WESTMARK MORTGAGE CORPORATION
SECURITY AND COLLATERAL AGENCY AGREEMENT
This Security and Collateral Agency Agreement (the "Agreement") dated as
of April 7, 1997 by and between Westmark Mortgage Corporation, a California
corporation with its mailing address at 000 XX 0xx Xxxxxx, Xxxxx 0, Xxxxxx
Xxxxx, Xxxxxxx 00000 (the "Company"), Household Financial Services, Inc., a
Delaware corporation with its mailing address at 0000 Xxxxxxx Xxxx, Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000 as secured party hereunder (the "Lender"), and First
Union Bank of North Carolina, N.A., a national banking association with its
mailing address at Xxx Xxxxx Xxxxx Xxxxxx, XX-0, Xxxxxxxxx, XX 00000-0000,
acting as custodian and agent hereunder for the Lender (said First Union Bank of
North Carolina, N.A. acting as such agent hereunder and any successor or
successors to said bank in such capacity being hereinafter referred to as the
"Collateral Agent");
WITNESSETH THAT:
WHEREAS, the Company and the Lender have entered into a Credit Agreement
dated as of April 7, 1997 (such Credit Agreement as the same may from time to
time be amended or restated from time to time being hereinafter referred to as
the "Credit Agreement") between the Company and the Lender pursuant to which the
Lender has agreed, subject to certain terms and conditions, to extend credit to
the Company; and
WHEREAS, as a condition precedent to entering into the Credit Agreement,
the Lender has required, among other things, that the Company grant to the
Lender, a lien on and security interest in certain personal property of the
Company as collateral security for such credit facilities and related
obligations, and that the Collateral Agent act as agent, bailee and custodian
for the benefit of the Lender, in each case pursuant to this Agreement and
various other instruments and documents;
Now, THEREFORE, for and in consideration of the execution and delivery
by the Lender of the Credit Agreement, and other good and valuable
consideration, receipt whereof is hereby acknowledged, the parties hereto hereby
agree as follows:
1. Terms defined in Credit Agreement. All capitalized terms used herein
without definition shall have the same meanings herein as such terms have in the
Credit Agreement.
2. Appointment of Collateral Agent. The Lender hereby appoints the
Collateral Agent to act as agent, bailee and custodian for the exclusive benefit
of the Lender with respect to the Collateral (as hereinafter defined). The
Collateral Agent hereby accepts such appointment and agrees to maintain and hold
all Collateral at any time delivered to it as agent, bailee and
custodian for the exclusive benefit of the Lender. The Collateral Agent
acknowledges and agrees that the Collateral Agent is acting and will act with
respect to the Collateral for the exclusive benefit of the Lender and is not and
shall not at any time in the future be, subject with respect to the Collateral,
in any manner whatsoever, to the direction or control of the Company except as
expressly permitted hereunder. The Collateral Agent agrees to act in accordance
with this Agreement and in accordance with any instructions properly delivered
pursuant hereto. Under no circumstances shall the Collateral Agent deliver
possession of the Collateral to the Company except in accordance with the
express terms of this Agreement or otherwise upon the written instruction of the
Lender.
