or to permit the holder or holders of
such obligations (or a trustee or agent on behalf of such holder or
holders) to cause such obligation to become due prior to its stated
maturity, whether or not such default or failure to perform should be
waived by the holder or holders of such obligation or such trustee; or
(j) one or more judgments for the payment of money in excess
of $10,000 in the aggregate are rendered against either of the
Borrowers or both and such judgment or judgments remain unsatisfied,
undischarged or unstayed and in effect for a period of thirty (30)
days; or
(k) this Agreement at any time after its execution and
delivery and for any reason, ceases to be in full force and effect or
is declared by a court of competent jurisdiction to be null and void;
or
(l) any of the Security Instruments, at any time after their
respective execution and delivery and for any reason, cease to
constitute valid and subsisting first liens and/or valid and perfected
first security interests in and to the Property purported to be
subject to such Security Instruments and such default shall continue
for a period of ten (10) calendar days after written notice of such
default to Borrowers by Lender; or
(m) a Material Adverse Effect occurs.
Section 6.2. Optional Acceleration. Upon the occurrence of any Event
of Default (other than those described in Section 6.1 (f) or (g)), the
Commitment of Lender shall immediately terminate and the holder of the Note, at
its option, without notice to Borrowers, may declare the principal of and
interest accrued and unpaid on the Note to be forthwith due and payable,
whereupon the same shall become due and payable without any presentment,
demand, protest, notice of protest, notice of intent to accelerate, notice of
acceleration, or notice of any kind (except notice required pursuant to this
Agreement or otherwise by law), all of which are hereby waived, and may
exercise any and all other rights, remedies, privileges and recourses granted
under the Loan Documents or now or hereafter existing in equity, at law, by
virtue of statute or otherwise.
Section 6.3. Automatic Acceleration. Upon the occurrence of any Event
of Default set forth in Subsection 6.1 (f) or (g) hereof, the Commitment of
Lender shall automatically terminate and the principal of and interest accrued
and unpaid on the Note shall be immediately and automatically due and payable
without notice or demand of any kind, and the same shall be due and payable
immediately without any presentment, acceleration, demand, protest, notice of
intent to accelerate, notice of acceleration, notice of protest or notice of
any kind (except notice required pursuant to this Agreement or otherwise by
law), all of which are hereby waived, and the holder of the Note may exercise
any and all other rights, remedies, privileges and recourses granted under the
Loan Documents or now or hereafter existing in equity, at law, by virtue of
statute or otherwise.
Section 6.4. Right of Set-Off. Upon the occurrence and during the
continuance of any Event of Default, or if Borrowers become insolvent, however
evidenced, Lender is hereby
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authorized at any time and from time to time, without notice to Borrowers (any
such notice being expressly waived by Borrowers), to set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by Lender to or for the
credit or the account of either or both of the Borrowers against any and all of
the indebtedness of each of the Borrowers to Lender, irrespective of whether or
not Lender shall have made any demand under this Agreement or the Note and
although such obligations may be unmatured. The rights of Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Lender may have.
ARTICLE 7: MISCELLANEOUS
Section 7.1. Notices. All notices, requests and communications
hereunder shall be given to or made upon the respective parties hereto as
follows:
If to Borrowers: Allied Mortgage Corporation
Attn: Xxx X. Xxxxx, President
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Allied Mortgage Capital Corporation
Attn: Xxx X. Xxxxx, Vice President
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
If to Lender: Coastal Banc ssb
Attn: Xxxx X. Xxxxxxx
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given to any party upon receipt (or when delivery is refused) when delivered
by fax or by hand, within three (3) calendar days of being deposited in the
U.S. Mail (registered or certified mail), if by mail, or when delivered to the
telegraph company, if by telegram, in each case addressed to such party as
provided herein or in accordance with the latest unrevoked direction from such
party.
Section 7.2. Deviation from Covenants. This Agreement may not be
amended without the written consent of Borrowers and Lender. The observance or
performance of any covenant, condition or obligation imposed on Borrowers
hereunder may not be waived without the written consent of Lender.
Section 7.3. Invalidity. In the event any one or more of the
provisions contained in this Agreement, the Security Instruments, the Note or
in any other instrument referred to herein or therein or executed in connection
herewith or therewith shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not
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affect any other provision of this Agreement, the Security Instruments, the
Note or any other instrument referred to herein or therein or executed in
connection herewith or therewith.
Section 7.4. Survival of Agreement. All representations, warranties,
covenants, and agreements of each of the Borrowers herein, shall survive the
execution and delivery of the Loan Documents.
Section 7.5. Successors and Assigns. All covenants and agreements
herein contained by or on behalf of each of the Borrowers shall bind its legal
representatives, successors and assigns and shall inure to the benefit of Lender
and its successors and assigns, except Borrowers may not, directly or
indirectly, assign or transfer, or attempt to assign or transfer, any of its
rights, duties or obligations under any Loan Documents without the prior
written consent of Lender.
