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WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE-FAMILY MORTGAGE LOANS)
BETWEEN
FIRST MORTGAGE NETWORK, INC.,
a Florida corporation
AND
BANK UNITED,
a federal savings bank.
Dated as of July 1, 1998
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TABLE OF CONTENTS
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1. DEFINITIONS.....................................................................................Page 1
1.1 Defined Terms............................................................................Page 1
1.2 Other Definitional Provisions............................................................Page 12
2. THE CREDIT......................................................................................Page 12
2.1 The Commitment...........................................................................Page 12
2.2 Procedures for Obtaining Advances........................................................Page 13
2.3 Note.....................................................................................Page 14
2.4 Interest.................................................................................Page 14
2.5 Principal Payments.......................................................................Page 15
2.6 Expiration of Commitment.................................................................Page 17
2.7 Method of Making Payments................................................................Page 17
2.8 Non-Usage Fee............................................................................Page 17
2.9 Miscellaneous Charges....................................................................Page 17
2.10 Bailee...................................................................................Page 18
3. COLLATERAL......................................................................................Page 18
3.1 Grant of Security Interest...............................................................Page 18
3.2 Security Interest in Mortgage-backed Securities..........................................Page 19
3.3 Delivery of Collateral Documents.........................................................Page 20
3.4 Delivery of Additional Collateral or Mandatory Prepayment................................Page 20
3.5 Right of Redemption from Pledge..........................................................Page 20
3.6 Collection and Servicing Rights..........................................................Page 21
3.7 Return or Release of Collateral at End of Commitment.....................................Page 21
3.8 Master Repurchase Agreement..............................................................Page 21
4. CONDITIONS PRECEDENT............................................................................Page 21
4.1 Initial Advance .........................................................................Page 21
4.2 Each Advance.............................................................................Page 23
5. REPRESENTATIONS AND WARRANTIES..................................................................Page 24
5.1 Organization; Good Standing; Subsidiaries................................................Page 24
5.2 Authorization and Enforceability.........................................................Page 24
5.3 Financial Condition......................................................................Page 24
5.4 Litigation...............................................................................Page 25
5.5 Compliance with Laws.....................................................................Page 25
5.6 Regulations G and U......................................................................Page 25
5.7 Investment Company Act and Public Utility Holding Company Act............................Page 25
5.8 Agreements...............................................................................Page 25
5.9 Title to Properties......................................................................Page 26
5.10 ERISA....................................................................................Page 26
5.11 Eligibility..............................................................................Page 26
5.12 Special Representations Concerning Collateral............................................Page 27
5.13 RICO.....................................................................................Page 28
5.14 Proper Names............................................................................Page 28
5.15 Direct Benefit From Loans...............................................................Page 29
5.16 Loan Documents Do Not Violate Other Documents...........................................Page 29
5.17 Consents Not Required...................................................................Page 29
5.18 Material Fact Representations...........................................................Page 29
5.19 Place of Business.......................................................................Page 29
5.20 Use of Proceeds; Business Loans.........................................................Page 30
5.21 No Undisclosed Liabilities..............................................................Page 30
5.22 Tax Returns and Payments................................................................Page 30
5.23 Subsidiaries............................................................................Page 30
5.24 Holding Company.........................................................................Page 30
6. AFFIRMATIVE COVENANTS...........................................................................Page 31
6.1 Payment of Note.........................................................................Page 31
6.2 Financial Statements and Other Reports..................................................Page 31
6.3 Maintenance of Existence; Conduct of Business...........................................Page 32
6.4 Compliance with Applicable Laws.........................................................Page 32
6.5 Inspection of Properties and Books......................................................Page 32
6.6 Notice..................................................................................Page 32
6.7 Payment of Debt, Taxes, etc.............................................................Page 33
6.8 Insurance...............................................................................Page 33
6.9 Closing Instructions....................................................................Page 33
6.10 Other Loan Obligations..................................................................Page 33
6.11 Use of Proceeds of Advances.............................................................Page 34
6.12 Special Affirmative Covenants Concerning Collateral.....................................Page 34
6.13 Cure of Defects in Loan Documents.......................................................Page 35
7. NEGATIVE COVENANTS..............................................................................Page 35
7.1 Contingent Liabilities..................................................................Page 35
7.2 Pledge of Mortgage Loans................................................................Page 35
7.3 Merger; Acquisitions....................................................................Page 35
7.4 Loss of Eligibility.....................................................................Page 35
7.5 Debt to Adjusted Tangible Net Worth Ratio...............................................Page 35
7.6 Minimum Adjusted Tangible Net Worth.....................................................Page 36
7.7 Transactions with Affiliates............................................................Page 36
7.8 Limits on Corporate Distributions.......................................................Page 36
7.9 RICO....................................................................................Page 36
7.10 No Loans or Investments Except Approved Investments.....................................Page 36
7.11 Charter Documents and Business Termination..............................................Page 37
7.12 Changes in Accounting Methods...........................................................Page 37
7.13 No Sales, Leases or Dispositions of Property............................................Page 37
7.14 Changes in Business or Assets...........................................................Page 37
7.15 Changes in Office or Inventory Location.................................................Page 37
7.16 Special Negative Covenants Concerning Collateral .......................................Page 37
7.17 No Indebtedness.........................................................................Page 38
7.18 Ownership of the Company................................................................Page 38
8. DEFAULTS; REMEDIES..............................................................................Page 38
8.1 Events of Default.......................................................................Page 38
8.2 Remedies................................................................................Page 41
8.3 Application of Proceeds.................................................................Page 44
8.4 Lender Appointed Attorney-in-Fact.......................................................Page 44
8.5 Right of Set-Off........................................................................Page 44
9. NOTICES.........................................................................................Page 45
10. REIMBURSEMENT OF EXPENSES; INDEMNITY............................................................Page 46
11. MISCELLANEOUS...................................................................................Page 47
11.1 Terms Binding Upon Successors; Survival of Representations..............................Page 47
11.2 Assignment..............................................................................Page 47
11.3 Amendments..............................................................................Page 47
11.4 Governing Law...........................................................................Page 47
11.5 Participations..........................................................................Page 47
11.6 Relationship of the Parties.............................................................Page 47
11.7 Severability............................................................................Page 48
11.8 Usury...................................................................................Page 48
11.9 Consent to Jurisdiction.................................................................Page 49
11.10 Arbitration.............................................................................Page 49
11.11 ADDITIONAL INDEMNITY....................................................................Page 50
11.12 No Waivers Except in Writing............................................................Page 51
11.13 Waiver of Jury Trial....................................................................Page 51
11.14 Multiple Counterparts...................................................................Page 51
11.15 No Third Party Beneficiaries............................................................Page 51
11.16 RELEASE OF LENDER LIABILITY.............................................................Page 51
11.17 Entire Agreement; Amendment.............................................................Page 52
11.18 NO OPAL AGREEMENTS......................................................................Page 52
EXHIBIT "A"................................................................................................Page 55
EXHIBIT "B"................................................................................................Page 58
EXHIBIT "C"................................................................................................Page 59
EXHIBIT "D"................................................................................................Page 63
EXHIBIT "E"................................................................................................Page 64
EXHIBIT "F"................................................................................................Page 65
EXHIBIT "G"................................................................................................Page 68
EXHIBIT "H"................................................................................................Page 69
EXHIBIT "I"................................................................................................Page 70
EXHIBIT "J"................................................................................................Page 71
EXHIBIT "K"................................................................................................Page 75
EXHIBIT "L"................................................................................................Page 77
EXHIBIT "M"................................................................................................Page 80
EXHIBIT "N"................................................................................................Page 83
WAREHOUSING CREDIT AND SECURITY AGREEMENT
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THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Agreement"), is
dated as of July 1, 1998, by and between FIRST MORTGAGE NETWORK, INC., a Florida
corporation (the "Company"), having its principal office at 0000 Xxxxxxx
Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, and BANK UNITED, a federal
savings bank (the "Lender"), having its principal office at 0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000.
WHEREAS, the Company has requested the Lender to make certain loans to
the Company to finance the origination or purchase of Mortgage Loans (as that
term is herein defined) which loans are for the benefit of the Company;
WHEREAS, the Lender is willing to make such loans as herein provided,
upon the terms, agreements and covenants and subject to the conditions
hereinafter set forth and in reliance on the representations and warranties
herein made and referred to; and
WHEREAS, the Company and the Lender desire to set forth herein the
terms and conditions upon which the Lender shall provide warehouse financing to
the Company;
NOW, THEREFORE, for good and valuable consideration, the amount and
sufficiency of which are hereby acknowledged by the parties hereto, to induce
the Lender to provide the warehouse financing facility to the Company and in
reliance of the representations and warranties made herein, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
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1.1 Defined Terms. Capitalized terms defined below or elsewhere in this
Agreement (including the exhibits hereto) shall have the following meanings:
"Adjusted Tangible Net Worth" means, with respect to Company, at
any date, the Tangible Net Worth of Company at such date plus 1.0% of
the sum of the outstanding principal balances of all Mortgage Loans for
which Company owns the Servicing Rights less 1.0% of the sum of the
outstanding principal balances of all Mortgage Loans owned by the
Company that will be sold in the secondary market or held by the
Company for investment.
"Advance" means a disbursement by the Lender under the Commitment
pursuant to Article 2 of this Agreement in respect of the closing or
settlement of a Single-family Mortgage Loan, whether or not such
disbursement is a Wet Settlement Advance.
"Advance Request" has the meaning set forth in Section 2.2(a)
hereof.
"Affiliate" means any Person controlling, controlled by or under
common control with any other Person. For purposes of this definition
"control" (including "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person,
whether
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through the ownership of voting securities, by contract, or otherwise
or owning or possessing the power to vote 10% or more of any class of
voting securities of any Person. Without limiting the generality of the
foregoing, for purposes of this Agreement, Company and each of its
respective Subsidiaries shall be deemed to be Affiliates of one
another.
"Aged Mortgage Loans" means an Eligible Mortgage Loan that has been
included in Collateral for a period of more than ninety (90) days.
"Agreement" means this Warehousing Credit and Security Agreement
(Single Family Mortgage Loans), either as originally executed or as
it may from time to time be supplemented, modified or amended.
"Applicable Law" means the laws of the State of Texas and the
United States of America in effect from time to time and applicable to
the transactions between the Lender and the Company pursuant to this
Agreement and the other Loan Documents whichever permits the charging
and collection of the highest nonusurious rate of interest on such
transactions. For purposes of determining Texas law with respect to
the highest nonusurious rate of interest, the weekly rate ceiling
permitted under Texas Credit Title, as amended, shall be controlling.
"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.
"Bailee Letter" has the meaning set forth in Section 3.3 hereof.
"Business Day" means any day excluding Saturday, Sunday and any day
on which Lender is closed for business.
"Capitalized Lease" means any lease under which rental payments are
required to be capitalized on a balance sheet of the lessee in
accordance with GAAP.
"Capitalized Rentals" means the amount of aggregate rentals due
and to become due under all Capitalized Leases under which the Company
is a lessee that would be reflected as a liability on a balance sheet
of the Company.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Collateral Documents" means all of the documents and other items
described on Exhibit "C" hereto and required to be delivered to the
Lender in connection with an Advance.
"Collateral Value" means
(a) with respect to any Eligible Mortgage Loan, an amount
equal to the least of (i) the Par Value thereof, (ii) the amount
which the Investor has committed
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to pay for such Mortgage Loan pursuant to a Purchase Commitment, or
(iii) the Fair Market Value of such Mortgage Loan;
(b) with respect to Mortgage-backed Securities, an amount
equal to the least of (i) the sum of the principal balances of
the Mortgage Loans from which such Mortgage-backed Securities were
created, (ii) the amount which the Investor has committed to pay
for such Mortgage-backed Securities pursuant to a Purchase
Commitment, or (iii) the Fair Market Value of such
Mortgage-backed Securities;
(c) with respect to Collateral that is not described within
(a) or (b) and that is pledged pursuant to Section 3.4 hereof,
Collateral Value shall equal an amount established by Lender in its
sole discretion;
(d) with respect to Collateral that is not described in
(a), (b), or (c) the Collateral Value shall be equal to $0.00;
(e) with respect to any Mortgage Loan that is not or ceases
to be an Eligible Mortgage Loan, the Collateral Value thereof shall
equal $0.00.
"Commitment" has the meaning set forth in Section 2.1 (a) hereof.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Conventional Mortgage Loan" means a Single-family Mortgage Loan,
other than an FHA Loan or VA Loan, that complies with all applicable
requirements for purchase under the FNMA or FHLMC standard form of
conventional mortgage purchase contract.
"Debt" means, with respect to any Person, at any date (a) all
indebtedness or other obligations of such Person which, in accordance
with GAAP, would be included in determining total liabilities as shown
on the liabilities side of a balance sheet of such Person at such date;
and (b) all indebtedness or other obligations of such Person for
borrowed money or for the deferred purchase price of property or
services; provided that for purposes of this Agreement, there shall be
excluded from Debt at any date loan loss reserves, deferred taxes
arising from capitalized excess service fees, and operating leases.
"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.
"Default Rate" has the meaning set forth in Section 2.4(c)
hereof.
"Electronic Request" has the meaning set forth in Section 2.2(a)
hereof.
"Eligible Mortgage Loan" means a Mortgage Loan that, at all times
during the term of this Agreement, (a) is evidenced by loan documents
that are the standard forms approved by FNMA or FHLMC or forms
previously approved, in writing, by the Lender in its sole discretion;
(b) is validly pledged to the Lender, subject to no other Liens; (c) is
not in default
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in the payment of principal and interest or in the performance of any
obligation under the Mortgage Note or the Mortgage evidencing or
securing such Eligible Mortgage Loan for a period of 60 days or more;
(d) if such Mortgage Loan is a Subprime Mortgage Loan, compiles with
all applicable underwriting guidelines and other requirements of an
Investor relating to the purchase of such Mortgage Loan; (e) has closed
less than 25 days prior to the date of the Advance made in connection
with such Eligible Mortgage Loan; (f) has a combined loan-to-collateral
value ratio not to exceed 100% (ratio to be based on the aggregate
amount of all loans secured by the Mortgaged Property securing such
Mortgage Loan), except for High LTV Mortgage Loans for which
loan-to-collateral value shall not exceed 125%; and (g) is covered by a
Purchase Commitment.
"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 all rules and regulations promulgated thereunder, as amended from
time to time and any successor statute.
"Event of Default" means any of the conditions or events set forth
in Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time and any successor statute.
"Fair Market Value" means, at any date, with respect to:
(a) any Mortgage-backed Security, the bid rate reflected on
the Telerate screen for a Mortgage-backed Security with the closest
coupon rate that does not exceed that of the Mortgage-backed
Security in question multiplied by the original face amount of such
Mortgage-backed Security, and multiplied by the current pool factor
for such Mortgage-backed Security.
(b) any Mortgage Loan, the market rate reflected on the
Telerate screen for thirty (30) day mandatory future delivery of
such Mortgage Loan multiplied by the outstanding principal balance
thereof.
In the event Telerate ceases to publish either the market or bid
price referenced in (a) and (b) above, the average bid rate quoted in
writing to the Lender as of the date of determination by any two
nationally recognized dealers selected by Lender that are making a
market in similar Mortgage Loans or Mortgaged-backed Securities shall
be utilized in lieu of the market or bid rate, as the case may be.
"FHA" means the Federal Housing Administration and any successor
thereto.
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"FHA Loan" means a Single-family Mortgage Loan, payment of which is
partially or completely insured by the FHA under the National Housing
Act or Title V of the Housing Act of 1949 or with respect to which
there is a current, binding and enforceable commitment for such
insurance issued by the FHA.
"FHLMC" means the Federal Home Loan Mortgage Corporation and any
successor thereto.
"FHLMC Guide" means the Xxxxxxx Xxx Xxxxxxx' and Servicers'
Guide, dated September 17, 1984, applicable bulletins, the applicable
MIDANET Users Guide (or the MIDAPHONE User's Guide) and any particular
purchase documents as defined in the Sellers' and Servicers' Guide, as
revised prior to the date hereof.
"FHLMC Pool" means a "group" or "grouping" of Mortgage Loans
assembled in accordance with (and as such term is used in) the FHLMC
Guide.
"FICA" means the Federal Insurance Contributions Act.
"First Mortgage" means a mortgage or deed of trust which
constitutes a first Lien on the property covered thereby.
