Exhibit 10.34.1
AMENDED AND RESTATED
INTERIM OPERATING AGREEMENT
This Amended and Restated Interim Operating Agreement ("Agreement") is made
effective as of December 31, 1997, by and between UNITED PANAM MORTGAGE CORP., a
California corporation formerly known as PAB Mortgage Corporation ("Mortgage
Company"), and PAN AMERICAN BANK, FSB, a federal savings bank ("Bank") with
reference to the following:
R E C I T A L S
A. Effective July 1, 1997, Bank distributed, by way of dividend to its
parent, all of the issued and outstanding shares of capital stock of the
Mortgage Company, as contemplated by that certain letter of January 28, 1997
submitted to the Office of Thrift Supervision ("OTS"), in connection with the
Bank's letter application, dated January 27, 1997, to establish the Mortgage
Company as an operating subsidiary on an interim basis (the "OTS Application").
The organization of the Mortgage Company and the transfer of its shares by
dividend were the subject of no objection or approval letters issued by the OTS
on February 20, 1997 and April 2, 1997. The Mortgage Company had been
incorporated by the Bank on January 10, 1997, to acquire certain lending
business currently conducted by the Bank at the offices listed on Schedule "A"
("Mortgage Company Offices") and to conduct such operations on an interim basis
pending the transfer of the Mortgage Company to its parent. Effective July 1,
1997, it commenced such operation pursuant to an Interim Operating Agreement,
dated as of July 1, 1997, as amended by a First Amendment to Operating Agreement
dated as of December 12, 1997 (the "Original Agreement").
B. The foregoing transactions were undertaken as part of the transfer
from the Bank of its entire existing subprime single-family mortgage loan
origination and mortgage banking business (the "Subprime Business") to the
Mortgage Company. In addition to the Mortgage Company assets described above,
following the expiration of the Term of this Agreement (as defined below), such
transfer will include the assumption by the Mortgage Company of all obligations
of the Bank under office leases for the Mortgage Company Offices and the
assignment of such leases to the Mortgage Company, the transfer of all employees
conducting the Subprime Business and the assumption of certain maintenance and
other service contracts in so far as such service contracts relate to the
Subprime Business.
C. Following completion of the transfer of the entire Subprime Business,
it is anticipated that the Bank will continue to underwrite loans originated by
the Mortgage Company for a fee and to purchase loans from the Mortgage Company
in the manner generally described in the OTS Application, on such terms and
procedures as are provided therein or as such terms and procedures may be
modified from time-to-time.
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D. In order to complete the transfer of the Subprime Business by the Bank
to the Mortgage Company, the Mortgage Company and certain of its employees and
agents involved in the origination, production and/or servicing of mortgage
loans are required to be licensed or to obtain or confirm exemptions from
licensing under various laws in effect in the states in which the Mortgage
Company maintains Mortgage Company Offices or otherwise originates or acquires
mortgage loans ("State Licensing Requirements"). The Bank, as a federally-
chartered savings bank, and its employees, are generally exempt from State
Licensing Requirements and can originate, produce and service mortgage loans
without the necessity of obtaining licenses or permits in the states in which
Subprime Business is currently conducted.
E. The Mortgage Company and the Bank wish to provide for the continued
origination and production of mortgage loans in connection with the Subprime
Business by the Bank and its employees and agents on an interim basis, pending
receipt by the Mortgage Company of all licenses, permits, authorizations and
exemptions required to satisfy State Licensing Requirements, in order to assure
the effective transition of the Subprime Business from the Bank to the Mortgage
Company, and completion by United PanAm Financial Corp. ("Holding Company"), the
parent of the Bank and the Mortgage Company, of an initial public offering of
its common stock, the proceeds of which will be used, in part, to provide
capital to the Bank and the Mortgage Company.
F. The parties have evaluated the ongoing relationship between the Bank
and the Mortgage Company and desire to amend and restate the Original Agreement
in its entirety to reallocate the benefits and burdens of the Subprime Business
as provided in this Agreement.
NOW, THEREFORE, the Mortgage Company and the Bank agree as follows:
I. Term. This Agreement shall remain in effect from December 31, 1997 until
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the later of (a) the end of the month following the month in which the initial
public offering of the Holding Company is concluded; and the end of the month in
which the Mortgage Company satisfies all State Licensing Requirements (the
"Term"). The terms hereof shall also apply to all Subprime Business conducted
during the fourth quarter of 1997.