3. Grant of Security Interest in the Collateral.
(a) The Company hereby grants to the Lender a security interest
in, and acknowledges and agrees that the Lender has and shaal continue to have a
continuing security interest in, any and all right, title and interest of the
Company, whether now existing or hereafter acquired or arising, in and to:
(i) Mortgage Loans. Mortgage Loans, whether now existing or
hereafter arising and however evidenced or acquired, in which the Company now
has or hereafter acquires any rights and for which the promissory notes
evidencing the same shall, from time to time, be either identified by the
Company for inclusion in the Borrowing Base or in the possession of the
Collateral Agent (or an agent or bailee acting on behalf of the Lender or
Collateral Agent) (the term "Mortgage Loans" means and includes any loans made
or acquired by the Company secured by real estate including without limitation
(i) all promissory notes, mortgages, deeds of trust or other security documents,
(ii) all guaranties and insurance policies, including without limitation, all
mortgage and title insurance policies and (iii) all right, title and interest of
the owner of such loan in any interest in any kind of property or asset relating
thereto whether real, personal or mixed, or tangible or intangible;
(ii) Take-Out Commitments. All rights (but not obligations)
of the Company under all Take-Out Commitments, now existing or hereafter
arising, covering any Mortgage Loans, all rights to deliver Mortgage Loans, to
purchasers or permanent investors pursuant thereto and all proceeds resulting
from the disposition of such Mortgage Loans, pursuant thereto (the term
"Take-Out Commitment" means with respect to any Mortgage Loan: (a) a commitment
issued in favor of and held by the Company made by another party under which
said party agrees to purchase such loan or (b) an underwriting agreement with a
third party);
(iii) Servicing Rights. All now existing or hereafter arising
rights to service, administer and/or collect Mortgage Loans (unless any such
assignment shall be prohibited) and all rights to the payment of money on
account of such servicing, administration and/or collection activities;
(iv) Receivables. Receivables, whether now existing or
hereafter arising, and however evidenced or acquired, in which the Company now
has or hereafter acquires any rights which constitute or relate to any of the
other Collateral herein described (the term "Receivables" means and includes
accounts, accounts receivable, contract rights,
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instruments, notes, drafts, acceptances, documents, chattel paper, any right of
the Company to payment for services rendered, and whether or not earned by
performance, and all other forms of obligations owing to the Company, and
general intangibles, all forms of obligations at any time owing to or held or
acquired by the Company and all of the Company's rights and claims with respect
to such obligations (including its rights to receive payments on such
obligations, all rights of the Company under any arrangements authorizing the
Company to draw checks or drafts on the bank account of the obligor in respect
of a Mortgage Loan, all rights of the Company under any other automatic payment
plan entered into by the obligor in respect of a Mortgage Loan, its rights to
all collateral and other security therefor [including, without limitation,
rights to all insurance of the foregoing as well as rights to any repossessed
goods or real property] and its rights under all guaranties thereof);
(v) Dealer Claims. All rights and claims of the Company,
whether now existing or hereafter arising, against dealers or others from whom
it acquires Mortgage Loans or liens or security interests in Mortgage Loans
(individually a "Dealer" and collectively "Dealers"), including, without
limitation, all payments (whether in cash or property), and rights to receive
payments or retain sums of money on account of or for Mortgage Loans returned,
charged back to or repurchased by the parties from whom the Company has acquired
Mortgage Loans or liens or security interests in Mortgage Loans, including
rights under letters of credit furnished to support rights and claims against
dealers (the foregoing being collectively referred to as the "Dealer Claims");
(vi) Indemnification Claims. All rights and claims of the
Company, whether now existing or hereinafter arising, against title companies or
other closing agents (collectively the "Closing Agents" and individually, a
"Closing Agent") under any and all agreements or arrangements between the
Company and a Closing Agent in connection with the closing and funding of
Mortgage Loans, (collectively, the "Indemnification Agreements"), including
without limitation, all payments and rights to receive payments or other
property thereunder;
(vii) Records and Cabinets. Supporting evidence and documents
relating to any of the above described property and agreements or arrangements
for the processing or collection thereof, including without limitation, computer
programs, disks, tapes and related electronic data processing media, together
with rights of the Company to retrieve the same from third parties, written
applications, credit information, account cards, payment records,
correspondence, notes and other evidences of indebtedness, insurance
certificates and the like, together with all books of account, ledgers, tapes
and discs and cabinets in or on which the same are reflected or maintained, all
whether now existing or hereafter arising (the "Records and Cabinets");
(viii) Remittance Account and Funding Account.
The Remittance Account (as defined in Section 9(c) hereof) and all deposit
accounts of, or for the benefit of, the Company or any Closing Agent and all
sums now or hereafter on deposit therein, into which proceeds of loans made by
the Lender to the Company are deposited.
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(ix) Proceeds and Products. All proceeds and products of the
foregoing and all insurance of the foregoing and proceeds thereof, whether now
existing or hereafter arising;
all of the foregoing being herein sometimes referred to as the "Collateral" and
the Mortgage Loans are sometimes hereinafter collectively referred to as
"Pledged Loans".
(b) This Agreement is made and given to secure, and shall secure, the
prompt payment or performance in full when due, whether by lapse of time,
acceleration or otherwise, of (i) all indebtedness, obligations and liabilities
of the Company under or in connection with or evidenced by (x) the Credit
Agreement or (y) the Notes from time to time issued by the Company thereunder or
(z) this Agreement or any other Loan Document, in each case whether now existing
or hereafter arising, due or to become due, direct or indirect, absolute or
contingent, and howsoever evidenced, held or acquired and (ii) all expenses and
charges, legal and otherwise, incurred by the Collateral Agent or the Lender in
collecting or enforcing any of such indebtedness, obligations and liabilities or
in realizing on or protecting any security therefor, including, without
limitation, the security afforded hereunder (all of such indebtedness,
obligations, liabilities, expenses and charges identified in the immediately
foregoing clauses (i) and (ii) being hereinafter referred to as the "Secured
Obligations").