"First Mortgage Loan" means a Mortgage Loan secured by a First
Mortgage.
"Floating Rate" has the meaning set forth in Section 2.4(a)
hereof.
"FNMA" means the Federal National Mortgage Association and any
successor thereto.
"FNMA Guide" means the FNMA Servicing Guide dated June 30, 1990, as
revised prior to the date hereof.
"FNMA Pool" means a "group" or "grouping" of Mortgage Loans
assembled in accordance with (and as such term is used in) the FNMA
Guide.
"Funding Account" means the non-interest bearing demand checking
account established with, maintained by, and pledged to Lender into
which shall be deposited the proceeds of Advances, the proceeds from
any sale of Collateral, and from which funds shall be disbursed for the
acquisition of Mortgage Loans.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable
to the circumstances as of the date of determination.
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"GNMA" means the Government National Mortgage Association and any
successor thereto.
"GNMA Guide" means the GNMA I Mortgage-Backed Securities Guide,
Handbook GNMA 5500.1 REV. 6, as revised prior to the date hereof, and
as may be revised from time to time, and GNMA II Mortgage-Backed
Securities Guide Handbook GNMA 5500.2, as revised prior to the date
hereof
"GNMA Pool" means, as applicable under the circumstances, a "pool"
of Mortgage Loans assembled in accordance with (and as such term is
used in) the GNMA Guide.
"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.
"High LTV Mortgage Loan" means a Single-family Mortgage Loan that
(a) is not a Subprime Mortgage Loan; (b) complies with all applicable
underwriting guidelines and other requirements of an Investor relating
to its purchase of such Mortgage Loan; (c) has a combined
loan-to-collateral value ratio not less than 100% (ratio to be based
upon all loans, including such Mortgage Loan and all loans secured by
the Mortgaged Property securing such Mortgage Loan) but not more than
125%; (d) is secured by a Second Mortgage; and (e) is covered by a
specific Purchase Commitment with respect to which there is no
condition which cannot be reasonably anticipated to be satisfied or
complied with before its expiration and has been prior approved by the
Investor for purchase.
"HUD" means the Department of Housing and Urban Development and any
successor thereto.
"Indebtedness" means and include, without duplication, (1) all
items which in accordance with GAAP, consistently applied, would be
included on the liability side of a balance sheet on the date as of
which Indebtedness is to be determined (excluding shareholders'
equity), (2) Capitalized Rentals under any Capitalized Lease, (3)
guaranties, endorsements and other contingent obligations in respect
of, or any obligations to purchase or otherwise acquire, Indebtedness
of others, and (4) indebtedness secured by any mortgage, pledge,
security interest or other Lien existing on any property owned by the
Person with respect to which indebtedness is being determined, whether
or not the indebtedness secured thereby shall have been assumed.
"Indemnified Liabilities" has the meaning set forth in Article 10
hereof.
"Interim Date" has the meaning set forth in Section 4.1 (a)(4)
hereof
"Internal Revenue Code" means the Internal Revenue Code of 1986, or
any subsequent federal income tax law or laws, as any of the foregoing
have been or may from time to time be amended.
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"Investor" means FNMA, FHLMC, GNMA, any of the Persons listed in
Exhibit "L" hereto, or a financially responsible institution which is
acceptable to Lender, in its sole discretion; provided that at any time
by written notice to Company Lender may disapprove any Investor in its
sole discretion, whether or not that Person is named as an Investor in
this definition or in Exhibit "L" or has been previously approved as an
Investor by Lender. Upon receipt of such notice, the Persons named in
Lender's notice shall no longer be Investors from and after the date of
the receipt of such notice.
"Jumbo Loan" means a Single-family Mortgage Loan (other than a FHA
Loan or VA Loan) that complies with all applicable requirements for
purchase under the FNMA or FHLMC standard form of conventional mortgage
purchase contract then in effect except that the amount of such
Mortgage Loan exceeds the maximum amount under those requirements, but
in no event shall the amount of such Single-family Mortgage Loan exceed
$1,000,000.00.
"Lender" has the meaning set forth in the first paragraph of this
Agreement.
"LIBOR Rate" means a rate of interest equal to the London Interbank
Offered Rate for U.S. dollar deposits as quoted by Telerate, Bloomberg
or any other rate quoting service, selected by Lender in its sole
discretion for an interest period of one month, effective two (2)
Business Days from the date of quotation. In the event such rate ceases
to be published, LIBOR Rate shall mean a comparable rate of interest
reasonably selected by Lender.
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan Documents" means this Agreement, the Note, and each other
document, instrument or agreement executed by the Company or any other
Person in connection herewith or therewith, as any of the same may be
amended, restated, renewed or replaced from time to time.
"Margin Stock" has the meaning assigned to that term in Regulations
G and U of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Master Repurchase Agreement" means that certain Master Repurchase
Agreement dated of even date herewith by and between Company and
Lender.
"Maximum Rate" means the maximum lawful non-usurious rate of
interest (if any) that, under Applicable Law, the Lender may charge the
Company on the Advances from time to time. To the extent that the
interest rate laws of the State of Texas are applicable and unless
changed in accordance with law, the applicable rate ceiling shall be
the weekly ceiling determined in accordance with Texas Credit Title, as
amended.
"Monthly Average LIBOR Rate" means the average of all LIBOR Rates
quoted during a given month. In the event (i) the Note is paid in full
and the Commitment is
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terminated prior to a month end; or (ii) the initial Advance hereunder
occurs on a date other than the first day of that month on which LIBOR
Rates are quoted, the Monthly Average LIBOR Rate shall mean, in the
case of clause (i), the average of all LIBOR Rates quoted that month up
to and including the last Business Day prior to such payment in full;
or, in the case of clause (ii), the LIBOR Rates quoted on the date of
the initial Advance through the end of that month.
"Mortgage" means a First Mortgage or Second Mortgage on improved
real property containing one to four family residences.
"Mortgage-backed Securities" means FHLMC, GNMA or FNMA securities
that are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note. A
Mortgage Loan, may be a Subprime Mortgage Loan, High LTV Mortgage Loan,
Conventional Mortgage Loan, FHA Loan, Jumbo Loan, or VA Loan, but may
not include any other mortgage loan without the prior written consent
of the Lender.
"Mortgage Note" means a note secured by a Mortgage.
"Mortgage Note Amount" means, as of the date of determination, the
then outstanding unpaid principal amount of a Mortgage Note.
"Mortgage Pool" means (a) a FHLMC Pool, (b) a FNMA Pool, or (c) a
GNMA Pool.
"Mortgaged Property" means the property, real, personal, tangible
or intangible, securing a Mortgage Note.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA that is maintained for employees of the
Company or a Subsidiary of the Company.
"Net Investable Balances" means the average collected balances in
non-interest bearing deposit accounts controlled or maintained by the
Company and its Subsidiaries in accounts at the Lender, less balances
to support float, activity charges, reserve requirements, Federal
Deposit Insurance Corporation insurance premiums and such other
assessments as may be imposed by governmental authorities from time to
time.
"Note" has the meaning set forth in Section 2.3 hereof
"Notices" has the meaning set forth in Article 9 hereof
"Obligations" means any and all indebtedness, obligations and
liabilities of the Company to the Lender (whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly
owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later
8
increased, created or incurred), arising out of or related to the Loan
Documents, or any of them.
"Officer's Certificate" means a certificate executed on behalf of
the Company by its chief financial officer or its treasurer or by such
other officer as may be designated herein, in the form of Exhibit "F"
hereto.
"OTS" means the Office of Thrift Supervision.
"Par Value" means, with respect to any Mortgage Loan the unpaid
principal balance of such Mortgage Loan on the date of the Advance made
against such Mortgage Loan.
"Participant" has the meaning set forth in Section 11.5 hereof.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal
entities, and federal and state governments and agencies or regulatory
authorities and political subdivisions thereof.
"Plans" has the meaning set forth in Section 5.10 hereof
"Pledged Mortgages" has the meaning set forth in Section 3.1 (a)
hereof
"Pledged Securities" has the meaning set forth in Section 3.1 (b)
hereof
"PMI" means any private mortgage insurance company which is
acceptable to Lender, in its sole discretion; provided that at any time
by written notice to Company, Lender may disapprove any PMI because it
has determined in its sole discretion and for any reason that it is no
longer comfortable with that Person being a PMI, whether or not that
Person has been previously approved as a PMI by Lender. Upon receipt of
such notice, the Persons named in Lender's notice shall no longer be
PMIs from and after the date of receipt of such notice.
"Purchase Agreement" means a written agreement, in form and
substance satisfactory to the Lender, issued in favor of the Company by
an Investor pursuant to which Investor agrees to purchase Mortgage
Loans that satisfy such Investor's current underwriting guidelines,
subject to Investor's approval of each Mortgage Loan submitted by
Company for purchase thereunder.
"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
specific Mortgage Loans or Mortgage-backed Securities at a specific
price and with respect to such commitment there is no condition which
cannot be reasonably anticipated to be satisfied or complied with
before its expiration.
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"Purchase Price" shall have the meaning set forth in the Master
Repurchase Agreement.
"Redemption Amount" has the meaning set forth in Section 3.5
hereof.
"RICO" means the Racketeer Influenced and Corrupt Organizations Act
of 1970, as amended.
"Second Mortgage" means a mortgage or deed of trust which
constitutes a second Lien on improved real property containing one to
four family residences.
"Second Mortgage Loan" means a Mortgage Loan secured by a Second
Mortgage.
"Securities" means the Mortgage Notes, securities, and financial
instruments sold by Company to the Lender under the Master Repurchase
Agreement at any time and from time to time.
"Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such Person
has the right to service Mortgage Loans.
"Servicing Rights" means (a) the rights, obligations, remedies,
powers, and responsibilities of a Person to service Mortgage Loans
owned by that Person, including without limitation the right to collect
principal and interest payments, administer escrow accounts, and the
right to own and possess loan files and all records, documents, and
data relating to such Mortgage Loans, and (b) the obligations, rights,
remedies, powers, privileges, benefits and responsibilities of a
Person to service Mortgage Notes for GNMA, FNMA or FHLMC under and in
accordance with the GNMA Guide, the FNMA Guide and the FHLMC Guide,
respectively or for any Investor under any Servicing Contract,
including, without limitation, (i) the right to receive servicing fees,
termination fees, net sales proceeds, late charges, insufficient fund
fees, and other ancillary income relating to the Mortgage Notes (ii)
the right to hold and administer the escrow accounts, and (iii) the
right to all loan files, insurance files, tax records, collection
records, documents, ledgers, computer printouts, computer tapes and
other records, data or information relating to the Mortgage Notes, the
escrow accounts or the servicing or otherwise necessary or proper to
perform the obligations of servicer.
"Single-family Mortgage Loan" means a Mortgage Loan secured by a
Mortgage covering improved real property containing one to four family
residences.
"Statement Date" has the meaning set forth in Section 4.1 (a)(4)
hereof.
"Subprime Mortgage Loan" means a Single-family Mortgage Loan that
(a) is, in the reasonable judgment of the Lender, consistent in all
respects with traditional standards imposed by whole loan purchasers,
relevant rating agencies and pool insurers for classification as "B" or
"C" or "D" Mortgage Loans; (b) has a maximum loan amount that
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does not exceed $350,000.00; (c) is secured by a First Mortgage or
Second Mortgage; and (d) has a loan-to-collateral value ratio not
greater than 100%.
"Subsidiary" means any corporation, association or other business
entity in which more than fifty percent (50%) of the total voting power
or shares of stock entitled to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Tangible Net Worth" means, with respect to any Person at any
date, the sum of the total shareholders' equity in such Person
(including capital stock, additional paid-in capital, and retained
earnings, but excluding treasury stock, if any), on a consolidated
basis; less the aggregate book value of all intangible assets of such
Person (as determined in accordance with GAAP), including without
limitation, goodwill, trademarks, trade names, service marks,
copyrights, patents, licenses, franchises, and Servicing Rights, each
to be determined in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in Section
5.3 hereof, provided that, for purposes of this Agreement, there shall
be excluded from total assets, advances or loans to shareholders,
officers or Affiliates, investments in Affiliates, assets pledged to
secure any liabilities not included in the Debt of such Person and
those other assets which would be deemed by HUD to be non-acceptable in
calculating adjusted net worth in accordance with its requirements in
the Audit Guide for Audit of Approved Non-Supervised Mortgagees", as in
effect as of such date.
"Termination Date" means June 30, 1999, or such earlier date upon
which Lender's obligation to fund shall be terminated pursuant to the
terms of this Agreement.
"Tribunal" means any court or governmental department, commission,
board, bureau, agency, or instrumentality of any state, commonwealth,
nation, territory, possession, county, parish, or municipality, whether
now or hereafter constituted and/or existing.
"VA" means the Veterans Administration and any successor thereto.
"VA Loan" means a Single-family Mortgage Loan, payment of which is
partially or completely guaranteed by the VA under the Servicemen's
Readjustment Act of 1944 or Chapter 37 of Title 38 of the United States
Code or with respect to which there is a current binding and
enforceable commitment for such a guaranty issued by the VA.
"Wet Settlement Advance" means a disbursement by the Lender under
the Commitment and pursuant to Section 2.2(a) of this Agreement, in
respect of the closing or settlement of a Single-family Mortgage Loan,
in anticipation of and pending subsequent delivery and examination of
the Collateral Documents as provided in Section 11 of Exhibit C.
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1.2 Other Definitional Provisions.
(a) Accounting terms not otherwise defined herein shall have the
meanings given the terms under GAAP.
(b) Defined terms may be used in the singular or the plural, as the
context requires.
2. THE CREDIT.
2.1 The Commitment.
(a) Subject to the terms and conditions of this Agreement and
provided no Default or Event of Default has occurred and is continuing,
the Lender agrees, from time to time during the period from the date
hereof to and including the Termination Date, to make Advances to the
Company, provided the sum of the total aggregate principal amount
outstanding at any one time of all such Advances plus the aggregate
Purchase Prices of all Securities which have not been repurchased by
the Company under the Master Repurchase Agreement shall not exceed
SIXTY MILLION DOLLARS ($60,000,000.00). The obligation of the Lender to
make Advances hereunder up to such limit is hereinafter referred to as
the "Commitment." Within the Commitment, the Company may borrow, repay
and reborrow. All Advances under this Agreement shall constitute a
single indebtedness, and all of the Collateral shall be security for
the Note and for the performance of all the Obligations of the Company
to the Lender. Notwithstanding anything contained herein to the
contrary or otherwise, each purchase of Securities by the Lender under
the Master Repurchase Agreement will automatically reduce by the amount
of the purchase price for such Securities, dollar for dollar, the
principal amount available to be borrowed within the Commitment for
so long as that purchase is outstanding under the Master Repurchase
Agreement.
(b) Advances shall be used by the Company solely for the
purpose of funding the acquisition or origination of Mortgage Loans, as
specified in the Advance Request and none other, and shall be made at
the request of the Company in the manner hereinafter provided in
Section 2.2, against the pledge of such Mortgage Loans and such other
collateral as is set forth in Section 3.1 hereof as Collateral
therefor. Advances shall also be subject to the following restrictions:
(1) No Advance shall be made against a Mortgage Loan
which is not an Eligible Mortgage Loan.
(2) The aggregate amount of Wet Settlement Advances
outstanding at any one time shall not exceed Fifteen Million
and No/100 Dollars ($15,000,000.00).
(3) The aggregate amount of Advances outstanding at any
one time against Aged Mortgage Loans shall not exceed One
Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00).
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(4) The aggregate amount of Advances outstanding at any
one time against High LTV Mortgage Loans shall not exceed Two
Hundred Fifty Thousand and No/100 Dollars ($250,000.00).
(c) No Advance against a Mortgage Loan shall exceed an amount
equal to 99% of the Collateral Value of such Mortgage Loan to be
determined as of the date such Mortgage Loan is pledged to Lender.
2.2 Procedures for Obtaining Advances.
(a) The Company may obtain an Advance hereunder subject to the
following:
(1) The Company may obtain an Advance hereunder, subject to
the satisfaction of the conditions set forth in Sections 4.1 and 4.2
hereof, upon compliance with the procedures set forth in this Section
2.2 and in Exhibit "C" attached hereto and made a part hereof Requests
for Advances shall be initiated by the Company (i) by delivering to
the Lender and its designee, by telecopy (with original to be sent
immediately thereafter by overnight mail) a completed and signed
request for an Advance (an "Advance Request") in the form of Exhibit
"A" attached hereto and made a part hereof, or (ii) by using the
electronic data transmission service provided by the Lender and its
licensor, MBMS Incorporated, to transmit to the Lender a request for
Advance ("Electronic Request"), which shall include all information
required by Exhibit "A" through the Warehouse Management System
software provided by the Lender and its licensor, MBMS Incorporated.