1. Production Employees. During the Term the Bank shall retain all loan
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origination and production employees and agents engaged in the Subprime Business
("Production Employees") under its direct employ. Production Employees shall be
transferred to the Mortgage Company upon the expiration of the Term. During the
Term, the Bank shall remain responsible for the payment of all wages and other
benefits due such employees.
2. Eligible Loans. During the Term, the Bank shall continue to originate
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and fund through the Production Employees subprime mortgage loans meeting its
underwriting guidelines and other requirements ("Eligible Loans"), which loan
programs and underwriting guidelines shall be specified jointly by the Mortgage
Company and the Bank. Such
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requirements shall include, among other things, requirements relating to owner
occupancy; loan-to-value ratios; lien priority; title, hazard, flood and
mortgage insurance; appraisal; borrower financial and credit history; loan
documentation, and compliance with state and federal laws and regulations.
3. Mortgage Company Offices. The parties recognize that certain State
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Licensing Requirements apply to the Mortgage Company Offices. To that end,
during the Term, the Bank shall continue to lease and remain obligated to
landlords under the office leases relating to the Mortgage Company Offices, and
shall pay all rent, utilities, insurance and other costs related to the
operation and maintenance of such offices, as well as to the loan production and
origination functions conducted at the Mortgage Company Offices, including all
personnel costs, telephones, and other Operating Expenses ("Office Expenses").
Such Office Expenses shall be paid during the Term by the Bank, and following
expiration of the Term by the Mortgage Company. To the extent the Bank retains
any liability to landlords for periods following the expiration of the Term
respecting the leases of the Mortgage Company Offices, the Mortgage Company
shall indemnify and hold the Bank harmless from any such liabilities. The
Mortgage Company shall not charge the Bank for use of the Mortgage Company
Office assets, which have been sold to the Mortgage Company and the Bank may
after July 1 acquire the assets necessary to originate and fund subprime
mortgage loans. Such assets acquired by the Bank after July 1 shall be sold to
the Mortgage Company at net book value upon satisfaction of State Licensing
Requirements.
4. Administrative Services. During the Term, Mortgage Company shall
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administer and supervise all Subprime Business conducted at the Mortgage Company
Offices to the extent consistent with applicable law and regulations. Such
services shall be provided as part of the Secondary Marketing Services described
below.
5. Secondary Marketing. During the Term, the Mortgage Company shall be
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responsible for all activities and related overhead and other expenses related
to administration of the Subprime Business, and the marketing and sale of
Eligible Loans originated and funded by the Bank during the Term, including the
securitization or other sale of loans, solicitation of bids for loans, advising
the Bank regarding sales pricing and related matters ("Secondary Marketing
Services"). This Agreement shall constitute the written authorization of the
Bank to the Mortgage Company to act as the Bank's agent for such purposes,
subject to applicable OTS regulations. For such Secondary Marketing Services
during the Term, the Mortgage Company shall be entitled to receive reimbursement
of its operating expenses and a Marketing Fee as described in Section 6 below.
6. Compensation of Mortgage Company. For Secondary Marketing Services
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performed by the Mortgage Company, it shall be entitled to reimbursement by the
Bank for all marketing, personnel, administrative and other costs and expenses
incurred by the Mortgage Company in connection with the performance of such
services, plus a marketing fee equal to 20% of such costs and expenses.
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7. Amendments to Agreement. The parties agree to negotiate in good
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faith respecting the reallocation of expenses and income should it appear that
the allocation of expenses and income in Section 6 did not fairly reflect the
terms of the economic relationship contemplated by the parties.
8. Indemnity. The Mortgage Company shall indemnify and hold harmless
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the Bank from and against any obligations or liabilities that the Bank may have
arising out of (a) any claim by any investor who purchased Eligible Loans sold
by the Bank during the Term, respecting indemnification for losses or the
repurchase of loans from such investor; (b) the leases, sums due Production
Employees or other expenses connected with the operation of the Mortgage Company
Offices or the conduct of the Subprime Business following the Term; and (c) any
assets transferred to or liabilities assumed by the Mortgage Company in
connection with the Subprime Business.
Executed effective as of December 31, 1997.
"Mortgage Company"
UNITED PANAM MORTGAGE CORP.
By: /s/ Xxxxxxxx X. Grill
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Title: Vice President
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"Bank"
PAN AMERICAN BANK, FSB
By: /s/ Xxxxxxxx X. Grill
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Title: President
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