4. Delivery of Collateral. (a) From time to time, the Company shall
deliver the Collateral or cause the Collateral to be delivered to the Collateral
Agent hereunder. Delivery of the Collateral consisting of Mortgage Loans shall
be effected by delivery of the Required Documents therefor. The Collateral
Agent's responsibility to review such Collateral is limited to the review steps
set forth on Exhibit A hereto, said review to be completed within five (5)
Business Days from receipt by the Collateral Agent of such Collateral. All
Collateral at any time delivered to the Collateral Agent hereunder shall be held
by the Collateral Agent in a fire resistant vault or other suitable depositary
maintained and controlled solely by the Collateral Agent, conspicuously marked
to show the interest of the Lender therein and not commingled with any other
assets or property of, or held by, the Collateral Agent.
(b) Unless and until notified to do otherwise by the Collateral Agent,
all promissory notes, mortgages, deeds of trust or other documents evidencing or
relating to Underlying Mortgage Loans shall be held by the Company subject to
the security interest of the Collateral Agent therein solely as custodian,
bailee and agent for and on behalf of the Collateral Agent and the Secured
Parties subject to the instructions of the Collateral Agent and upon being
requested to do so, the Company shall deliver all such promissory notes,
mortgages, deeds of trust and other documents to the Collateral Agent together
with such endorsements, assignments and other instruments and documents as the
Collateral Agent may request.
5. Collateral Agent's Review of Collateral. Each delivery of Mortgage
Loans shall be accompanied by a report of the Company summarizing all pertinent
information with respect to such Mortgage Loans. Upon any receipt of Required
Documents for any such item of Collateral, the Collateral Agent shall review the
same and verify that:
(a) All Required Documents relating to such item of Collateral appear
regular on their face and are in the Collateral Agent's possession; and
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(b) The statements set forth on Exhibit A hereto are accurate and
complete in all respects.
Such verification for Collateral delivered during any period covered by
a collateral report referred to in Section 11(b) below shall be set forth in
such report. If the Collateral Agent notes any exception in the review described
in subsections (a) or (b) above or questions, in its reasonable discretion, the
genuineness, regularity, propriety, or accuracy of any item of Collateral, the
Collateral Agent shall so note in its next collateral report delivered to the
Lender. In the event that the Company has been required to deliver the
Additional Required Documents with respect to any Pledged Loan, the Collateral
Agent shall review and verify such Additional Required Documents consistent with
the obligations of the Collateral Agent above.
6. Borrowing Base Conformity; Xxxx-to-Market Requirement. (a) In support
of its obligation to repay the Secured Obligations, the Company shall cause to
be maintained with the Collateral Agent a Borrowing Base consisting of Eligible
Mortgage Loans.
(b) In the event on any day the outstanding principal balance of Loans
under the Credit Agreement ("Aggregate Credit Exposure") exceeds the- Borrowing
Base, as determined by the Collateral Agent at the request of the Lender in the
course of making a Determination of Availability pursuant to Section 7 below,
the Collateral Agent shall promptly so notify the Lender which shall promptly so
notify the Company and the Company shall immediately pay to the Lender the full
amount of such excess.
7. Determination of Availability; Calculation Assumptions. (a) Upon the
request of the Lender on any Business Day upon which the Company has delivered
to the Lender a request for a Borrowing under the Credit Agreement ("Borrowing
Request"), the Collateral Agent shalI compute the Borrowing Base and promptly
notify the Lender on such date of the dollar amount by which the Borrowing Base
exceeds (or is less than) the Aggregate Credit Exposure on such date before
effecting the credit extensions and repayments contemplated by such Borrowing
Request (a "Determination of Availability").
(b) In making any Determination of Availability or other calculation
involving a determination of the Borrowing Base, the Collateral Agent shall be
permitted to rely, without independent investigation of the correctness thereof,
on:
(1) The most recent information supplied by the Lender to the
Collateral Agent with respect to Aggregate Credit Exposure outstanding;
(2) With respect to a determination as to whether or not a
Pledged Loan is at any time covered by a Take-Out Commitment, or the outstanding
principal balance thereof or the cost or acquisition price therefor, information
supplied by the Company to the Collateral Agent on the related Delivery
Certificate; and
(3) With respect to a determination as to whether amounts received
in the Remittance Account represent the purchase price paid for a specific
Pledged Loan and, consequently, whether such Pledged Loan should be removed from
any such calculation, information supplied by the Company to the Collateral
Agent in writing.