The Lender shall have the right, on not less than three (3) Business
Days' prior notice to the Company, to modify the Advance Request,
Electronic Request, or any exhibits hereto to conform to current legal
requirements or Lender practices, and, as so modified, said Advance
Request, Electronic Request or exhibits shall be deemed a part hereof.
In consideration of the Lender permitting the Company to make
Electronic Requests for Advances utilizing the Warehouse Management
System software or Advance Requests by telecopy, the Company covenants
and agrees to assume liability for and to protect, indemnify and save
the Lender harmless from, any and all liabilities, obligations,
damages, penalties, claims, causes of action, costs, charges and
expenses, including attorneys' fees and expenses of employees, which
may be imposed, incurred by or asserted against the Lender by reason of
any loss, damage or claim howsoever arising or incurred because of, out
of or in connection with (i) any action of the Lender pursuant to
Electronic Requests or Advance Requests by telecopy, (ii) the breach of
any provisions of this Agreement by the Company, (iii) the transfer of
funds pursuant to such Electronic Requests or Advance Requests by
telecopy, or (iv) the Lender's honoring or failing to honor any
Electronic Request or Advance Request by telecopy for any reason or no
reason whatsoever. The Lender is entitled to rely upon and act upon
Electronic Requests or Advance Requests by telecopy, and the Company
shall be unconditionally and absolutely estopped from denying (x) the
authenticity and validity of any such transaction so acted upon by the
Lender once the Lender has advanced funds and has deposited or
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transferred such funds as requested in any such Electronic Request or
Advance Request by telecopy, and (y) the Company's liability and
responsibility therefor.
(2) In the case of any Wet Settlement Advances, the Company
shall follow the procedures and, at or prior to the Lender's making of
such Wet Settlement Advance, shall deliver to the Lender or its
designee the documents set forth in Section 11 of Exhibit "C" hereto.
In case of Collateral financed through a Wet Settlement Advance, the
Company shall cause all Collateral Documents to be delivered to the
Lender or its designee within three (3) calendar days after the date
of the Wet Settlement Advance relating thereto.
(3) Before funding, the Lender and its designee shall have a
reasonable time to examine such Advance Request and the Collateral
Documents to be delivered prior to such requested Advance, as set
forth in the applicable Exhibit hereto, and may reject such of them as
do not meet the requirements of this Agreement or of the related
Purchase Commitment. The Advance Request and the Collateral Documents
must be received by Lender no later than 2:00 p.m. Houston, Texas time
in order for funding to occur the same day.
(b) To make an Advance, the Lender shall credit the Funding Account
upon compliance by the Company with the terms of this Agreement.
2.3 Note. The Company's obligation to pay the principal of, and
interest on, all Advances made by the Lender shall be evidenced by a promissory
note (the "Note") of the Company dated as of the date hereof, in form of Exhibit
"N" hereto. The term "Note" shall include all extensions, renewals and
modifications of the Note and all substitutions therefor. All terms and
provisions of the Note are hereby incorporated herein.
2.4 Interest.
(a) (1) The unpaid amount of each Advance against Mortgage Loans that
are not Aged Mortgage Loans shall bear interest from the date of such Advance
until paid in full, at a rate of interest equal to the lesser of (i) **, or (ii)
** which is equal to **.
(2) The unpaid amount of each Advance outstanding against Mortgage
Loans that are Aged Mortgage Loans shall bear interest (1) form the date such
Mortgage Loans become Aged Mortgage Loans until such Advances is paid in full at
a rate of interest equal to the lesser of (i) ** or (ii) **.
(3) Notwithstanding Section 2.4(a)(1) through (2) above to the
contrary, the unpaid portion ("NIB Advances") of Advances equal to Net
Investable Balances shall bear at the following rates in the following order of
priority: (1) first ** and second, **.
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** indicates information which has been omitted pursuant to a confidential
treatement request filed separately with the Commission.
(b) Interest shall be computed on the basis of a 360-day year and
applied to the actual number of days elapsed in each interest calculation period
and shall be payable monthly in arrears, on the first day of each month,
commencing with the first month following the date of this Agreement, and ending
on Termination Date.
(c) Obligations not paid when due (whether at stated maturity, upon
acceleration following the occurrence of an Event of Default or otherwise) shall
bear interest, from the date due until paid in full, at a rate of interest
("Default Rate") at all times equal to the lesser of (i) four percent (4%) per
annum over the Floating Rate; or (ii) the Maximum Rate, said interest to be
payable on demand by Lender.
2.5 Principal Payments.
(a) The outstanding unpaid principal amount of all Advances shall be
payable in full upon June 30, 1999.
(b) The Company shall have the right to prepay the outstanding Advances
in whole or in part, from time to time, without premium or penalty.
(c) The Company shall be obligated to pay to the Lender, without the
necessity of prior demand or notice from the Lender, and the Company authorizes
the Lender to charge the Funding Account or any other accounts of the Company
(excluding any monies held by Company in trust for third parties) in Lender's
possession for the amount of any outstanding Advance against a specific Mortgage
Loan upon the earliest occurrence of any of the following events:
(1) The expiration of ninety (90) days from the date of any Advance
for any Mortgage Loan (excluding Aged Mortgage Loans).
(2) The expiration of thirty (30) days from the date the Mortgage
Loan was delivered to an Investor for examination and purchase, without
the purchase being made, or upon rejection of the Mortgage Loan as
unsatisfactory by an Investor;
(3) The expiration of forty-five (45) days from the date Mortgage
Loan is delivered to the certificating custodian acceptable to the
Lender for the issuance of a Mortgage-backed Security;
(4) The expiration of three (3) calendar days from the date a Wet
Settlement Advance was made without receipt of all Collateral Documents
relating to such Mortgage Loan, or such Collateral Documents, upon
examination by the
15
Lender, are found not to be in compliance with the requirements of this
Agreement or the related Purchase Commitment;
(5) The expiration of ten (10) Business Days from the date a
Collateral Document in connection with such Mortgage Loan was delivered
to the Company for correction or completion, without being returned
to the Lender, corrected or completed;
(6) The Mortgage Loan is in default and such default continues for
a period of sixty (60) days or more;
(7) The expiration of three (3) Business Days after the date on
which the related Purchase Commitment, if any, expires, is terminated
or otherwise canceled or no longer in full force and effect and the
specific Mortgage Loan was not delivered under the Purchase Commitment
prior to such termination, expiration or cancellation;
(8) The Mortgage Loan is not or ceases to be an Eligible Mortgage
Loan;
(9) Upon sale of the Mortgage Loan.
Upon receipt of such payment by the Lender, such Mortgage Loans or
Mortgage-backed Securities shall be considered to have been redeemed from
pledge, and the Collateral Documents relating thereto which have not been
delivered to the Investor or the pool custodian or pool trustee shall be
released by the Lender to the Company.
(d) With respect to Aged Mortgage Loans, the Company shall be obligated
to pay to the Lender (and the Company authorizes the Lender to charge the
Funding Account or any other accounts of the Company [excluding monies held by
the Company in trust for third parties] in Lender's possession for the payment
thereof) the principal payments in the amounts and on the dates specified below:
(1) On the date a Pledged Mortgage becomes an Aged Mortgage Loan, a
principal payment in an amount necessary to reduce the outstanding
unpaid Advances made against such Aged Mortgage Loan to an amount equal
to 90% of the Collateral Value of such Aged Mortgage Loan;
(2) On the date an Aged Mortgage Loan has been included in the
Collateral for 120 days, a principal payment in an amount necessary
to reduce the outstanding unpaid Advances made against such Aged
Mortgage Loan to an amount equal to 80% of the Collateral Value of such
Aged Mortgage Loan;
(3) On the date an Aged Mortgage Loan has been included in the
Collateral for 150 days, a principal payment in an amount necessary to
reduce the outstanding unpaid Advances made against such Aged Mortgage
Loan to an amount equal to 70% of the Collateral Value of such Aged
Mortgage Loan;
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(4) On the date an Aged Mortgage Loan has been included in the
Collateral for 180 days, an amount equal to the balance of the
aggregate outstanding unpaid Advances against such Aged Mortgage Loan.
2.6 Expiration of Commitment. Unless extended or terminated earlier as
permitted hereunder, the Commitment shall expire of its own term, and without
the necessity of action by the Lender, at the close of business on the Business
Day immediately preceding 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.
2.7 Method of Making Payments. Except as otherwise specifically
provided herein, all payments hereunder shall be made to the Lender not later
than the close of business (Houston time) on the date when due unless such date
is a non-Business Day, in which case, such payment shall be due on the first
Business Day thereafter, and shall be made in lawful money of the United States
of America in immediately available funds.
2.8 Non-Usage Fee. At the end of each month during the term of this
Agreement (i.e., from its effective date through the Termination Date), the
Lender shall determine average usage of the Commitment by calculating the
arithmetic daily average of the outstanding balance of Advances in the preceding
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 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 of 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 (i.e., as a "true
commitment fee" under Texas law); provided that such fee shall be waived for
any month thereafter if the Unused Portion for such month is equal to or less
than fifty percent (50%) of the Commitment. Each calculation by the Lender of
the amount of any Non-Usage Fee shall be conclusive and binding on the Company,
absent manifest error.
2.9 Miscellaneous Charges. At the end of each month during the term
of this Agreement, the Company shall pay to the Lender in arrears on or before
five (5) days after the later of (a) the end of each calendar month or (b) the
Company's receipt of the Lender's xxxx for such monthly period, a transaction
fee equal to $15.00 per Pledged Mortgage held by Lender during such month and
for which Lender has not previously received a transaction fee, for the handling
and administration of Advances and Collateral. For the purposes hereof, Company
shall, at its sole cost and expense, pay
17
all miscellaneous charges and expenses incurred by the Lender in connection with
the handling and administration of Advances and Collateral, including,
without limitation, all charges for security delivery fees 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.
2.10 Bailee. Lender appoints Company and Company shall act as its
bailee to (i) hold in trust for Lender (A) the original recorded copy of the
mortgage, deed of trust, or trust deed securing each Pledged Mortgage, (B) a
mortgagee policy of title insurance (or binding unexpired and unconditional
commitment to issue such insurance if the policy has not yet been delivered to
Company) insuring the Company's perfected Lien created by that mortgage, deed of
trust, or trust deed, (C) the original insurance policies for each Pledged
Mortgage, and (D) all other original documents relating to each Pledged
Mortgage, including any promissory notes, any other loan documents, and
supporting documentation, surveys, settlement statements, closing instructions,
and Mortgage-backed Securities, and (ii) deliver to Lender any of the foregoing
items as soon as reasonably practicable upon Lender's request.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of the Note
and for the performance of all of the Company's Obligations hereunder, the
Company hereby assigns and transfers all right, title and interest in and to and
grants a security interest to the Lender in the following described property,
whether now owned or hereafter acquired (the "Collateral"):
(a) All Mortgage Loans including all Mortgage Notes and Mortgages
evidencing such Mortgage Loans including without limitation all
Mortgage Loans in respect of which Wet Settlement Advances have been
made by the Lender, which from time to time are delivered or caused to
be delivered to the Lender or its designee, come into the possession,
custody or control of the Lender for the purpose of assignment or
pledge or in respect of which an Advance has been made by the Lender
hereunder (the "Pledged Mortgages").
(b) All Mortgage-backed Securities which are from time to time
delivered or caused to be delivered to, or are otherwise in the
possession of the Lender, or its designee, its agent, bailee or
custodian as assignee or pledged to the Lender, or for such purpose are
registered by book-entry in the name of the Lender (the "Pledged
Securities").
(c) All private mortgage insurance and all commitments issued by
the FHA or VA to insure or guarantee any Mortgage Loans included in the
Pledged Mortgages; all guaranties related to Pledged Securities; all
Purchase Commitments held by the Company covering the Pledged Mortgages
or the Pledged Securities and all proceeds resulting from the sale
thereof to Investors pursuant thereto; all personal property, contract
rights, servicing and servicing fees and income or other proceeds,
amounts and payments payable to the Company as compensation or
reimbursement, accounts and general intangibles of whatsoever kind
relating to the Pledged Mortgages, the Pledged Securities and all other
documents or instruments relating to the Pledged Mortgages and the
Pledged Securities, including, without limitation, any interest of the
Company in any fire, casualty or hazard
18
insurance policies and any awards made by any public body or decreed by
any court of competent jurisdiction for a taking or for degradation of
value in any eminent domain proceeding as the same relate to the
Pledged Mortgages.
(d) All right, title and interest of the Company in and to all
escrow accounts, documents, instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records (including all information, records, tapes, data,
programs, discs and cards necessary or helpful in the administration or
servicing of the foregoing Collateral) and other information and data
of the Company relating to the foregoing Collateral.
(e) All now existing or hereafter acquired cash delivered to or
otherwise in the possession of the Lender or its agent, bailee or
custodian or designated on the books and records of the Company as
assigned and pledged to the Lender.
(f) All cash and non-cash proceeds of the foregoing Collateral,
including all dividends, distributions and other rights in connection
with, and all additions to, modifications of and replacements for, the
foregoing Collateral, and all products and proceeds of the foregoing
Collateral, together with whatever is receivable or received when the
foregoing Collateral or proceeds thereof are sold, collected, exchanged
or otherwise disposed of, whether such disposition is voluntary or
involuntary, including, without limitation, all rights to payment with
respect to any cause of action affecting or relating to the foregoing
Collateral or proceeds thereof.
3.2 Security Interest in Mortgage-backed Securities. The Company's
ability to convert Mortgage Loans that are within the Collateral to
Mortgage-backed Securities are subject to the following conditions:
(a) Pledged Mortgages that are to be transferred to a pool
custodian in connection with the issuance of Mortgage-backed
Securities, shall be released from the Lender's security interest only
against payment to the Lender of the amount due the Lender in
connection with such Pledged Mortgages as determined in accordance
with Section 3.5 of this Agreement or against the issuance of such
Mortgage-backed Securities and the continuation of the Lender's first
priority, perfected security interest in such Mortgage-backed
Securities and the proceeds thereof until payment due the Lender in
respect of said Pledged Mortgages is made to the Lender.
(b) In the case of Mortgage-backed Securities created from Pledged
Mortgages, the Lender shall have the exclusive right to the possession
of the Mortgage-backed Securities if the Mortgage-backed Securities are
not to be issued in certificated form, shall have the right to
have the book entries for the Mortgage-backed Securities issued in the
Lender's name or the name or names of its designees. Lender shall cause
delivery of the Mortgage-backed Securities to be made to the Investor
or the book entries registered in the name of the Investor or the
Investor's designee only against payment therefor. The Company
acknowledges that the Lender may enter into one or more standing
arrangements with other financial institutions for the issuance of
Mortgage-backed Securities in book entry form in
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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.
3.3 Delivery of Collateral Documents. The Lender or its designee
exclusively shall deliver Pledged Mortgages or Pledged Securities to (a) an
Investor that has issued a Purchase Commitment with respect thereto for its
examination and purchase, or (b) an Approved Custodian for purposes of
examination or delivery in connection with the issuance of Mortgage-backed
Securities. In such cases where the Lender must deliver documents to an Investor
or Approved Custodian, the Lender must receive signed shipping instructions (in
the form of Exhibit "D" attached hereto), no later than 2:00 p.m. Houston, Texas
time one (1) Business Day prior to the expiration of the appended Purchase
Commitment, in addition to any other documents listed in Section III of Exhibit
"C" in respect of the issuance of Mortgage-backed Securities. If shipping
instructions are received by Lender before 2:00 p.m. Houston, Texas time of any
Business Day, Lender will ship the documents together with the Bailee Letter (in
form of Exhibit "K") to the Investor or Approved Custodian on the same Business
Day, otherwise Lender will ship the documents the next Business Day following
receipt of shipping instructions. In any case in which an Advance has been made
hereunder against Pledged Mortgages, based on the existence of a Purchase
Commitment covering such Pledged Mortgages, the Company agrees that such Pledged
Mortgages will not be placed in any mortgage pool other than an Eligible
Mortgage Pool, unless such Pledged Mortgages have been redeemed from pledge as
permitted hereunder or other arrangements, satisfactory to the Lender in its
sole discretion, have been made for the redemption of such Pledged Mortgages
from pledge hereunder. The Lender may deliver any document relating to the
Collateral to the Company for correction or completion against a trust receipt
in the form of Exhibit "E" attached hereto executed by the Company. The Company
hereby represents and warrants to and agrees with the Lender that any request by
the Company for release of the Collateral consisting of or relating to Mortgage
Loans to the Company shall be solely for the purposes of correcting clerical or
non-substantial documentation problems in preparation for returning such
Collateral to the Lender for ultimate sale or exchange and the aggregate
Collateral Value of the Collateral released to the Company pursuant to this
Section 3.3 will not exceed $500,000.00; the Company shall request such release
in compliance with all of the terms and conditions of such release set forth
herein; and the Company will return to the Lender such documentation released to
the Company pursuant to this Section 3.3 within ten (10) calendar days after
such delivery.