Section 7.6. Renewal, Extension or Rearrangement. All provisions of
this Agreement relating to the Note shall apply with equal force and effect to
each and all promissory notes hereinafter executed which in whole or in part
represent a renewal, extension or rearrangement of any part of the indebtedness
originally represented by the Note.
Section 7.7. Waivers. No waiver of any Default or Event of Default
shall be deemed a waiver of any other Default or Event of Default. No course of
dealing on the part of Lender, its officers or employees, nor any failure or
delay by Lender with respect to exercising any right, power or privilege of
Lender under this Agreement, the Security Instrument or the Note shall operate
as a waiver thereof. Rights and remedies of Lender under this Agreement, the
Security Instruments and the Note shall be cumulative and the exercise or
partial exercise of any such right or remedy shall not preclude the exercise of
any other right or remedy.
Section 7.8. Termination. This Agreement shall remain in effect until
full and complete payment of the Note and all other Indebtedness.
Section 7.9. Governing Law. This Agreement, the Note, the Security
Instruments and the other Loan Documents shall be governed by, construed and
interpreted in accordance with the laws of the State of Texas, without
reference to its principles of conflicts of law and except to the extent that
the federal laws of the United States of America may apply.
Section 7.10. Controlling Document. In the event of actual conflict
in the terms and provisions of this Agreement, the Note, the Security
Instruments and the other Loan Documents, the terms and provisions of this
Agreement will control.
Section 7.11. Savings Clause. It is the intention of the parties
hereto to comply strictly with applicable usury laws; accordingly,
notwithstanding any provision to the contrary in the Note or in any of the
documents securing the payment thereof or otherwise relating hereto, in no
event shall the Note or such documents require or permit the payment, charging,
taking, reserving, or receiving of any sums constituting interest under
applicable laws which exceed the maximum amount permitted by such laws. If any
such excess interest is contracted for, charged, taken, reserved, or received
in connection with the Loan evidenced by the Note or in any of the documents
securing the payment hereof or otherwise relating hereto, or in any
communication
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by Lender or any other person to Borrowers or any other party liable for
payment of the Note, or in the event all or part of the principal or interest
hereof shall be prepaid or accelerated, so that under any of such circumstances
or under any other circumstance whatsoever the amount of interest contracted
for, charged, taken, reserved, or received on the amount of principal actually
outstanding from time to time under the Note shall exceed the maximum amount of
interest permitted by applicable usury laws, then in any such event it is
agreed as follows: (i) the provisions of this paragraph shall govern and
control, (ii) any such excess shall be canceled automatically to the extent of
such excess, and shall not be collected or collectible, (iii) any such excess
which is or has been received shall be credited against the then unpaid
principal balance hereof or refunded to Borrowers, at Lender's option, and (iv)
the effective rate of interest shall be automatically reduced to the maximum
lawful rate allowed under applicable laws as construed by courts having
jurisdiction hereof or thereof. Without limiting the foregoing, all
calculations of the rate of interest contracted for, charged, taken, reserved,
or received in connection herewith which are made for the purpose of
determining whether such rate exceeds the maximum lawful rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of the loan, including all
prior and subsequent renewals and extensions, all interest at any time
contracted for, charged, taken, reserved, or received. The terms of this
paragraph shall be deemed to be incorporated in every loan document, security
instrument, and communication relating to the Note and Loan. The term
"applicable usury laws" shall mean such laws of the State of Texas or the laws
of the United States, whichever laws allow the higher rate of interest, as such
laws now exist; provided, however, that if such laws shall hereafter allow
higher rates of interest, then the applicable usury laws shall be the laws
allowing the higher rates, to be effective as of the effective date of such
laws.
Chapter 4 of the Texas Credit Code (relating to installment loans),
codified at Articles 5069-4.01 to 5069-4.04, as amended, Texas Revised Civil
Statutes, shall not apply to this agreement.
Chapter 15 of the Texas Credit Code (relating to revolving loans and
revolving triparty accounts), codified at Articles 5069-15.01 to 5069-15.11, as
amended, Texas Revised Civil Statutes, shall not apply to this agreement.
Section 7.12. Consent or Approval of Lender. Except as otherwise
specifically provided, any consent or approval of Lender required under any of
the Loan Documents may be granted or withheld by Lender in its sole and
absolute discretion.
Section 7.13. No Third Party Beneficiary. This Agreement is for the
sole benefit of Lender and Borrowers and is not for the benefit of any third
party.
Section 7.14. Counterparts. This Agreement may be executed in several
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute one and the same
agreement.