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8. Allocation of Payments Received. All amounts received by the
Collateral Agent (including without limitation all amounts credited to the
Remittance Account) prior to the occurrence and continuance of any Event of
Default or Default on account of the sale or other disposition of the Collateral
shall be remitted and applied as provided in Section 9(c) hereof. Any other
amounts which may be received by the Collateral Agent prior to the occurrence
and continuance of any Event of Default or Default shall be made available to
the Company at the principal office of the Lender in Prospect Heights, Illinois
or at such other place designated by the Lender. All amounts of any kind which
may be received by the Collateral Agent with respect to the Collateral during
the continuance of any Default shall be held by the Collateral Agent for the
benefit of the Lender until such Default is cured or waived. Any amounts
received or held by the Collateral Agent during the continuance of any Event of
Default shall be paid to the Lender and applied in accordance with the Credit
Agreement.
9. Handling of Collateral; Remittance Account. (a) Unless an Event of
Default shall have occurred and be continuing, from time to time until otherwise
notified by the Required Banks (by telephone, telecopier or otherwise), the
Collateral Agent is hereby authorized to release documentation relating to
Pledged Loans to the Company against a trust receipt executed by the Company in
the form of Exhibit B hereto. The Company and the Collateral Agent will comply
with the trust receipt procedures specified on Exhibit C hereto. The Company
hereby represents and warrants that any request by the Company for release of
Collateral under this Section 9(a) shall be solely for the purposes of
correcting clerical or other non-substantial documentation problems in
preparation of returning such Collateral to the Collateral Agent for ultimate
sale or exchange and that the Company has requested such release in compliance
with all terms and conditions of such release set forth herein and in the Credit
Agreement, including, without limitation, the definition of Eligible Mortgage
Loan.
(b) Unless an Event of Default or Default shall have occurred and be
continuing, in the event of a proposed sale of Pledged Loans or in connection
with the formation of a mortgage pool supporting mortgage backed securities,
which in either case will yield net proceeds to the Company in a minimum amount
at least equal to the amount by which the Note must be prepaid so that after
giving effect to the release of the related Pledged Loans involved in such sale
or securitization transaction, the outstanding principal balance of the Notes
will not exceed the Borrowing Base as then in effect (the "Release Price") upon
delivery by the Company to the Collateral Agent of a shipping request in the
form of that attached hereto as Exhibit D (which request shall be delivered to
the Collateral Agent no later than 10 days prior to the expected transmittal
date contemplated below), the Collateral Agent will transmit Pledged Loans held
by it as directed by the Company as follows:
(1) If the transmittal is of documentation for Pledged Loans in
the possession of the Collateral Agent to a third party which has been approved
in writing by the Lender, which approval shall not be unreasonably withheld or
delayed and which approval must be requested by the Company no later than 30
days prior to such anticipated transmittal in connection with the sale of such
Pledged Loans pursuant to a Take-Out Commitment, such transmittal will be under
cover of a transmittal letter in the form of that attached hereto as Exhibit E
(or such other form as may be approved by the Lender).
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(2) If the transmittal is of documentation for Pledged Loans in
connection with the shipment to a custodian or trustee which has been approved
in writing by the Required Banks which approval shall not be unreasonably
withheld or delayed in connection with the formation of a mortgage pool
supporting mortgage-backed securities pursuant to a Take-Out Commitment (any
such mortgage-backed security secured or otherwise supported by any such Pledged
Loan being referred to herein as a "MBS"), such transmittal will be under cover
of a transmittal letter in the form of that attached hereto as Exhibit F (or
such other form as may be approved by the Required Banks). The Collateral Agent
shall use its best efforts to obtain written acknowledgment of receipt from the
addressee of any transmittal letter or other communication sent by the
Collateral Agent hereunder.