3.4 Delivery of Additional Collateral or Mandatory Prepayment. At any
time that the aggregate Collateral Value of the Collateral then pledged
hereunder is less than the aggregate amount of the Advances then outstanding
hereunder, the Lender may request, and the Company shall within two (2) Business
Days after Notice by the Lender (a) deliver to the Lender or its designee for
pledge hereunder additional Mortgage Loans and/or cash, in aggregate amounts
sufficient to cover the difference between the Collateral Value of the
Collateral pledged and the aggregate amount of Advances outstanding hereunder,
or (b) repay the Advances in an amount sufficient to reduce the aggregate
balance thereof outstanding to an amount equal to or below the Collateral Value
of the Collateral pledged hereunder.
3.5 Right of Redemption from Pledge. So long as no Event of Default has
occurred, the Company may redeem a Mortgage Loan or Mortgage-backed Security by
notifying the Lender of
20
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 Advance made with respect to or
relating to such Mortgage Loan or Mortgage-backed Security.
3.6 Collection and Servicing Rights. So long as no Event of Default
shall have occurred, the Company shall be entitled to service and receive and
collect directly all sums payable to the Company in respect of the Collateral
other than proceeds of any Purchase Commitment or proceeds of the sale of any
Collateral. Following the occurrence of any Event of Default, the Lender or its
designee shall thereafter be entitled to service and receive and collect all
sums payable to the Company in respect of the Collateral, and in such case (a)
the Lender or its designee in its discretion may, in its own name or in the name
of the Company or otherwise, demand, xxx for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so, (b) the Company
shall, if the Lender so requests, forthwith pay to the Lender at its principal
office all amounts thereafter received by the Company upon or in respect of any
of the Collateral, advising the Lender as to the source of such funds, and (c)
all amounts so received and collected by the Lender shall be held by it as part
of the Collateral.
3.7 Return or Release of Collateral at End of Commitment. If (a) the
Commitment shall have expired or been terminated, and (b) no Advances, interest
or other Obligations evidenced by the Loan Documents or due under this Agreement
shall be outstanding and unpaid, the Lender shall deliver or release all
Collateral in its possession to the Company. The receipt of the Company for any
Collateral released or delivered to the Company pursuant to any provision of
this Agreement shall be a complete and full acquittance for the Collateral so
returned, and the Lender shall thereafter be discharged from any liability or
responsibility therefor.
3.8 Master Repurchase Agreement. If the Lender purchases any Pledged
Mortgages under the Master Repurchase Agreement, the Purchase Price to be paid
by the Lender for such Pledged Mortgage under the Master Repurchase Agreement
shall be credited against the Note in an amount equal to the outstanding Advance
made against such Pledged Mortgage and the balance of the Purchase Price after
such application, if any, shall be paid to the Company. Any Pledged Mortgage
shall be eligible for purchase by Lender under the Master Repurchase Agreement
following delivery of such Pledged Mortgage to the Investor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the initial
Advance under this Agreement is subject to the satisfaction, in the sole
discretion of the Lender, on or before the date thereof, of the following
conditions precedent:
(a) The Lender shall have received the following, all of which must be
satisfactory in form and content to the Lender, in its sole discretion:
(1) The Loan Documents dated as of the date hereof duly executed by
the Company;
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(2) Certified copies of the Company's articles of incorporation and
bylaws and certificates of good standing dated no less recently than
ninety (90) days prior to the date of this Agreement and a
certification from the taxing authority of the state of incorporation
stating that the Company is in good standing with said taxing
authority:
(3) A certificate (in the form of Exhibit "J") of the Company's
corporate secretary as to the resolution of the board of directors of
the Company authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents and the incumbency and
authenticity of the signatures of the officers of the Company executing
this Agreement and the other Loan Documents and each Advance Request
and all other instruments or documents to be delivered pursuant hereto
(the Lender being entitled to rely thereon until a new such certificate
has been furnished to the Lender);
(4) Financial statements of the Company (and its Subsidiaries, on a
consolidated basis) containing a balance sheet as of December 31, 1997
(the "Statement Date") and related statements of income, changes in
stockholders' equity and cash flows for the period ended on the
Statement Date and a balance sheet as of April 30, 1998 ("Interim
Date") and related statement of income for the period ended on the
Interim Date, all prepared in accordance with GAAP applied on a basis
consistent with prior periods and in the case of the statements as of
the Statement Date, audited by independent certified public accountants
of recognized standing acceptable to the Lender;
(5) A favorable written opinion of counsel to the Company, dated as
of the date of this Agreement, to be in substantially the form of
Exhibit "M" hereto, and addressed to the Lender;
(6) A tax, lien and judgment search of the appropriate public
records for the Company, including a search of Uniform Commercial Code
financing statements, which search shall not have disclosed the
existence of any prior Lien on the Collateral other than in favor of
the Lender or as permitted hereunder;
(7) Copies of the certificates, documents or other written
instruments which evidence the Company's eligibility described in
Section 5.11 hereof, all in form and substance satisfactory to the
Lender;
(8) Copies of the Company's errors and omissions insurance policy
or mortgage impairment insurance policy and blanket bond coverage
policy, all in form and content satisfactory to the Lender, showing
compliance by the Company as of the date of this Agreement with the
related provisions of Section 6.9 hereof and showing Lender as an
additional loss payee on such policies;
(9) Executed financing statements in recordable form covering the
Collateral and ready for filing in all jurisdictions required by the
Lender;
22
(10) Evidence that the Funding Account has been established with
the Lender;
(11) Evidence that Intuit, Inc. has acquired preferred capital
stock of the Company for a purchase price of $6,000,000.00, the form
and substance of such preferred stock being acceptable to the Lender in
its sole discretion;
(12) Evidence that $2,000,000.00 of subordinated debt of the
Company has been converted to preferred stock of the Company.
4.2 Each Advance. The obligation of the Lender to make the initial and
each subsequent Advance under this Agreement is subject to the satisfaction, in
the sole discretion of the Lender, as of the date of each such Advance, of the
following additional conditions precedent:
(a) In connection with an Advance, the Company shall have delivered
to the Lender the Advance Request or the Electronic Request, Collateral
Documents, and documents required under and shall have satisfied the
procedures set forth in Section 2.2 and Exhibit "C". All items
delivered to the Lender or its designee shall be satisfactory to the
Lender in form and content, and the Lender may reject such of them as do
not meet the requirements of this Agreement or of the related Purchase
Commitment.
(b) The Lender shall have received evidence satisfactory to it as to
the making 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 Uniform Commercial Code of
Texas or other applicable law.
(c) The representations and warranties of the Company contained in
Article 5 hereof shall be accurate and complete in all material respects
as if made on and as of the date of each Advance.
(d) The Company shall have performed all agreements to be performed
by it hereunder and, as of the date of the Advance Request, and after
giving effect to the requested Advance, there shall exist no Default or
Event of Default hereunder.
(e) The Company shall not have incurred any material liabilities,
direct or contingent, except as approved by Lender pursuant to Section
7.17, since the dates of the Company's most recent financial statements
theretofore delivered to the Lender.
(f) The Lender shall have received from counsel for the Company, if
requested by the Lender in its sole discretion, an updated opinion, in
form and substance satisfactory to the Lender, addressed to the Lender
and dated as of the date of such Advance, covering such of the matters
as the Lender may reasonably request.
(g) Such additional documents, instruments, and information as
Lender or its legal counsel may require.
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Acceptance of the proceeds of the requested Advance by the Company
shall be deemed a representation by the Company that all conditions set forth in
this Article 4 shall have been satisfied as of the date of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Lender, as of the
date of this Agreement and (unless otherwise notified in writing by the Company
and Lender, in its sole discretion, approves in writing) as of the date of each
Advance Request and the making of each Advance, that:
5.1 Organization, Good Standing, Subsidiaries. The Company and each
Subsidiary of the Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has the full legal power and authority to own its property and to carry on its
business as currently conducted and is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction in which the
transaction of its business makes such qualification necessary, except in
jurisdictions, if any, where a failure to be in good standing has no material
adverse effect on the business, operations, assets or financial condition of the
Company or any such Subsidiary. For the purposes hereof, good standing shall
include qualification for any and all licenses and payment of any and all taxes
required in the jurisdiction of its incorporation and in each jurisdiction in
which the Company transacts business. The Company has no Subsidiaries except as
set forth on Exhibit "G" hereto. Exhibit "G" sets forth with respect to each
such Subsidiary, its name, address, place of incorporation, each state in which
it is qualified as a foreign corporation, and the percentage ownership of the
Company in such Subsidiary.
5.2 Authorization and Enforceability. The Company has all requisite
corporate power and authority to execute, deliver, create, issue, comply and
perform this Agreement, the Note and all other Loan Documents to which the
Company is party and to make the borrowings hereunder. The execution, delivery
and perfomance by the Company of this Agreement, the Note and all other Loan
Documents to which the Company is party and the making of the borrowings
hereunder and thereunder, have been duly and validly authorized by all necessary
corporate action on the part of the Company (none of which actions has been
modified or rescinded, and all of which actions are in full force and effect)
and do not and will not conflict with or violate any provision of law or of the
articles of incorporation or by-laws of the Company, conflict with or result in
a breach of or constitute a default or require any consent under any contracts
to which Company is a party, or result in the creation of any Lien upon any
property or assets of the Company other than the Lien on the Collateral granted
hereunder, or result in or require the acceleration of any Indebtedness of the
Company pursuant to any agreement, instrument or indenture to which the Company
is a party or by which the Company or its property may be bound or affected.
This Agreement, the Note and all other Loan Documents contemplated hereby or
thereby constitute legal, valid, and binding obligations of the Company,
enforceable in accordance with their respective terms, except as limited by
bankruptcy, insolvency or other such laws affecting the enforcement of creditors
rights generally.
5.3 Financial Condition. The balance sheet of the Company provided to
Lender pursuant to Section 4.1 (a)(4) hereof (and if applicable, its
Subsidiaries, on a consolidating and consolidated basis) as at the Statement
Date, and the related statements of income, changes in stockholders' equity, and
cash flows for the fiscal year ended on the Statement Date, heretofore furnished
to the
24
Lender, fairly present the financial condition of the Company and its
Subsidiaries as at the Statement Date and the Interim Date and the results of
its and their operations for the fiscal period ended on the Statement Date and
the Interim Date. The Company had, on the Statement Date and the Interim Date,
no known material liabilities, direct or indirect, fixed or contingent, matured
or unmatured, or liabilities for taxes, long-term leases or unusual forward or
long-term commitments not disclosed by, or reserved against in, said balance
sheet and related statements, and at the present time there are no material
unrealized or anticipated losses from any loans, advances or other commitments
of the Company except as heretofore disclosed to the Lender in writing. Said
financial statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved. Since the Statement Date,
there has been no material adverse change in the business, operations, assets or
financial condition of the Company or its Subsidiaries, nor is the Company aware
of any state of facts particular to the Company which (with or without notice or
lapse of time or both) would or could result in any such material adverse
change.
5.4 Litigation. Except as disclosed on Exhibit "H", there are no
actions, claims, suits or proceedings pending, or to the knowledge of the
Company, threatened or reasonably anticipated against or affecting the Company
or any Subsidiary of the Company in any court or before any arbitrator or before
any government commission, board, bureau or other administrative agency which,
if adversely determined, may reasonably be expected to result in any material
and adverse change in the business, operations, assets or financial condition of
the Company or any of Company's Subsidiaries, as a whole.
5.5 Compliance with Laws. To the knowledge of Company, neither the
Company nor any Subsidiary of the Company is in violation of any provision of
any law, or of any judgment, award, rule, regulation, order, decree, writ or
injunction of any court or public regulatory body or authority which might have
a material adverse effect on the business, operations, assets or financial
condition of the Company or any of Company's Subsidiaries, as a whole.
5.6 Regulations G and U. The Company is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock, and no part of the proceeds of
any Advances made hereunder will be used to purchase or carry any Margin Stock
or to extend credit to others for the purpose of purchasing or carrying any
Margin Stock.
5.7 Investment Company Act and Public Utility Holding Company Act.
Neither the Company nor any of its Subsidiaries is an "investment company" or
controlled by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. Neither the Company nor any of its Subsidiaries
is subject to regulation under the Public Utility Holding Company Act of 1935,
as amended.
5.8 Agreements. Neither the Company nor any Subsidiary of the Company
is a party to any agreement, instrument or indenture, or subject to any
restriction, materially and adversely affecting its business, operations,
assets or financial condition, except as disclosed in the financial statements
described in Section 5.3 hereof. The Company and each Subsidiary of the Company
are not in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement, instrument, or
indenture which default could have a material
25
adverse effect on the business, operations, properties or financial condition of
the Company as a whole. No holder of any Indebtedness of the Company or of any
of its Subsidiaries has given notice of any alleged default thereunder or, if
given, the same has been cured or will be cured by Company within the cure
period provided therein, and no liquidation or dissolution of the Company or
any of its Subsidiaries and no receivership, insolvency, bankruptcy,
reorganization or other similar proceedings relative to the Company or any of
its Subsidiaries or any of their respective properties is pending, or to the
knowledge of the Company, threatened.
5.9 Title to Properties. The Company and each Subsidiary of the Company
has good, valid, insurable (in the case of real property) and marketable title
to all of its properties and assets (whether real or personal, tangible or
intangible) reflected on the financial statements described in Section 5.3
hereof, and all such properties and assets are free and clear of all Liens
except as disclosed in such financial statements and not prohibited under this
Agreement.
5.10 ERISA. All plans ("Plans") of a type described in Section 3(3) of
ERISA in respect of which the Company or any Subsidiary of the Company is an
"Employer," as defined in Section 3(5) of ERISA, are in substantial compliance
with ERISA, and none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Internal Revenue Code, and neither the Company nor any Subsidiary of the
Company has incurred any material liability (including any material contingent
liability) to or on account of any such Plan pursuant to Sections 4062, 4063,
4064, 4201 or 4204 of ERISA; and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a material risk
to the Company or a Subsidiary of the Company of incurring a liability to or on
account of any such Plan pursuant to any of the foregoing Sections of ERISA. No
Plan or trust forming a part thereof has been terminated since December 1, 1974.
5.11 Eligibility. The Company has all requisite corporate power and
authority and all necessary licenses, permits, franchises and other
authorizations to own and operate its property and to carry on its business as
now conducted. If approved now or hereafter as a lender or seller/servicer for
any one or more of the governmental agencies as set forth below, the Company
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.
26
(e) VA lender in good standing under the VA loan guarantee
program eligible to originate, purchase, hold, sell, and service
VA-guaranteed Mortgage Loans.
(f) All licenses, permits, and other authorizations required by any
Governmental Authority to carry on its business as now conducted in any
jurisdiction.
5.12 Special Representations Concerning Collateral. The Company hereby
represents and warrants to the Lender, as of the date of this Agreement and as
of the date of each Advance, that:
(a) The Company is the legal and equitable owner and holder, free
and clear of all Liens (other than Liens granted hereunder), of the
Pledged Mortgages and the Pledged Securities. All Pledged Mortgages,
Pledged Securities, and Purchase Commitments have been duly authorized
and validly granted or issued to the Company, and all of the foregoing
items of Collateral comply with all of the requirements of this
Agreement, and have been validly pledged or assigned to the Lender,
subject to no other Liens.
(b) The Company has, and will continue to have, the full right,
power and authority to pledge the Collateral pledged and to be pledged
by it hereunder.