SECTION 7.15. INDEMNITY. THE BORROWERS SHALL, JOINTLY AND SEVERALLY,
INDEMNIFY AND HOLD THE LENDER, ITS SUCCESSORS, ASSIGNS, AGENTS, AND EMPLOYEES,
HARMLESS FROM AND AGAINST ANY AND ALL
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CLAIMS, ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES, FINES,
PENALTIES, AND LIABILITIES, INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
COSTS, ARISING OUT OF, CONNECTED WITH, OR RESULTING FROM (A) THE OPERATION OF
THE BORROWERS' BUSINESSES, (B) THE LENDER'S PRESERVATION OR ATTEMPTED
PRESERVATION OF COLLATERAL, AND (C) ANY FAILURE OF THE SECURITY INTERESTS AND
LIENS IN THE COLLATERAL GRANTED TO THE LENDER PURSUANT TO THIS AGREEMENT TO BE
OR TO REMAIN PERFECTED OR TO HAVE THE PRIORITY AS CONTEMPLATED THEREIN
REGARDLESS OF WHETHER THE CLAIM IS CAUSED BY OR ARISES OUT OF, IN WHOLE OR IN
PART, THE NEGLIGENCE OF THE LENDER OR MAY BE BASED ON THE STRICT LIABILITY OF
THE LENDER. THIS INDEMNITY SHALL NOT APPLY TO THE EXTENT THE SUBJECT OF THE
INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE LENDER. AT THE LENDER'S REQUEST, THE BORROWERS SHALL, JOINTLY
AND SEVERALLY, AT THEIR OWN COST AND EXPENSE, DEFEND OR CAUSE TO BE DEFENDED
ANY AND ALL SUCH ACTIONS OR SUITS THAT MAY BE BROUGHT AGAINST THE LENDER AND,
IN ANY EVENT, SHALL SATISFY, PAY, AND DISCHARGE ANY AND ALL JUDGMENTS, AWARDS,
PENALTIES, COSTS, AND FINES THAT MAY BE RECOVERED AGAINST THE LENDER IN ANY
SUCH ACTION, PLUS ALL ATTORNEYS' FEES AND COSTS RELATED THERETO TO THE EXTENT
PERMITTED BY APPLICABLE LAW; PROVIDED, HOWEVER, THAT THE LENDER SHALL GIVE THE
BORROWERS (TO THE EXTENT THE LENDER SEEKS INDEMNIFICATION THEREFOR FROM THE
BORROWERS UNDER THIS SECTION 7.15) WRITTEN NOTICE OF ANY SUCH CLAIM, DEMAND, OR
SUIT AFTER THE LENDER HAS RECEIVED WRITTEN NOTICE THEREOF, AND THE LENDER SHALL
NOT SETTLE ANY SUCH CLAIM, DEMAND, OR SUIT, IF THE LENDER SEEKS INDEMNIFICATION
THEREFOR FROM THE BORROWERS, WITHOUT FIRST GIVING NOTICE TO THE BORROWERS OF
THE LENDER'S DESIRE TO SETTLE AND OBTAINING THE CONSENT OF THE BORROWERS TO THE
SAME, WHICH CONSENT THE BORROWERS HEREBY AGREE NOT TO UNREASONABLY WITHHOLD.
ALL OBLIGATIONS OF THE BORROWERS UNDER THIS SECTION 7.15 SHALL SURVIVE THE
PAYMENT OF THE NOTE AND THE OBLIGATIONS.
Section 7.16. Waiver of Jury Trial. Company hereby expressly waives
any right to a trial by jury in any action or legal proceeding arising out of
or relating to this Agreement or any other Loan Document for the transactions
contemplated hereby or thereby.
Section 7.17. Limitation of Liability. Notwithstanding anything herein,
in the Note or in any of the other Loan Documents to the contrary, Capital shall
be liable upon the indebtedness evidenced by the Note or arising under the other
Loan Documents, and for performance of all of the covenants and agreements of
Borrowers contained therein, to the full extent (but only to the extent) of all
Collateral pledged by Capital which constitutes security for the payment of such
indebtedness and Lender shall not be entitled to recover any deficiency judgment
against Capital if the foreclosure or recovery of or against the collateral
securing the Note is not sufficient to pay the amounts owed by Borrowers;
provided, however, Capital shall be fully liable to Lender for: (a) the amount
of damages, if any, caused by fraudulent or deceitful actions, misstatements or
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omissions; (b) waste of the Collateral securing the Note; and (c) all costs,
court costs and reasonable attorneys' fees incurred by Lender in collecting any
of the foregoing. Nothing herein is intended or construed to in any way limit,
affect, diminish, reduce or impair, in any manner whatsoever, the liability of
the Company for the full payment of the indebtedness evidenced by the Note or
arising under this Agreement or the other Loan Documents and performance of all
covenants and agreements contained therein.
SECTION 7.18. NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT, THE NOTE,
THE OTHER LOAN DOCUMENTS, AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
WITNESS THE EXECUTION HEREOF, as of the date first above written.
BORROWERS:
ALLIED MORTGAGE CORPORATION,
a Texas corporation
By: /s/ XXX X. XXXXX
-------------------------------------
XXX X. XXXXX, President
ALLIED MORTGAGE CAPITAL CORPORATION,
a Texas corporation
By: /s/ XXX X. XXXXX
-------------------------------------
XXX X. XXXXX, Vice President
LENDER:
COSTAL BANC ssb
By: /s/ X. X. XXXXXXXX
-------------------------------------
X. X. XXXXXXXX, Senior Vice President
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