(c) All amounts payable on account of the sale of any Pledged Loan or
the sale of the MBS related thereto will be instructed to be paid directly by
the purchaser to a trust account maintained with Household Bank, N.A. in the
name of the Company under sole custody and control of the Lender (the
"Remittance Account"). Pursuant to Section 3 above the Company has granted a
security interest in and lien upon the Remittance Account and in any and all
amounts at any time held therein as collateral security for the Secured
Obligations. This Section 9(c) shall constitute notice to the Collateral Agent
and Household Bank, N.A. of such security interest pursuant to Section
9302(l)(g) of the Illinois Uniform Commercial Code and any other law or
regulation requiring such notice. This Section 9(c) shall further constitute
irrevocable notice to the Collateral Agent and Household Bank, N.A. that
Remittance Account is a "no access" account to the Company. The Lender shall
hold such security interest in and lien upon the accounts referred to in Section
3 above and all funds at any time held therein for the benefit of the Secured
Parties with all rights of a secured party under the Illinois Uniform Commercial
Code. Unless an Event of Default or Default shall have occurred and be
continuing, when final payment of items constituting proceeds of the sales of
Pledged Loans or any MBS relating thereto has been received and are acceptable
to the Collateral Agent as such, an amount equal to the Release Price therefor
shall be transferred to the Lender and applied by the Lender as a prepayment on
the Note as set forth in Section 2.5 of the Credit Agreement with the balance of
such proceeds to be made available to the Company at the Agent's principal
office in Prospect Heights, Illinois. Amounts received after the occurrence and
during the continuance of any Event of Default or Default shall be handled in
accordance with Sections 8 and 16 hereof.
(d) Prior to the occurrence of an Event of Default, the Collateral
Agent shall take such steps as they may be reasonably directed from time to time
by the Company in writing which are not inconsistent with the provisions of this
Security Agreement and the Credit Agreement and which the Company deems
necessary to enable the Company to perform and comply with Approved Take-Out
Commitments.
(e) As long as no Event of Default has occurred and is continuing and
if, but only if, such action is not inconsistent with the express provisions of
this Security Agreement and the Credit Agreement and would not create an Event
of Default or Default hereunder or thereunder, the Company may engage in the
consumer finance mortgage business and, in connection therewith, may: originate,
acquire and service Pledged Loans; receive payments on Pledged Loans from the
obligors thereon and impounds and fees in connection therewith; retain, use and
apply fees and payments made on account of the Pledged Loans by the obligors
thereunder; disburse from impound accounts; in the ordinary course of the
Company's business, deal with
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and manage its records, files and other items described in Section 3 above; sell
or otherwise dispose of Pledged Loans not included in the Borrowing Base, with
or without servicing rights; pledge Pledged Loans to the extent permitted under
the Credit Agreement; sell servicing rights; and enter into, exercise rights
under, perform, modify, waive and cancel any Take-Out Commitments.
(f) Following the occurrence of an Event of Default or Default, the
Collateral Agent shall not, and shall incur no liability to the Company or any
other Person for refusing to, release any item of Collateral to the Company or
any other Person (other than under existing Approved Take-out Commitments)
without the express prior written consent and at the direction of the Lender.
10. Release of Collateral. (a) No later than the close of business of
the Collateral Agent on the second Business Day following the delivery by the
Company to the Collateral Agent (with a copy concurrently delivered to the
Lender) of a Release Request, the Collateral Agent shall, unless prohibited by
law or judicial process binding upon the Collateral Agent and unless a Default
or Event or Default shall have occurred and be continuing, unconditionally
release Excess Collateral (as defined below) from the Lien of the Collateral
Agent and the Lender hereunder.
(b) For purposes of this Section 10, the term "Excess Collateral" shall
mean at any date, Pledged Loans included as Collateral hereunder at such date
which, if released, would not result in a failure of the Company to be in
compliance with the requirements of the Credit Agreement and Section 6 above.
The Collateral Agent shall be entitled to rely, without independent
investigation of the correctness thereof, on the most recent information
supplied to it by the Lender with respect to Aggregate Credit Exposure and, with
respect to the outstanding principal balance of Pledged Loans, on the most
recent information supplied to it by the Company in making any determination
regarding Excess Collateral pursuant hereto. The Collateral Agent may, in the
discretion of and upon direction of the Lender to do so, select those Pledged
Loans which it will release pursuant to subsection (a) above, it being expressly
acknowledged and agreed by the Company that the Collateral Agent and Lender
intend to retain a Lien hereunder on Pledged Loans which they deem of the
highest value. The Collateral Agent and the Lender will from time to time
establish the general parameters of the approach to such selection process which
they anticipate following but the Collateral Agent and the Lender reserve the
right to act in their sole discretion in making such selection and shall have no
liability to the Company or any other Person in connection with any actual
selection and subsequent release other than such as constitutes gross negligence
or willful misconduct on their part.