(c) Any Mortgage Loan and related documents included in the Pledged
Mortgages (1) as of the date of the Advance Request for such Mortgage
Loan, has been duly executed and delivered by the parties thereto; (2)
has been made in compliance with all requirements of the Real Estate
Settlement Procedures Act, Equal Credit Opportunity Act, the federal
Truth-In-Lending Act and all other applicable laws and regulations; (3)
is valid and enforceable in accordance with its terms, without defense
or offset; (4) has not been modified or amended except in writing,
which writing is part of the Collateral Documents, nor any requirements
thereof waived; and (5) complies with the terms of this Agreement and,
if applicable, with the related Purchase Commitment held by the
Company. Each Mortgage Loan has been fully advanced in the face amount
thereof and each Mortgage creates a Lien on the premises described
therein.
(d) No monetary default, nor, to the knowledge of the Company, any
event which, with notice or lapse of time or both, would become a
default, has occurred and is continuing under any Mortgage Loan
included in the Pledged Mortgages; provided, however, that, with
respect to Pledged Mortgages which have already been pledged as
Collateral hereunder, if any such default or event has occurred, the
Company will promptly notify the Lender and the same shall not have
continued for more than sixty (60) days.
(e) The Company has complied with all laws, rules and regulations
in respect of the FHA insurance or VA guarantee of each Mortgage Loan
included in the Pledged Mortgages designated by the Company as an FHA
insured or VA guaranteed Mortgage Loans, and such insurance or
guarantee is in full force and effect. All such FHA insured and VA
guaranteed Mortgage Loans comply in all respects with all applicable
requirements for purchase under the FNMA standard form of selling
contract for FHA insured and VA guaranteed loans and any supplement
thereto then in effect.
27
(f) All fire and casualty policies covering Mortgaged Property
encumbered by a Pledged Mortgage (1) name the Company and its
successors and assigns as the insured under a standard mortgagee
clause, (2) are and will continue to be in full force and effect, and
(3) afford and will continue to afford insurance against fire and such
other risks as are usually insured against in the broad form of
extended coverage insurance from time to time available, as well as
insurance against flood hazards if the same is required by FHA or VA.
(g) Pledged Mortgages encumbering Mortgaged Property located in a
special flood hazard area designated as such by the Secretary of HUD
are and shall continue to be covered by special flood insurance under
the National Flood Insurance Program.
(h) Each FHA insured Mortgage Loan pledged hereunder meets all
applicable governmental requirements for such insurance. Each Mortgage
Loan, against which an Advance is made on the basis of a Purchase
Commitment meets all requirements of such Purchase Commitment. The
Company shall assure that Mortgage Loans pledged pursuant to this
Agreement and intended to be used in the formation of Mortgage-backed
Securities shall comply, or prior to the formation of any such
Mortgage-backed Security, shall comply with the requirements of the
governmental instrumentality, department or agency guaranteeing such
Mortgage-backed Security.
(i) For Pledged Mortgages which will be used to secure GNMA
Mortgage-backed Securities, the Company has received from GNMA a
Confirmation Notice or Confirmation Notices for Request Additional
Commitment Authority and for Request Pool Numbers, and there remains
available thereunder a commitment on the part of GNMA sufficient to
permit the issuance of GNMA Mortgage-backed Securities in an amount at
least equal to the amount of such Pledged Mortgages designated by the
Company as the Mortgage Loans to be used to secure such GNMA
Mortgage-backed Securities; each such Confirmation Notice is in full
force and effect; each of such Pledged Mortgages has been assigned by
the Company to one of such Pool Numbers and a portion of the available
GNMA Commitment has been allocated thereto by the Company, in an amount
at least equal to the principal amount of each Mortgage Note secured by
such Pledged Mortgages; and each such assignment and allocation has
been reflected in the books and records of the Company.
(j) Each Pledged Mortgage in excess of $250,000.00 is Supported by
an appraisal that meets the appraisal requirements of FNMA or FHLMC (in
the case of residential Mortgaged Property), or the Office of Thrift
Supervision for the type of Mortgaged Property securing that Pledged
Mortgage; or, alternatively, such Pledged Mortgage is eligible for
purchase or is guaranteed or insured by a U.S. Government agency or a
U.S. Government sponsored enterprise.
5.13 RICO. The Company is not in violation of any laws, statutes or
regulations, including, without limitations, RICO, which contain provisions
which could potentially override Lender's security interest in the Collateral.
5.14 Proper Names. The Company does not operate in any Jurisdiction
under a trade name, division, division name or name other than those names
set forth on Exhibit "I" attached
28
hereto and all such names included on Exhibit "I" are utilized by the Company
only in the jurisdictions listed therein.
5.15 Direct Benefit From Loans. The Company has received, or, upon the
execution and funding thereof, will receive (a) direct benefit from the making
and execution of this Agreement and the other Loan Documents to which it is a
party, and (b) fair and independent consideration for the entry into, and
performance of, this Agreement and the other Loan Documents to which it is a
party. Contemporaneously with the disbursements of each Advance by the Lender to
the Company, all such proceeds will be used to finance the origination or
purchase of Mortgage Loans.
5.16 Loan Documents Do Not Violate Other Documents. Neither the
execution and delivery by the Company of this Agreement or any other Loan
Document to which it is a party nor the consummation of the transactions herein
and therein contemplated, nor the performance of, or compliance with, the terms
and provisions hereof and thereof, does or will contravene, breach or conflict
with any provision of either of its articles of incorporation or by-laws, or
any applicable law, statute, rule or regulation or any judgment, decree, writ,
injunction, franchise, order or permit applicable to the Company or its assets
or properties, or does or will conflict or be inconsistent with, or does or will
result in any breach or default of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of any Lien upon any of the property or assets of the Company
pursuant to the terms of any indenture, mortgage, deed of trust, loan
agreement, or other instrument to which the Company is a party or by which the
Company or any of its property may be bound, the contravention, conflict,
inconsistency, breach or default of which will have a materially adverse effect
on the Company's condition, financial or otherwise, or affect its ability to
perform, promptly and fully, its obligations hereunder or under any of the other
Loan Documents.
5.17 Consents Not Required. Except for those consents that have already
been obtained and delivered to Lender or required as a condition to any Advance
hereunder, no consent of any Person and no consent, license, permit, approval,
or authorization of, exemption by, or registration or declaration with, any
Tribunal is required in connection with the execution, delivery, performance,
validity, or enforceability of this Agreement or any of the Loan Documents by
the Company.
5.18 Material Fact Representations. Neither the Loan Documents nor any
other agreement, document, certificate, or written statement furnished to the
Lender by or on behalf of the Company in connection with the transactions
contemplated in any of the Loan Documents contains any untrue statement of a
material adverse fact. There are no material adverse facts or conditions
relating to the making of the Commitment, any of the Collateral, and/or the
financial condition and business of the Company known to the Company which have
not been fully disclosed, in writing, to the Lender, it being understood that
this representation is made as of, and shall be limited to the date of this
Agreement. All writings heretofore or hereafter exhibited or delivered to the
Lender by or on behalf of the Company are and will be genuine and what they
purport to be.
5.19 Place of Business. The principal place of business of the Company
is 0000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, and the chief
executive office of the Company and the office where it keeps its financial
books and records relating to its property and all contracts
29
relating thereto and all accounts arising therefrom is located at the address
set forth for the Company in Section 9 hereof.
5.20 Use of Proceeds; Business Loans. The Company will use the
proceeds of the Advances made pursuant to the Commitment solely as follows, and
for no other purpose: finance the origination and purchase of Mortgage Loans.
All loans evidenced by the Note are and shall be "business loans", as such term
is used in the Depository Institutions Deregulation and Monetary Control Act of
1980, as amended, and such loans are for business or commercial purposes and not
primarily for personal, family, household or agricultural use, as such terms are
used or defined in Texas Credit Title, Regulation Z promulgated by the Board of
Governors of the Federal Reserve System, and Titles I and V of the Consumer
Credit Protection Act. Article 5069, Chapter 15, Texas Revised Civil Statues and
Section 346.003 of the Texas Finance Code (which regulates revolving loans and
revolving triparty accounts) shall not apply to this Agreement.
5.21 No Undisclosed Liabilities. Other than as permitted in Section
7.17 hereof, the Company does not have any liabilities or Indebtedness, direct
or contingent, except for liabilities or Indebtedness which, in the aggregate,
do not exceed $25,000.00.
5.22 Tax Returns and Payments. All federal, state and local income,
excise, property and other tax returns required to be filed with respect to
Company's operations and those of its Subsidiaries in any jurisdiction have been
filed on or before the due date thereof (plus any applicable extensions); all
such returns are true and correct; all taxes, assessments, fees and other
governmental charges upon the Company, and Company's Subsidiaries and upon its
property, income or franchises, which are due and payable have been paid,
including, without limitation, all FICA payments and withholding taxes, if
appropriate, other than those which are being contested in good faith by
appropriate proceedings, diligently pursued and as to which the Company has
established adequate reserves determined in accordance with GAAP, consistently
applied. The amounts reserved, as a liability for income and other taxes
payable, in the financial statements described in Section 5.3 hereof are
sufficient for payment of all unpaid federal, state and local income, excise,
property and other taxes, whether or not disputed, of the Company and its
Subsidiaries, accrued for or applicable to the period and on the dates of such
financial statements and all years and periods prior thereto and for which the
Company, and Company's Subsidiaries may be liable in their own right or as
transferee of the assets of, or as successor to, any other Person.
5.23 Subsidiaries. The Company has not issued, and does not have
outstanding, any warrants, options, rights or other obligations to issue or
purchase any shares of its capital stock or other securities, except as shown on
Exhibit "G" attached hereto. The outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. All of Company's Subsidiaries are listed on Exhibit "G" attached
hereto.
5.24 Holding Company. The Company is not a "holding company" or a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
30
6. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment
is outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or under any other Loan Document, the Company
shall:
6.1 Payment of Note. Punctually pay or cause to be paid the principal
of, interest on and all other amounts payable hereunder and under the Note in
accordance with the terms thereof.
6.2 Financial Statements and Other Reports. Deliver to the Lender:
(a) As soon as available and in any event within thirty (30) days
after the end of each calendar month, statements of income, changes in
stockholders' equity, and cash flows of the Company and, if applicable,
Company's Subsidiaries, on a consolidated and consolidating basis for
the immediately preceding month, and related balance sheet as at the
end of the immediately preceding month, all in reasonable detail,
prepared in accordance with GAAP applied on a consistent basis, and
certified as to the fairness of presentation by the president and chief
financial officer of the Company, subject, however, to year-end audit
adjustments.
(b) As soon as available and in any event within ninety (90) days
after the close of each fiscal year: statements of income, changes in
stockholders' equity and cash flows of the Company, and, if applicable,
Company's Subsidiaries, on a consolidated and consolidating basis for
such year, the related balance sheet as at the end of such year
(setting forth in comparative form the corresponding figures for the
preceding fiscal year), all in reasonable detail, prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved, and accompanied by an opinion in form and substance
satisfactory to the Lender and prepared by an accounting firm
reasonably satisfactory to the Lender, or other independent certified
public accountants of recognized standing selected by the Company and
acceptable to the Lender, as to said financial statements and a
certificate signed by the president and chief financial officer of the
Company stating that said financial statements fairly present the
financial condition and results of operations of the Company and, if
applicable, Company's Subsidiaries as at the end of, and for, such
year.
(c) Together with each delivery of financial statements required in
this Section 6.2, an Officer's Certificate.
(d) Reports in respect of the Pledged Mortgages and Pledged
Securities, in such detail and at such times as the Lender in its
discretion may request at any time or from time to time to be delivered
with the monthly financial statements required in Section 6.2(a).
(e) Copies of all regular or periodic financial and other reports,
if any, which the Company shall file with the Securities and Exchange
Commission or any governmental agency successor thereto and copies of
any audits completed by GNMA, FHLMC, or FNMA. Copies of the Mortgage
Bankers' Financial Reporting Forms (FNMA Form 1002) which the Company
shall have filed with FNMA.
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(f) From time to time, with reasonable promptness, such further
information regarding the business, operations, properties or financial
condition of the Company as the Lender may reasonably request.
6.3 Maintenance of Existence, Conduct of Business. Preserve and
maintain its corporate existence in good standing and all of its rights,
privileges, licenses and franchises necessary in the normal conduct of its
business, including, without limitation, its eligibility as lender,
seller/servicer and issuer described under Section 5.11 hereof, conduct its
business in an orderly and efficient manner; maintain a net worth of acceptable
assets as required by HUD at any and all times for maintaining the Company's
status as a FHA approved mortgagee; and make no material change in the nature
or character of its business or engage in any business in which it was not
engaged on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority, a
breach of which could materially adversely affect its business, operations,
assets, or financial condition, except where contested in good faith and by
appropriate proceedings, and with sufficient reserves established therefor.
6.5 Inspection of Properties and Books. Permit authorized
representatives of the Lender to (a) discuss the business, operations, assets
and financial condition of the Company and Company's Subsidiaries with their
officers and employees and to examine their books of account, records, reports
and other papers and make copies or extracts thereof, and (b) inspect all of the
Company's property and all related information and reports at Lender's expense,
all at such reasonable times as the Lender may request. The Company will provide
its accountants with a copy of this Agreement promptly after the execution
hereof and will instruct its accountants to answer candidly any and all
questions that the officers of the Lender or any authorized representatives of
the Lender may address to them in reference to the financial condition or
affairs of the Company and Company's Subsidiaries. The Company may have its
representatives in attendance at any meetings between the officers or other
representatives of the Lender and the Company accountants held in accordance
with this authorization.
6.6 Notice. Give prompt written notice to the Lender of (a) any action,
suit or proceeding instituted by or against the Company or any of its
Subsidiaries in any federal or state court or before any commission or other
regulatory body (federal, state or local, domestic or foreign) which action,
suit or proceeding has at issue in excess of Twenty-Five Thousand Dollars
($25,000.00) (except for normal collection and foreclosure proceedings initiated
by the Company in connection with a Mortgage Loan or any other mortgage loan),
or any such proceedings threatened against the Company, or any of Company's
Subsidiaries in writing containing the details thereof, (b) the filing,
recording or assessment of any federal, state or local tax Lien against it, or
any of its assets or any of its Subsidiaries, (c) the occurrence of any Event of
Default hereunder or the occurrence of any Default and continuation thereof for
five (5) days, (d) the suspension, revocation or termination of the Company's
eligibility, in any respect, as approved lender, seller/servicer or issuer as
described under Section 5.11 hereof, (e) the transfer, loss or termination
of any Servicing Contract to which the Company is a party, or which is held for
the benefit of the Company, and the reason for such transfer, loss or
termination, if known to the Company, and (f) any other action, event or
condition of any nature which may lead to or result in a material adverse effect
upon the business, operations,
32
assets, or financial condition of the Company or Company's Subsidiaries or
which, with or without notice or lapse of time or both, would constitute a
default under any other agreement instrument or indenture to which the Company
is a party or to which the Company its properties or assets may be subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations and
Indebtedness of the Company, and cause to be paid and performed all obligations
and Indebtedness of its Subsidiaries in accordance with the terms thereof and
pay and discharge or cause to be paid and discharged all taxes, assessments and
governmental charges or levies imposed upon the Company or its Subsidiaries, or
upon their respective income, receipts or properties before the same shall
become past due, as well as all lawful claims for labor, materials and supplies
or otherwise which, if unpaid, might become a Lien or charge upon such
properties or any part thereof, provided, however, that the Company and its
Subsidiaries shall not be required to pay obligation, Indebtedness, taxes,
assessments or governmental charges or levies or claims for labor, materials or
supplies for which the Company or its Subsidiaries shall have obtained an
adequate bond or adequate insurance or which are being contested in good faith
and by proper proceedings which are being reasonably and diligently pursued if
such proceedings do not involve any likelihood of the sale, forfeiture or loss
of any such property or any interest therein while such proceedings are pending,
and provided further that book reserves adequate under generally accepted
accounting principles shall have been established with respect thereto and
provided further that the owing Person's title to, and its right to use, its
property is not materially adversely affected thereby.