11. Reports. (a) The Company shall deliver to the Collateral Agent on
or before the 15th of each month a copy of a status report of the Collateral
reasonably satisfactory to the Collateral Agent as of the close of business on
the last day of the immediately preceding month.
(b) The Collateral Agent shall deliver to the Company and Lender: (1)
on or before 5 days following receipt by it of the report referred to in Section
11(a) above, a collateral report in the form of that attached hereto as Exhibit
G with respect to the status of the Borrowing Base as of the date of the most
recent Borrowing Base Certificate provided by the Company pursuant to the Credit
Agreement, and (2) from time to time, such other reports and information as the
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Lender may from time to time reasonably request. In preparing any such reports
the Collateral Agent shall be entitled to rely, without independent
investigation (other than the review steps described on Exhibit A hereto), on
information supplied to the Collateral Agent by the Company and the Lender.
12. No Reliance. The Collateral Agent shall not be responsible to any
Secured Party for any recitals, statements, representations or warranties
contained herein or in any other Loan Document; or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility, accuracy,
completeness or sufficiency of the Collateral or this Agreement or other Loan
Document or instruments executed and delivered, or which could have been
executed or delivered, in connection with this Agreement or the other Loan
Documents, including, without limitation, the attachment, creation,
effectiveness or perfection of the security interest granted or purported to be
granted hereunder in and to the Collateral or the Company's or Collateral's
compliance with federal or state licensing requirements, usury, retail
installment sales and consumer credit and protection laws and regulations. The
Collateral Agent shall be entitled to refrain from exercising any discretionary
powers or actions under this Agreement or any other Loan Document until the
Co1lateral Agent shall have received the prior written consent of the Lender to
such action.
13. Costs and Expenses. The Company agrees to pay the fees, costs and
expenses of the Collateral Agent in accordance with the terms of a written
agreement between the Company and the Collateral Agent together with all other
costs and expenses in connection herewith as provided in the Credit Agreement.
14. Availability of Documents. The Lender and its agents, accountants,
attorneys and auditors will be permitted during normal business hours at any
time and from time to time upon reasonable notice to examine (to the extent
permitted by applicable law) the files, documents, records and other papers in
the possession or under the control of the Collateral Agent relating to any or
all Collateral and to make copies thereof. Prior to the occurrence of an Event
of Default, any such activity will be at the cost and expense of the Lender and
following the occurrence of an Event of Default, all costs and expenses
associated with the exercise by Lender of its rights under this Section 14 shall
be promptly paid by the Company upon demand of the Lender.
15. Covenants, Agreements, Representations and Warranties. So long as
any Secured Obligations or any obligation to extend the same remain outstanding,
the Company hereby covenants and agrees with, and represents and warrants to,
the Lender that:
(a) The Company is the sole lawful owner of the Collateral and has the
sole right, power and lawful authority to deliver this Agreement and to perform
each and all of the matters and things herein provided for.
(b) The Company's chief executive office and chief place of business is
at 000 XX 0xx Xxxxxx, Xxxxx 0, Xxxxxx Xxxxx Xxxxxxx 00000, and the Company has
no other executive offices or places of business other than 000 Xxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000. The Company will not maintain an
executive office or place of business at a location other than those specified
pursuant to the immediately preceding sentence without first
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providing the Collateral Agent and the Lender 30 days' prior written notice of
its intent to do so; provided, however, that the Company will at all times
maintain its chief executive office in the contiguous continental United States.
(c) The Collateral and every part thereof is and will be free and clear
of all security interests, liens, attachments, levies and encumbrances of every
kind, nature and description and whether voluntary or involuntary, except for
the security interest of the Collateral Agent therein and liens permitted under
the Security Agreement. The Company will warrant and defend the Collateral
against any claims and demands of all persons at any time claiming the same or
any interest in the Collateral adverse to the Collateral Agent or Lender.
(d) Each Pledged Loan which is included at any time in the computation
of the Borrowing Base, is an Eligible Mortgage Loan.