6.8 Insurance. Maintain (a) errors and omissions insurance or
mortgage impairment insurance and blanket bond coverage, with such companies and
in such amounts as satisfy prevailing FNMA and FHLMC requirements applicable to
a qualified mortgage originating institution, and (b) liability insurance and
fire and other hazard insurance on its properties, with responsible insurance
companies approved by the Lender, in such amounts and against such risks as is
customarily carried by similar businesses operating in the same vicinity; and
(c) within thirty (30) days after notice from the Lender, obtain such additional
insurance as the Lender shall reasonably require, all at the sole expense of the
Company. Copies of such policies shall be furnished to the Lender without charge
upon obtaining such coverage or any renewal of or modification to such coverage.
6.9 Closing Instructions. The Company agrees to indemnify and hold the
Lender harmless from and against any loss, including reasonable attorneys' fees
and costs, attributable to the failure of a title insurance company, agent or
attorney to comply with the disbursement or instruction letter or letters of the
Company or of the Lender relating to any Mortgage Loan. The Lender shall have
the right to pre-approve the closing instructions of the Company to the title
insurance company, agent or attorney in any case where the Mortgage Loan to be
created at settlement is intended to be warehoused by the Company pursuant
hereto.
6.10 Other Loan Obligations. Perform all obligations under the terms of
each loan agreement, note, mortgage, security agreement or debt instrument by
which the Company is bound or to which any of its property is subject, and
promptly notify the Lender in writing of a declared default under or the
termination, cancellation, reduction or non-renewal of any of its other lines of
credit or financing agreements with any other lenders Exhibit "B" hereto is a
true and complete list of all such lines of credit or financing agreements as of
the date hereof.
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6.11 Use of Proceeds of Advances. Use the proceeds of each Advance
solely for the purpose of financing or purchasing Pledged Mortgages, including
the issuance of Mortgage-backed Securities based thereon.
6.12 Special Affirmative Covenants Concerning Collateral.
(a) Warrant and defend the right, title and interest of the Lender
in and to the Collateral against the claims and demands of all Persons
whomsoever.
(b) Service or cause to be serviced all Pledged Mortgages in
accordance with the standard requirements of the issuers of Purchase
Commitments covering the same and all applicable FHA and VA
requirements, including without limitation taking all actions necessary
to enforce the obligations of the obligors under such Mortgage Loans.
The Company shall service or cause to be serviced all Mortgage Loans
backing Pledged Securities in accordance with applicable governmental
requirements and issuers of Purchase Commitments covering the same. The
Company shall hold all escrow funds collected in respect of Pledged
Mortgages and Mortgage Loans backing Pledged Securities in trust,
without commingling the same with non-custodial funds, and apply the
same for the purposes for which such funds were collected.
(c) Execute and deliver to the Lender such Uniform Commercial Code
financing statements with respect to the Collateral as the Lender may
request. The Company shall also execute and deliver to the Lender such
further instruments of sale, pledge or assignment or transfer, and such
powers of attorney, as required by the Lender to secure the Collateral,
and shall do and perform all matters and things necessary or desirable
to be done or observed, for the purpose of effectively creating,
maintaining and preserving the security and benefits intended to be
afforded the Lender under this Agreement. The Lender shall have all the
rights and remedies of a secured party under the Uniform Commercial
Code of Texas, or any other applicable law, in addition to all rights
provided for herein.
(d) Notify the Lender within two (2) Business Days after receipt of
notice from an Investor of any default under, or of the termination of,
any Purchase Commitment relating to any Pledged Mortgage, Eligible
Mortgage Pool or Pledged Security.
(e) Promptly comply in all respects with the terms and conditions
of all Purchase Commitments, and all extensions, renewals and
modifications or substitutions thereof or thereto. The Company will
cause to be delivered to the Investor the Pledged Mortgages and
Pledged Securities to be sold under each Purchase Commitment not later
than the expiration thereof.
(f) Maintain, at its principal office or in a regional office
approved by the Lender, or in the office of a computer service bureau
engaged by the Company and approved by the lenders and, upon request,
shall make available to the Lender the originals, or copies in any case
where the originals have been delivered to the Lender or to an
Investor, of its Mortgage Notes and Mortgages included in Pledged
Mortgages, Mortgage-backed Securities delivered to the Lender as
Pledged Securities, Purchase Commitments, and all related Mortgage Loan
34
documents and instruments, and all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records and other information and data relating to the
Collateral.
6.13 Cure of Defects in Loan Documents. The Company will promptly cure
and cause to be promptly cured any defects in the creation, issuance, execution
and delivery of this Agreement and the other Loan Documents; and upon request of
the Lender and at the Company's expense, the Company will promptly execute and
deliver, and cause to be executed and delivered, to the Lender or its designee,
all such additional documents, agreements and/or instruments in compliance with
or in accomplishment of the covenants and agreements of this Agreement and the
other Loan Documents, and/or to create, perfect, preserve, extend and/or
maintain any and all Liens created pursuant hereto or pursuant to any other Loan
Document as valid and perfected Liens (of a priority as set forth in this
Agreement) in favor of the Lender to secure the Obligations, all as reasonably
requested from time to time by the Lender.
7. NEGATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment
is outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or any other Loan Document, the Company shall
not, either directly or indirectly, without the prior written consent of the
Lender:
7.1 Contingent Liabilities. Assume, incur, create, guarantee, endorse,
or otherwise become or be liable for the obligation of any Person other than the
Company except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and excluding the sale of Mortgage
Loans with recourse in the ordinary course of the company's business.
7.2 Pledge of Mortgage Loans. Except for Mortgage Loans pledged to the
lenders described in Exhibit "B", pledge or grant a security interest in any
existing or future Mortgage Loans acquired by the Company other than to the
Lender except as otherwise expressly permitted in this Agreement; provided,
however, that if no Default or Event of Default has occurred and is continuing,
servicing on individual Mortgage Loans may be sold concurrently with and
incidental to the sale of such Mortgage Loans (with servicing released) in the
ordinary course of the Company's business.
7.3 Merger, Acquisitions. Liquidate, dissolve or consolidate, except
for transactions involving not more than $50,000.00 each. Merge or acquire any
substantial part of the assets of another, except for transactions involving
companies in similar lines of business as the Company and so as long as the
Company is the surviving entity of any such merger.
7.4 Loss of Eligibility. Take any action that would cause the Company
to lose all or any part of its status as an eligible lender, seller/servicer and
issuer as described under Section 5.11 hereof.
7.5 Debt to Adjusted Tangible Net Worth Ratio. Permit the Ratio of Debt
to Adjusted Tangible Net Worth of the Company (and its Subsidiaries, on a
consolidated basis) to exceed 20:1 computed as of the end of each calendar
month.
35
7.6 Minimum Adjusted Tangible Net Worth, Permit Adjusted Tangible
Net Worth of the Company (and its Subsidiaries, on a consolidated basis) to be
less than the sum of Eight Million and No/100 Dollars ($8,000,000.00) plus fifty
(50%) of the net proceeds of any sale, transfer or assignment of capital stock
of any class, subordinated debentures or other equity or investment security, or
additional paid in capital, computed as of the end of each calendar month.
7.7 Transactions with Affiliates. Directly or indirectly (a) make any
loan, advance, extension of credit or capital contribution to any of its
Affiliates, (b) transfer, sell, pledge, assign or otherwise dispose of any of
its assets to or on behalf of such Affiliates, (c) merge or consolidate with or
purchase or acquire assets from such Affiliates, or (d) transfer, pledge, or
assign or otherwise pay management fees in excess of Fifty Thousand Dollars
($50,000.00) per annum to or on behalf of such Affiliates, except for
transactions described in clauses (a) through (c) of this Section 7.7 involving
not more than $25,000.00 each.
7.8 Limits on Corporate Distributions. Pay, make or declare or incur
any liability to pay, make or declare any dividend (excluding stock dividends)or
other distribution, direct or indirect, on or on account of any shares of its
stock or any redemption or other acquisition, direct or indirect, of any shares
of its stock or of any warrants, rights or other options to purchase any shares
of its stock nor purchase, acquire, redeem or retire any stock or ownership
interest in itself whether now or hereafter outstanding except that so long as
no Default, Event of Default or violation of Sections 7.5 and 7.6 hereof exists
at such time, or would exist immediately thereafter, the Company may declare and
pay cash dividends to its shareholders; provided, however, that such cash
dividends must be declared and paid within 20 days after delivery to Lender of
the financial statements described in Section 6.2(a) hereof.
7.9 RICO. Violate any laws, statutes or regulations, whether federal or
state, for which forfeiture of its properties is a potential penalty, including,
without limitations, RICO.
7.10 No Loans or Investments Except Approved Investments. Without the
prior written consent of Lender, make or permit to remain outstanding any loans
or advances to, or investments in, any Person, except that the foregoing
restriction shall not apply to:
(a) investments in marketable obligations maturing no later than
180 days from the date of acquisition thereof by the Company and issued
and fully guaranteed, directly, by the full faith and credit of the
Government of the United States of America or any agency thereof, and
(b) investments in certificates of deposit maturing no later than
180 days from the date of issuance thereof and issued by commercial
banks in the United States and such banks rated by Xxxxx'x Investor
Service, Inc. and receiving a rating of Prime-2 or higher on Moody's
short term debt rating or rated by Standard & Poor's Corporation and
receiving a rating of AA-/A1+ or higher on S&P's short term debt
rating, or issued by Lender, it being acknowledged and agreed that the
foregoing requirements shall pertain to certificates of deposit issued
and/or received on a date on or after the date of this Agreement); and
(c) investments not to exceed $50,000.00 in the aggregate.
36
7.11 Charter Documents and Business Termination.
(a) Amend or otherwise modify its corporate charter or otherwise
change its corporate structure in any manner which will have a
materially adverse effect on the Company's condition, financial or
otherwise, or which will have a material adverse effect upon the
Company's ability to perform, promptly and fully, its obligations
hereunder or under any of the other Loan Documents, or
(b) Take any action with a view toward its dissolution, liquidation
or termination, or, in fact, dissolve, liquidate or terminate its
existence.
7.12 Changes in Accounting Methods. Make any change in its accounting
method as in effect on the date of this Agreement or change its fiscal year
ending date from December 31, unless such changes (a) are required for
conformity with generally accepted accounting principles and, in such event, the
Company will give prior written notice of each such change to the Lender or (b)
or if not so required, are in conformity with generally accepted accounting
principles and have the prior written approval of the Lender which approval
shall not be unreasonably withheld.
7.13 No Sales, Leases or Dispositions of Property. Except in the
ordinary course of its business, sell, lease, transfer or otherwise dispose of
all or any material portion or portions or integral part of its properties or
assets, whether now owned or hereafter acquired (whether in a single transaction
or in a series of transactions), or enter into any arrangement, directly or
indirectly, with any person, whereby it shall sell or transfer any of its
properties or assets, whether now owned or hereafter acquired, and thereafter
rent or lease as lessee such property or any part thereof which it intends to
use for substantially the same purpose or purposes as the property sold or
transferred.
7.14 Changes in Business or Assets. Make any substantial change (a) in
the nature of its business as now conducted, or (b) in the use of its property
as now used and proposed to be used.
7.15 Changes in Office or Inventory Location. Change the address and/or
location of its chief executive office or principal place of business or the
place where it keeps its books and records or its inventory to a location
outside the State of Florida unless, prior to any such change, the Company shall
execute and cause to be executed such additional agreements and/or lien
instruments as the Lender may reasonably request to conform with the provisions
hereof and the transactions and perfected Liens in the Collateral contemplated
under this Agreement and the other Loan Documents.
7.16 Special Negative Covenants Concerning Collateral.
(a) Amend or modify, or waive any of the terms and conditions of,
or settle or compromise any claim in respect of, any Pledged Mortgages
or Pledged Securities.
(b) Sell, assign, transfer or otherwise dispose of, or grant any
option with respect to, or pledge or otherwise encumber (except
pursuant to this Agreement or as permitted herein) any of the
Collateral or any interest therein.
37
(c) Make any compromise, adjustment or settlement in respect of
any of the Collateral or accept other than cash in payment or
liquidation of the Collateral.
7.17 No Indebtedness. Except for the Indebtedness described in Exhibit
"B" hereto, without the prior written consent of Lender, incur, create, assume
or guarantee or in any manner become or be liable or permit to be outstanding
any Indebtedness (including obligations for the payment of rentals other than
provided for herein) nor guarantee any contract or other obligation, and will
not in any way become or be responsible for obligations of any Person, whether
by agreement to purchase the Indebtedness of any other Person or agreement for
the furnishing of funds to any other Person through the purchase of goods,
supplies or services (or by way of stock purchase, capital contribution, advance
or loan) for the purpose of paying or discharging the Indebtedness of any other
Person or otherwise, except that the foregoing restrictions shall not apply to:
(a) the Obligations.
(b) liabilities for taxes, assessments, governmental charges or
levies which are not yet due and payable or which are being contested
in good faith by appropriate proceedings diligently conducted if
reserves adequate under generally accepted accounting principles have
been established therefor.
(c) endorsements of negotiable instruments for collection in the
ordinary course of business.
(d) Indebtedness incurred in the ordinary course of business in
connection with normal trade or business obligations which are payable
within 90 days of the occurrence thereof, provided, however, that no
Indebtedness shall be incurred by the Company to any Affiliate other
than in the ordinary course of business and upon substantially the same
or better terms as it could obtain in an arm's length transaction with
a Person who is not an Affiliate.
(e) Indebtedness of less than $50,000.00, in the aggregate,
incurred in the ordinary course of business.
(f) Indebtedness incurred in the ordinary course of business for
the purpose of leasing office space or equipment to be used in the
conduct of the business of the Company.
7.18 Management of the Company. Permit any change in the executive
officers of the Company. For the purposes of the foregoing negative covenant,
executive officers of the Company shall include Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx
X. Xxxx, Xxxxxx X. Xxxxxxxx, Xxxx X. Xxxxx, and Xxxx Xxxxxx.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the following
conditions or events shall be an event of default ("Event of Default"):
38
(a) Failure to pay the principal of any Advance when due, whether
at stated maturity, by acceleration, or otherwise; or failure to pay
any installment of interest on any Advance or any other amount due
under this Agreement within ten (10) days after the due date; or
failure to pay, beyond any applicable grace period, the principal or
interest on any other indebtedness due the Lender; or
(b) Failure of the Company to pay any sums due and payable under
the Master Repurchase Agreement or Company's breach or default of any
term, condition, covenant, or agreement of the Master Repurchase
Agreement; or
(c) Failure of the Company or any of its Subsidiaries to pay, or
any default in the payment of any principal or interest on, any other
Indebtedness or in the payment of any contingent obligation beyond any
period of grace provided; or breach or default with respect to any
other material term of any other Indebtedness of any loan agreement,
mortgage, indenture or other agreement relating thereto, if the effect
of such failure, default or breach is to cause, or to permit the holder
or holders thereof (or a trustee on behalf of such holder or holders)
to cause, Indebtedness of the Company or its Subsidiaries iv the
aggregate amount of Fifty Thousand Dollars ($50,000.00) or more to
become or be declared due prior to its stated maturity (upon the giving
or receiving of notice, lapse of time, both, or otherwise) or failure
of the Company to comply with Section 6.11 hereof, or
(d) Any of the Company's representations or warranties made or
deemed made herein or in any other Loan Document, or in any statement
or certificate at any time given by the Company in writing pursuant
hereto or thereto shall be inaccurate or incomplete in any materially
adverse respect on the date as of which made or deemed made; or
(e) The Company shall default in the performance of or compliance
with any term or covenant contained in this Agreement and such default
shall not have been remedied or waived within thirty (30) days after
receipt of notice from the Lender of such default other than those
referred to above in Subsections 8.1 (a), 8.1 (b) or 8.1 (c); or
(f) (1) A court having jurisdiction shall enter a decree or order
for relief in respect of the Company or any of Company's Subsidiaries
in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect in respect of the Company
or any of Company's Subsidiaries, which decree or order is not stayed;
or a filing of an involuntary case under any applicable bankruptcy,
insolvency or other similar law in respect of the Company or any of
Company's Subsidiaries has occurred; or (2) any other similar relief
shall be granted under any applicable federal or state law; or a decree
or order of a court having jurisdiction for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer
having similar powers over the Company or any of Company's
Subsidiaries, or over all or a substantial part of their respective
property, shall have been entered; or the involuntary appointment of an
interim receiver, trustee or other custodian of the Company or any of
Company's Subsidiaries, for all or a substantial part of their
respective property; or the issuance of a warrant of attachment,
execution or similar process against any substantial part of the
property of the Company or any of Company's Subsidiaries, and the
continuance of any such events in Subsections (1) and (2) above for
39
sixty (60) days unless dismissed or discharged (provided, however, that
Lender shall have no obligation to make Advances during said sixty
(60) day period); or
(g) The Company or any of Company's Subsidiaries shall have an
order for relief entered with respect to it or commence a voluntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall consent to the entry of an order
for relief in an involuntary case, or to the conversion to an
involuntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; the making by
the Company or any of Company's Subsidiaries of any assignment for the
benefit of creditors; or the failure of the Company or any of Company's
Subsidiaries, or the admission, by any of them of its inability, to pay
its debts as such debts become due; or
(h) Any money judgment, writ or warrant of attachment, or similar
process involving in any case an amount in excess of Fifty Thousand
Dollars ($50,000.00) shall be entered or filed against the Company or
any of its Subsidiaries or any of their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of
thirty (30) days or in any event no later than five (5) days prior to
the date of any proposed sale thereunder; or
(i) Any order, judgment or decree shall be entered against the
Company decreeing the dissolution or split up of the Company and such
order shall remain undischarged or unstayed for a period in excess of
twenty (20) days (provided, however, Lender shall not be obligated to
make Advances during said 20 day period); or
(j) Any Plan maintained by the Company or any of Company's
Subsidiaries shall be terminated within the meaning of Title IV of
ERISA or a trustee shall be appointed by ail appropriate United States
district court to administer any Plan, or the Pension Benefit Guaranty
Corporation (or any successor thereto) shall institute proceedings to
terminate any Plan or to appoint a trustee to administer any Plan if as
of the date thereof the Company's or any Subsidiary's liability (after
giving effect to the tax consequences thereof) to the Pension Benefit
Guaranty Corporation (or any successor thereto) for unfunded guaranteed
vested benefits under the Plan exceeds the then current value of assets
accumulated in such Plan by more than Fifty Thousand Dollars
($50,000.00) (or in the case of a termination involving the Company or
any of Company's Subsidiaries as a "substantial employer" (as defined
in Section 4001(a)(2) of ERISA) the withdrawing employer's
proportionate share of such excess shall exceed such amount); or
(k) The Company or any of Company's Subsidiaries as employer under
a Multiemployer Plan shall have made a complete or partial withdrawal
from such Multiemployer Plan and the plan sponsor of such Multiemployer
Plan shall have notified such withdrawing employer that such employer
has incurred a withdrawal liability in all annual amount exceeding
Fifty thousand Dollars ($50,000.00); or
(1) The Company shall purport to disavow its obligations hereunder
or shall contest the validity or enforceability hereof, or the Lender's
security interest on any portion
40
of the Collateral shall become unenforceable or otherwise impaired;
provided that, subject to the Lender's approval, no Event of Default
shall occur as a result of such impairment if all Advances made against
any such Collateral shall be paid in full within ten (10) days of the
date of such impairment; or
(m) The Company dissolves or terminates its existence, or
discontinues its usual business; or
(n) Any court shall find or rule, or the Company shall assert or
claim, (1) that the Lender does not have a valid, perfected,
enforceable Lien and security interest in the Collateral of the
priority as represented in this Agreement or in any other Loan
Document, or (ii) that this Agreement or any of the Loan Documents does
not or will not constitute the legal, valid, binding and enforceable
obligations of the party or parties (as applicable) thereto, or (iii)
that any Person has a conflicting or adverse Lien, claim or right in,
or with respect to, the Collateral and the Company is unable within 10
days to have such finding or ruling reversed or to have such adverse
Lien, claim or right removed; or
(o) The Company shall have concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made
any transfer of its property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid; or
shall have suffered or permitted, while insolvent, any creditor to
obtain a Lien upon any of its property through legal proceedings or
distraint or other process which is not vacated within 60 days from the
date thereof, or
(p) There shall be a material adverse change in the financial
condition, business or operations of the Company.
8.2 Remedies.
(a) Upon the occurrence of any Event of Default described in
Sections 8.1 (f) or 8.1 (g), the Commitment shall be terminated and
all Obligations of the Company shall automatically become due and
payable, without presentment for payment, demand, notice of
non-payment, protest, notice of protest, notice of intent to
accelerate, notice of acceleration, maturity, or any other notices or
requirements of any kind of Lender to the Company or any other Person
liable thereon or with respect thereto, all of which are hereby
expressly waived by the Company.
(b) Upon the occurrence of any Event of Default, other than those
described in Sections 8.1 (f) or 8.1 (g), the Lender may, by written
notice to the Company, terminate the Commitment and/or declare all
Obligations of the Company to be immediately due and payable, whereupon
the same shall forthwith become due and payable, together with all
accrued and unpaid interest thereon, and the obligation of the Lender
to make any Advances shall thereupon terminate.
41
(c) Upon the occurrence of any Event of Default, the Lender may
also do any of the following:
(1) Foreclose upon or otherwise enforce its security interest
in and Lien on the Collateral to secure all payments and
performance of Obligations of the Company in any manner permitted
by law or provided for hereunder.
(2) Notify all obligors in respect of the Collateral that the
Collateral has been assigned to the Lender and that all payments
thereon are to be made directly to the Lender or such other party
as may be designated by the Lender; settle, compromise, or release,
in whole or in part, any amounts owing on the Collateral, any such
obligor or any Investor or any portion of the Collateral, on terms
acceptable to the Lender; enforce payment and prosecute any action
or proceeding with respect to any and all Collateral; and where any
such Collateral is in default, foreclose on and enforce security
interests in, such Collateral by any available judicial procedure
or without judicial process and sell property acquired as a result
of any such foreclosure.
(3) Act, or contract with a third party to act, as servicer or
subservicer of each item of Collateral requiring servicing and
perform all obligations required in connection with Purchase
Commitments, such third party's fees to be paid by the Company.
(4) Require the Company to assemble the Collateral and/or books
and records relating thereto and make such available to the Lender
at a place to be designated by the Lender.
(5) Enter onto property where any Collateral or books and
records relating thereto are located and take possession thereof
with or without judicial process.
(6) Prior to the disposition of the Collateral, prepare it for
disposition in any manner and to the extent the Lender deems
appropriate.
(7) Exercise all rights and remedies of a secured creditor
under the Uniform Commercial Code of Texas or other applicable law,
including, but not limited to, selling or otherwise disposing of
the Collateral, or any part thereof, at one or more public or
private sales, whether or not such Collateral is present at the
place of sale, for cash or credit or future delivery, on such terms
and in such manner as the Lender may determine, including, without
limitation, sale pursuant to any applicable Purchase Commitment. If
notice is required under such applicable law, the Lender will give
the Company not less than ten (10) days' notice of any such public
sale or of the date after which private sale may be held. The
Company agrees that ten (10) days' notice shall be reasonable
notice. The Lender may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale,
and such sale may be made at any time or place to which the same
may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the
42
Collateral so sold may be retained by the Lender until the selling
price is paid by the purchaser thereof, but the Lender shall not
incur any liability in case of the failure of such purchaser to
take up and pay for the Collateral so sold and, in case of any such
failure, such Collateral may again be sold upon like notice. The
Lender may, however, instead of exercising the power of sale herein
conferred upon it, proceed by a suit or suits at law or in equity
to collect all amounts due upon the Collateral or to foreclose the
pledge and sell the Collateral or any portion thereof under a
judgment or decree of a court or courts of competent jurisdiction,
or both.
(8) Proceed against the Company on the Note.
(d) The Lender shall incur no liability as a result of the sale
or other disposition of the Collateral, or any part thereof, at any
public or private sale or disposition. The Company hereby waives (to
the extent permitted by law) any claims it may have against the Lender
arising by reason of the fact that the price at which the Collateral
may have been sold at such private sale was less than the price which
might have been obtained at a public sale or was less than the
aggregate amount of the outstanding Advances and the unpaid interest
accrued thereon, even if the Lender accepts the first offer received
and does not offer the Collateral to more than one offeree and none of
the actions described herein shall render Lender's disposition of the
Collateral in such a manner as commercially unreasonable.
(e) The Company specifically waives (to the extent permitted by
law) any equity or right of redemption, all rights of redemption, stay
or appraisal which the Company has or may have under any rule of law or
statute now existing or hereafter adopted, and any right to require the
Lender to (1) proceed against any Person, (2) proceed against or
exhaust any of the Collateral or pursue its rights and remedies as
against the Collateral in any particular order, or (3) pursue any
other remedy in its power. The Lender shall not be required to take
any steps necessary to preserve any rights of the Company against
holders of mortgages prior in lien to the Lien of any Mortgage included
in the Collateral or to preserve rights against prior parties.
(f) The Lender may, but shall not be obligated to, advance any sums
or do any act or thing necessary to uphold and enforce the Lien and
priority of, or the security intended to be afforded by, any Mortgage
included in the Collateral, including, without limitation, payment of
delinquent taxes or assessments and insurance premiums. All advances,
charges, costs and expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Lender in exercising any right,
power or remedy conferred by this Agreement, or in the enforcement
hereof, together with interest thereon, at the Default Rate, from the
time of payment until repaid, shall become a part of the principal
balance outstanding hereunder and under the Note.
(g) No failure on the part of the Lender to exercise, and no delay
in exercising, any right, power or remedy provided hereunder, at law
or in equity shall operate as a waiver thereof, nor shall any single or
partial exercise by the Lender of any right, power or remedy provided
hereunder, at law or in equity preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. Without
intending to limit the foregoing, all
43
defenses based on the statute of limitations are hereby waived by
the Company to the extent permitted by law. The remedies herein
provided are cumulative and are not exclusive of any remedies provided
at law or in equity.
8.3 Application of Proceeds. The proceeds of any sale, disposition or
other enforcement of the Lender's security interest in all or any part of the
Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses of such sale or
enforcement, including reasonable compensation to the Lender's agents
and counsel, and all expenses, liabilities and advances made or
incurred by or on behalf of the Lender in connection therewith;
Second, to the payment of any other amounts due (other than
principal and interest) under the Note or this Agreement;
Third, to the payment of interest accrued and unpaid on the Note;
Fourth, to the payment of the outstanding principal balance of the
Note; and
Finally, to the payment to the Company, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
If the proceeds of any such sale, disposition or other enforcement are
insufficient to cover the costs and expenses of such sale, as aforesaid, and the
payment in full of all Obligations of the Company, the Company shall remain
liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby appointed
the attorney-in-fact of the Company, with full power of substitution, for the
purpose of carrying out the provisions hereof and taking any action and
executing any instruments which the Lender may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, the Lender shall have the right and power to give notices of its
security interest in the Collateral to any Person, either in the name of the
Company or in its own name, to endorse all Pledged Mortgages or Pledged
Securities payable to the order of the Company, to change or cause to be changed
the book-entry registration or name of subscriber or Investor on any Pledged
Security, or to receive, endorse and collect all checks made payable to the
order of the Company representing any payment on account of the principal of or
interest on, or the proceeds of sale of, any of the Pledged Mortgages or Pledged
Securities and to give full discharge for the same.
8.5 Right of Set-Off. If the Company shall default in the payment of
the Note, any interest accrued thereon, or any other sums which may become
payable hereunder when due, or in the performance of any of its other
Obligations under this Agreement, the Lender, shall have the right, at any time
and from time to time, without notice, to set-off and to appropriate or apply
any and all property or indebtedness of any kind at any time held or owing by
the Lender to or for the credit of the account of the Company (excluding any
monies held by the Company in trust for third parties) against and on account
of the Obligations, irrespective of whether or not the Lender shall have made
any demand hereunder and whether or not said Obligations shall have matured;
provided,
44
however, that the Lender shall not be allowed to set-off against funds in
accounts with respect to which (i) the Company is a trustee or an escrow agent
in respect of bona fide third parties other than Affiliates, and (ii) such trust
or escrow arrangement was so denominated at the time of the creation of such
account.
9. NOTICES.
All notices, demands, consents, requests and other communications
required or permitted to be given or made hereunder (collectively, "Notices")
shall, except as otherwise expressly provided hereunder, be in writing and shall
be delivered in person or mailed, first class, return receipt requested, postage
prepaid, or delivered by overnight courier, addressed to the respective parties
hereto at their respective addresses hereinafter set forth or, as to any such
party, at such other address as may be designated by it in a Notice to the
other. All Notices shall be conclusively deemed to have been properly given or
made when duly delivered, in person or by overnight courier, or if mailed on the
third Business Day after being deposited in the mails, addressed as follows:
If to the Company: First Mortgage Network, Inc.
Attn: Xxxx Xxxxxx
0000 Xxxxxxx Xxxxxxxxx, 0xx
Xxxxx Xxxxxxxxxx, Xxxxxxx 00000
Fax No: (000) 000-0000
with a copy to: Xxxxx & Xxxxxx
Attn: Xxxxxx X. Xxxxxx, Xx.
The Xxxxxxxxx Building
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Fax No: (000) 000-0000
If to the Lender: Bank United
Attn: Xxxx X. Xxxx
Regional Director, Mortgage Banker Financing
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Fax No: (000) 000-0000
with a copy to: Bank United
Attn: Xxxxx Xxxxxxxx
Managing Director, Mortgage Banker Financing
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax No: (000) 000-0000
45
and: Bank United
Attn: Xxxxxxxx X. Xxxxxxx
General Counsel
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Fax No: (000) 000-0000
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Company shall: (a) pay all out-of-pocket costs and expenses of the Lender,
including, without limitation, reasonable attorneys' fees not to exceed
$3,000.00 plus costs and expenses of counsel, in connection with the
preparation, negotiation, documentation, enforcement and administration of this
Agreement, the Note, and other Loan Documents and the making and repayment of
the Advances and the payment of interest thereon; provided, however, costs and
expenses of Lender for attorneys fees in connection with the preparation,
negotiation and documentation of the lending transaction evidenced by this
Agreement shall not exceed $3,000.00 plus the reasonable expenses of Lender's
counsel; (b) pay, and hold the Lender and any holder of the Note harmless from
and against, any and all present and future stamp, documentary and other similar
taxes with respect to the foregoing matters and save the Lender and the holder
or holders of the Note harmless from and against any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes; (c)
INDEMNIFY, PAY AND HOLD HARMLESS THE LENDER AND ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES OR AGENTS AND ANY SUBSEQUENT HOLDER OF THE NOTE FROM AND AGAINST ANY
AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER (THE "INDEMNIFIED
LIABILITIES") (INCLUDING, WITHOUT LIMITATION, INDEMNIFIED LIABILITIES
RESULTING, IN WHOLE OR IN PART, FROM LENDER'S OWN NEGLIGENCE OR STRICT
LIABILITY) WHICH MAY BE IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST THE LENDER
OR SUCH HOLDER IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE
NOTE, OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY TO THE EXTENT THAT ANY SUCH INDEMNIFIED LIABILITIES RESULT (DIRECTLY
OR INDIRECTLY) FROM ANY CLAIMS MADE, OR ANY ACTIONS, SUITS OR PROCEEDINGS
COMMENCED OR THREATENED, BY OR ON BEHALF OF ANY CREDITOR (EXCLUDING THE LENDER
AND THE HOLDER OR HOLDERS OF THE NOTE), SECURITY HOLDER, SHAREHOLDER, CUSTOMER
(INCLUDING, WITHOUT LIMITATION, ANY PERSON HAVING ANY DEALINGS OF ANY KIND WITH
THE COMPANY), TRUSTEE, DIRECTOR, OFFICER, EMPLOYEE AND/OR AGENT OF THE COMPANY
ACTING IN SUCH CAPACITY, THE COMPANY OR ANY GOVERNMENTAL REGULATORY BODY OR
AUTHORITY. THE FOREGOING INDEMNITY SHALL NOT APPLY TO THE EXTENT THE INDEMNIFIED
LIABILITIES RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
LENDER OR LENDER'S OWN VIOLATIONS OF REGULATIONS APPLICABLE TO IT. THE
AGREEMENT OF THE COMPANY CONTAINED IN THIS SUBSECTION (C) SHALL SURVIVE THE
EXPIRATION OR
46
TERMINATION OF THIS AGREEMENT AND THE PAYMENT IN FULL OF THE NOTE. ATTORNEYS'
FEES AND DISBURSEMENTS INCURRED IN ENFORCING, OR ON APPEAL FROM, A JUDGMENT
PURSUANT HERETO SHALL BE RECOVERABLE SEPARATELY FROM AND IN ADDITION TO ANY
OTHER AMOUNT INCLUDED IN SUCH JUDGMENT, AND THIS CLAUSE IS INTENDED TO BE
SEVERABLE FROM THE OTHER PROVISIONS OF THIS AGREEMENT AND TO SURVIVE AND NOT BE
MERGED INTO SUCH JUDGMENT.