(e) The Company will promptly pay when due all taxes, assessments, and
governmental charges and levies upon or against the Company or its operations or
the Collateral or any other property of the Company, in each case before the
same become delinquent and before penalties accrue thereon, unless and to the
extent that the same are being contested in good faith by appropriate
proceedings which prevent foreclosure on or other realization upon the
Collateral and preclude interference with the operation of the Company's
business in the ordinary course, and the Company shall have established adequate
reserves therefor.
(f) The Company will not, without the Lender's prior written consent,
sell, assign, mortgage, lease or otherwise dispose of the Collateral or any
interest therein except to the Collateral Agent or in connection with shipment
of Pledged Loans under Approved Take-Out Commitments and as otherwise permitted
under Section 9 above.
(g) The Company will at all times allow the Lender or its
representatives free access to and right of inspection of the premises of the
Company and the Collateral. The Company will not remove the Collateral from its
present location without the Lender's prior written consent (provided that it is
understood and agreed that if for any reason Collateral is at any time kept or
located at locations other than its present location or locations hereafter
consented to by the Lender, the Collateral Agent shall nevertheless have and
retain a security interest therein).
(h) The Company agrees, at all times upon the request of the Collateral
Agent or the Lender, to account fully for the Collateral and all proceeds
thereof and further agrees, upon the occurrence and during the continuance of
any Event of Default or Default, to promptly deliver to the Collateral Agent, in
the form received, all Collateral or Proceeds thereof endorsed to the Collateral
Agent as appropriate and accompanied by such assignments and powers, duly
executed, as the Collateral Agent shall request and until so delivered all
Collateral and Proceeds shall be held in trust for the Collateral Agent,
separate from all other property of the Company and identified as the property
of the Collateral Agent.
(i) The Company has not invoiced Receivables or otherwise transacted
business, and does not invoice Receivables or otherwise transact business, under
any trade names or styles other than in its name indicated at the beginning
hereof. The Company will not change its name
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or transact business under any trade name, in each case without first giving the
Lender 30 days' prior written notice of its intent to do so.
(j) The Company agrees to execute and deliver to the Lender and the
Collateral Agent such further endorsements, agreements, financing statements and
assignments or other instruments and documents and to do all such other things
as the Collateral Agent or Lender may deem necessary or appropriate to assure
the Lender its security interest and the priority thereof hereunder, including
such financing statement or statements or amendments thereof or supplements
thereto or other instruments as the Lender may from time to time require in
order to comply with the Uniform Commercial Code as enacted in the State of
Illinois and any successor statute(s) thereto (the "Code"). The Company agrees
to promptly deliver to the Collateral Agent all originals of Collateral or
proceeds constituting chattel paper or instruments. The Company hereby agrees
that a carbon, photographic or other reproduction of this Agreement or any such
financing statement is sufficient for filing as a financing statement by the
Collateral Agent without notice thereof to the Company wherever the Collateral
Agent in its sole discretion desires to file the same. In the event for any
reason the law of any other jurisdiction than Illinois becomes or is applicable
to the Collateral or any part thereof, the Company agrees to execute and deliver
all such instruments and to do all such other things as the Collateral Agent or
Lender in its sole discretion deems necessary or appropriate to preserve,
protect and enforce the security interest of the Collateral Agent under the law
of such other jurisdiction to at least the same extent as such security interest
would be protected under the Code. The Collateral Agent shall, after an Event of
Default shall have occurred hereunder and while continuing, have the right to
take physical possession of any and all of the Collateral and to maintain such
possession on the Company's premises or to remove the Collateral or any part
thereof to such other places as the Collateral Agent may desire. If the
Collateral Agent exercises its right to take possession of the Collateral, the
Company shall, upon Collateral Agent' demand, assemble the Collateral and make
it available to the Collateral Agent at a place designated by the Collateral
Agent. The Company shall at its expense perform any and all other steps
requested by Collateral Agent to preserve and protect the security interest
hereby granted in the Collateral.
(k) The Company will not, except as permitted under Section 16(a)
hereof, modify, compromise, extend, rescind or cancel any note, mortgage, deed
of trust or other document, instrument or agreement relating to any Pledged Loan
pledged under this Security Agreement or consent to a postponement of strict
compliance on the part of any party thereto with any material term or provision
thereof.
(1) The Company will do all things that a prudent investor would deem
necessary or desirable to maintain, preserve and protect the Collateral.