11. MISCELLANEOUS.
11.1 Terms Binding Upon Successors, Survival of Representations. The
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of" the parties hereto and their respective successors and assigns. All
representations, warranties, covenants and agreements herein contained on the
part of the Company shall survive the making of any Advance and the execution of
the Note, and shall be effective so long as the Commitment is outstanding
hereunder or there remain any Obligations of the Company hereunder or under the
Note to be paid or performed.
11.2 Assignment. This Agreement may not be assigned by the Company.
The Lender may assign, at any time, in whole or in part, its rights and delegate
its obligations under this Agreement and the other Loan Documents, along with
the Lender's security interest in any or all of the Collateral, and any assignee
thereof may enforce this Agreement and the other Loan Documents, and such
security interest.
11.3 Amendments. Except as otherwise provided in this Agreement, this
Agreement may not be amended, modified or supplemented unless such amendment,
modification or supplement is set forth in a writing signed by the parties
hereto.
11.4 Governing-Law. This Agreement and the other Loan Documents shall
be governed by the laws of the State of Texas, without reference to its
principles of conflicts of laws.
11.5 Participations. The Lender may at any time sell, assign or grant
participations in, or otherwise transfer to any other Person (a "Participant"),
all or part of the Obligations of the Company under this Agreement. Without
limitation of the exclusive right of the Lender to collect and enforce such
Obligations, the Company agrees that each disposition will give rise to a
debtor-creditor relationship of the Company to the Participant, and the Company
authorizes each Participant, upon the occurrence of an Event of Default, to
proceed directly by right of setoff, banker's lien, or otherwise, against any
assets of the Company which may be in the hands of such Participant. The Company
authorizes the Lender to disclose to any prospective Participant and any
Participant any and all information in the Lender's possession concerning the
Company, this Agreement and the Collateral.
11.6 Relationship of the Parties. This Agreement provides for the
making of Advances by the Lender, in its capacity as a lender, to the Company,
in its capacity as a borrower, and for the payment of interest, repayment of
principal by the Company to the Lender, and for the payment of certain fees by
the Company to the Lender. The relationship between the Lender and the Company
47
is limited to that of creditor/secured party, on the one hand, and debtor, on
the other hand. The provisions herein for compliance with financial covenants
and delivery of financial statements are intended solely for the benefit of the
Lender to protect its interests as lender in assuring payments of interest and
repayment of principal and payment of certain fees, and nothing contained in
this Agreement shall be construed as permitting or obligating the Lender to act
as a financial or business advisor or consultant to the Company, as permitting
or obligating the Lender to control the Company or to conduct the Company's
operations, as creating any fiduciary obligation on the part of the Lender to
the Company, or as creating any joint venture, agency, or other relationship
between the parties hereto other than as explicitly and specifically stated in
this Agreement. The Company acknowledges that it has had the opportunity to
obtain the advice of experienced counsel of its own choosing in connection with
the negotiation and execution of this Agreement and to obtain the advice of such
counsel with respect to all matters contained herein, including, without
limitation, the provision for waiver of trial by jury. The Company further
acknowledges that it is experienced with respect to financial and credit matters
and has made its own independent decisions to apply to the Lender for credit and
to execute and deliver this Agreement.
11.7 Severability. If any provision of this Agreement shall be declared
to be illegal or unenforceable in any respect, such illegal or unenforceable
provision shall be and become absolutely null and void and of no force and
effect as though such provision were not in fact set forth herein, but all other
covenants, terms, conditions and provisions hereof shall nevertheless continue
to be valid and enforceable.
11.8 Usury. It is the intent of Lender and the Company in the
execution and performance of this Agreement and the Note or any Loan Document to
remain in strict compliance with Applicable Law from time to time in effect. In
furtherance thereof, Lender and the Company stipulate and agree that none of the
terms and provisions contained in the Note, this Agreement or any Loan Document
shall ever be construed to create a contract to pay for the use, forbearance or
detention of money with interest at a rate or in an amount in excess of the
Maximum Rate or amount of interest permitted to be charged under Applicable Law.
For purposes of this Agreement, the Note and any other Loan Document, "interest"
shall include the aggregate of all charges which constitute interest under
Applicable Law that are contracted for, taken, charged, reserved, or received
under this Agreement, the Note or any other Loan Document. The Company shall
never be required to pay unearned interest or interest at a rate or in an
amount in excess of the Maximum Rate or amount of interest that may be lawfully
charged under Applicable Law, and the provisions of this paragraph shall control
over all other provisions of this Agreement and the Note or any Loan Document,
which may be in actual or apparent conflict herewith. If the Note is prepaid, or
if the maturity of the Note is accelerated for any reason, or if under any other
contingency the effective rate or amount of interest which would otherwise be
payable under the Note would exceed the Maximum Rate or amount of interest
Lender or any other holder of the Note is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event Lender or any holder of
the Note shall charge, contract for, take, reserve or receive monies that are
deemed to constitute interest which would, in the absence of this provision,
increase the effective rate or amount of interest payable under the Note to a
rate or amount in excess of that permitted to be charged, contracted for, taken,
reserved or received under Applicable Law then in effect, then the principal
amount of the Note or the amount of interest which would otherwise be payable
under the Note or both shall be reduced to the amount allowed under Applicable
Law as now or hereinafter construed by the courts having jurisdiction, and
48
all such moneys so charged, contracted for, taken, reserved or received that are
deemed to constitute interest in excess of the Maximum Rate or amount of
interest permitted by Applicable Law shall immediately be returned to or
credited to the account of the Company upon such determination. Lender and the
Company further stipulate and agree that, without limitation of the foregoing,
all calculations of the rate or amount of interest contracted for, charged,
taken, reserved or received under the Note which are made for the purpose of
determining whether such rate or amount exceeds the Maximum Rate, shall be made
to the extent not prohibited by Applicable Law, by amortizing, prorating,
allocating and spreading during the period of the full stated term of the Note,
all interest at any time contracted for, charged, taken, reserved or received
from the Company or otherwise by Lender or any other holder of the Note.
11.9 Consent to Jurisdiction. Subject to the provisions of Section
11.10 of this Agreement, the Company hereby agrees that any action or proceeding
under this Agreement, the Note or any document delivered pursuant hereto may be
commenced against it in any court of competent jurisdiction within the State of
Texas, by service of process upon the Company by first class registered or
certified mail, return receipt requested, addressed to the Company at its
address last known to the Lender. The Company agrees that any such suit, action
or proceeding arising out of or relating to this Agreement or any other such
document may be instituted in Xxxxxx County, State District Court or in the
United States District Court for the District of Texas at the option of the
Lender; and the Company hereby waives any objection to the venue, or any claim
as to inconvenient forum, of any such suit, action or proceeding. Nothing herein
shall affect the right of the Lender to accomplish service of process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction or court.
11.10 Arbitration. To the maximum extent not prohibited by law, any
controversy, dispute or claim arising out of, in connection with, or relating to
the Commitment or the Loan Documents or any transaction provided for therein,
including but not limited to any claim based on or arising from an alleged tort
or an alleged breach of any agreement contained in any of the Loan Documents,
shall, at the request of any party to the Loan Documents (either before or after
the commencement of judicial proceedings), be settled by arbitration pursuant to
Title 9 of the United States Code, which the parties hereto acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). If Title 9 of the United States Code is inapplicable to any such claim,
dispute or controversy for any reason, such arbitration shall be conducted
pursuant to the Texas General Arbitration Act and in accordance with the
Commercial Arbitration Rules of the AAA. In any such arbitration proceeding: (i)
all statutes of limitations which would otherwise be applicable shall apply; and
(ii) the proceeding shall be conducted in Houston, Texas, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a
panel of three arbitrators if the amount in controversy is over $1,000,000.00.
All arbitrators shall be selected by the process of appointment from a panel
pursuant to Section 13 of the AAA Commercial Arbitration Rules and each
arbitrator shall be either an active attorney, a mortgage banker or retired
judge with an AAA acknowledged expertise in the subject matter of the
controversy, dispute or claim. Any award rendered in any such arbitration
proceeding shall be final and binding, and judgment upon any such award may be
entered in any court having jurisdiction,
49
If any party to any Loan Document files a proceeding in any court to
resolve any such controversy, dispute or claim, such action shall not constitute
a waiver of the right of such party or a bar to the right of any other party to
seek arbitration under the provisions of this Section of that or any other
claim, dispute or controversy, and the court shall, upon motion of any party to
the proceeding, direct that such controversy, dispute or claim be arbitrated in
accordance with this Section.
Notwithstanding any of the foregoing, the parties hereto agree that no
arbitrator or panel of arbitrators shall possess or have the power to (i) assess
punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator
may construe ambiguous terms) any Loan Document, (iii) enter judgment on the
debt, (iv) exercise equitable powers or issue or enter any equitable remedies
with respect to matters submitted to arbitration, or (v) allow discovery of
attorney/client privileged information. The Commercial Arbitration Rules of the
AAA are hereby modified to this extent for the purpose of arbitration of any
dispute, controversy or claim arising out of, in connection with, or relating to
the Loan or any Loan Document. The parties hereby further agree to waive, each
to the other, any claims for punitive damages and agree neither an arbitrator
nor any court shall have the power to assess such damages.
No provision of, or the exercise of any rights under, this Section
shall limit or impair the right of any party to any Loan Document before, during
or after any arbitration proceeding to: (i) exercise self-help remedies such as
setoff or repossession; (ii) foreclose judicially or otherwise) any Lien on or
security interest in any real or personal Collateral; or (iii) obtain emergency
relief from a court of competent jurisdiction to prevent the dissipation,
damage, destruction, transfer, hypothecation, pledging or concealment of assets
or of Collateral securing any Indebtedness, obligation or guaranty referenced in
any Loan Document. Such emergency relief may be in the nature of, but is not
limited to: pre-judgment attachments, garnishments, sequestrations, appointments
of receivers, or other emergency injunctive relief to preserve the status quo,
11.11 ADDITIONAL INDEMNITY. IN ADDITION TO THE INDEMNITY PROVIDED IN
SECTION 10, THE COMPANY SHALL INDEMNIFY AND HOLD THE LENDER, ITS SUCCESSORS,
ASSIGNS, AGENTS, AND EMPLOYEES, HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES, FINES, PENALTIES, AND
LIABILITIES, INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS, ARISING
OUT OF, CONNECTED WITH, OR RESULTING FROM (A) THE OPERATION OF THE COMPANY'S
BUSINESSES, (B) THE LENDER'S PRESERVATION OR ATTEMPTED PRESERVATION OF
COLLATERAL, AND (C) ANY FAILURE OF THE SECURITY INTERESTS AND LIENS IN THE
COLLATERAL GRANTED TO THE LENDER PURSUANT TO THIS AGREEMENT TO BE OR TO REMAIN
PERFECTED OR TO HAVE THE PRIORITY AS CONTEMPLATED THERE IN 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 COMPANY SHALL, AT ITS OWN COST AND
EXPENSE,
50
DEFEND OR CAUSE TO BE DEFENDED ANY AND ALL SUCH ACTIONS OR SUITS THAT MAY BE
BROUGHT AGAINST THE LENDER AND, IN ANY EVENT, SHALL SATISFY, PAY, AND DISCHARGE
ANY AND ALL JUDGMENTS, AWARDS, PENALTIES, COSTS, AND FINES THAT MAY BE RECOVERED
AGAINST THE LENDER IN ANY SUCH ACTION, PLUS ALL ATTORNEYS' FEES AND COSTS
RELATED THERETO TO THE EXTENT PERMITTED BY APPLICABLE LAW; PROVIDED, HOWEVER,
THAT THE LENDER SHALL GIVE THE COMPANY (TO THE EXTENT THE LENDER SEEKS
INDEMNIFICATION THEREFOR FROM THE COMPANY UNDER THIS SECTION 11.11) 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 COMPANY, WITHOUT FIRST
GIVING NOTICE TO THE COMPANY OF THE LENDER'S DESIRE TO SETTLE AND OBTAINING THE
CONSENT OF THE COMPANY TO THE SAME, WHICH CONSENT THE COMPANY HEREBY AGREES NOT
TO UNREASONABLY WITHHOLD. ALL OBLIGATIONS OF THE COMPANY UNDER THIS SECTION
11.11 SHALL SURVIVE THE PAYMENT OF THE NOTE AND THE OBLIGATIONS.
11.12 No Waivers Except in Writing. No failure or delay on the part of
the Lender in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. No notice to or demand on
the Company or any other Person in any case shall entitle the Company or such
other Person to any other or further notice or demand in similar or other
circumstances.
11.13 Waiver of Jury Trial. Company hereby expressly waives any right
to a trial by jury in any action or legal proceeding arising out of or relating
to this Agreement or any other Loan Document for the transactions contemplated
hereby or thereby.
11.14 Multiple Counterparts. This Agreement may be executed in any
number of counterparts, all of which, taken together, shall constitute one and
the same instrument.
11.15 No Third Party Beneficiaries. This Agreement is for the sole and
exclusive benefit of the Company and Lender. This Agreement does not create, and
is not intended to create, any rights in favor of or enforceable by any other
Person. This Agreement may be amended or modified by the agreement of the
Company and Lender, without any requirement or necessity for notice to, or the
consent of or approval of any other Person.
11.16 REALEASE OF LENDER LIABILITY. TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW FROM TIME TO TIME IN EFFECT, THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY (AND AFTER IT HAS CONSULTED WITH ITS OWN ATTORNEY)
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT NO CLAIM MAY BE MADE BY THE COMPANY
AGAINST THE LENDER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES,
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ATTORNEYS, ACCOUNTANTS, AGENTS OR INSURERS, OR ANY OF ITS OR THEIR SUCCESSORS
AND ASSIGNS, FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM IS BASED ON
CONTRACT OR TORT OR DUTY IMPOSED BY LAW) ARISING OUT OF, OR RELATED TO, THE
TRANSACTIONS CONTEMPLATED BY ANY OF THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN
DOCUMENTS, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR
THEREWITH. IN FURTHERANCE OF THE FOREGOING, THE COMPANY HEREBY WAIVES, RELEASES
AND AGREES NOT TO XXX UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT
ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
11.17 Entire Agreement; Amendment. This Agreement, the Note, and the
other Loan Documents referred to herein embody the final, entire Agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof. The provisions of this Agreement and the other Loan
Documents to which the Company is a party may be amended or waived only by an
instrument in writing signed by the parties hereto.
11.18 NO ORAL AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
FIRST MORTGAGE NETWORK, INC.,
a Florida corporation
By:/s/ XXXX XXXXXX
-----------------------------
XXXX XXXXXX, Chairman and CEO
BANK UNITED
By:/s/ XXXX XXXX
------------------------------
XXXX XXXX, Regional Director,
Mortgage Banker Financing
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EXHIBITS:
--------
A - Advance Request
B - Existing Company Indebtedness
C - Procedures and Documentation for Warehousing Single-family Mortgage
Loans
D - Shipping Instructions
E - Trust Receipt
F - Officer's Certificate
G - Subsidiaries
H - Litigation
I - Trade Names
J - Secretary's Certificate
K - Bailee Letter
L - Investors
M - Legal Opinion
N - Note
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STATE OF FLORIDA ss.
ss.
COUNTY OF BROWARD ss.
The foregoing instrument was acknowledged before me this 17th day of
August, 1998, by XXXX XXXXXX, Chairman and CEO of FIRST MORTGAGE NETWORK, INC.,
a Florida corporation, on behalf of the corporation.
OFFICIAL NOTARY SEAL /s/ XXXXX XXXXXXXX
XXXXX XXXXXXXX -------------------------
COMMISSION NUMBER NOTARY PUBLIC IN AND FOR
CC 685293 THE STATE OF FLORIDA
MY COMMISSION EXPIRES
OCT. 28, 2001
[SEAL]
STATE OF GEORGIA ss.
ss.
COUNTY OF _____________ ss.
The foregoing instrument was acknowledged before me this______ day of
August, 1998, by XXXX X. XXXX, Regional Director, Mortgage Banker Financing of
BANK UNITED, a federal savings bank, on behalf of federal savings bank.
_________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF GEORGIA
[SEAL]
54