(m) On failure of the Company to perform any of the covenants and
agreements herein contained, the Lender or the Collateral Agent may at its
option perform the same and in so doing may expend such sums as the Lender or
the Collateral Agent may deem advisable in the performance thereof, including
without limitation the payment of any insurance premiums, the payment of any
taxes, liens and encumbrances, expenditures made in defending against any
adverse claims and all other expenditures which the Lender or the Collateral
Agent may be compelled to make by operation of law or which the Lender or the
Collateral Agent may make by agreement or otherwise for the protection of the
security hereof. All such sums and amounts
-11-
so expended shall be repayable by the Company immediately without notice or
demand, shall constitute additional Secured Obligations hereunder and shall bear
interest from the date said amounts are expended at the rate per annum
(computed on the basis of a year of 360 days for the actual number of days
elapsed) determined by adding _% to the Domestic Rate with any change in such
rate per annum as so determined by reason of a change in such Domestic Rate to
be effective on the date of such change in said Domestic Rate (such rate per
annum as so determined being hereinafter referred to as the "Default Rate"). No
such performance of any covenant or agreement by the Lender or the Collateral
Agent on behalf of the Company, and no such advancement or expenditure therefor,
shall relieve the Company of any default under the terms of this Agreement or in
any way obligate the Lender or the Collateral Agent, or the Lender to take any
further or future action with respect thereto. The Lender or the Collateral
Agent in making any payment hereby authorized may do so according to any xxxx,
statement or estimate procured from the appropriate public office or holder of
the claim to be discharged without inquiry into the accuracy of such xxxx,
statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien or title or claim. The Collateral Agent in performing any
act hereunder shall be the sole judge of whether the Company is required to
perform the same under the terms of this Agreement. The Collateral Agent or the
Lender are each authorized to charge any depository or other account of the
Company maintained with the Collateral Agent or Lender for the amount of such
sums and amounts so expended by the Collateral Agent.
16. Collection of Collateral Payments.
(a) The Company shall make collection of all Pledged Loans,
Receivables, Dealer Claims and any other sums due with respect to the Collateral
(collectively, "Collateral Payments") unless notified to the contrary by the
Collateral Agent after the occurrence and during the continuance of any Default
or Event of Default and may use the same to carry on its business in accordance
with sound business practice and otherwise subject to the terms hereof and of
any separate written agreements between the Company and the Lender; provided
that, other than in the ordinary course of the Company's business and consistent
with practices historically observed by it, the Company shall not, without the
prior written consent of the Lender, grant any extension of the time of payment
of any Collateral Payment, compromise or settle any Collateral Payment for less
than the full amount thereof, release (in whole or in part) any person or
property liable for the payment thereof or granted as collateral security
therefor, or allow any credit or discount whatsoever thereon.
(b) Upon the occurrence of any Default or Event of Default hereunder,
all instruments (including any postdated checks) at any time constituting part
of the Collateral Payments shall, upon receipt by the Company and request by the
Collateral Agent or the Lender, be immediately endorsed to and deposited with
the Collateral Agent in the same form as received by the Company. Upon the
occurrence and during the continuation of any Default or Event of Default
hereunder, whether or not the Collateral Agent has exercised any or all of its
rights under other provisions of this Section 16, in the event the Collateral
Agent requests the Company to do so:
(i) all chattel paper at any time constituting part of the
Collateral Payments shall, upon receipt by the Company, be immediately endorsed
to and deposited with the Collateral Agent; and/or
-12-
(ii) the Company shall instruct all customers and account debtors
to remit all payments in respect of Collateral Payments to a lock box or lock
boxes under the sole custody and control of the Collateral Agent and which are
maintained at post offices selected by the Collateral Agent.
(c) Upon the occurrence and during the continuation of any Default or
Event of Default hereunder, whether or not the Collateral Agent has exercised
any or all of its rights under other provisions of this Section 16, the
Collateral Agent or its designee may notify account debtors or others at any
time that Collateral Payments have been assigned to the Collateral Agent or of
the Collateral Agent' security interest therein and either in its own name, or
the name of the Company, or both, demand, collect (including, without
limitation, through a lock box analogous to that described in Section 16(b)(ii)
hereof), receive, receipt for, xxx for, compound and give acquittance for any or
all amounts due or to become due on Collateral Payments, and in the Collateral
Agent's discretion file any claim or take any other action or proceeding which
Collateral Agent may deem necessary or appropriate to protect and realize upon
the security interest of Collateral Agent in the Collateral Payments.
(d) Upon the occurrence and during the continuation of any Default or
Event of Default hereunder, the Collateral Agent may, at any time or times
thereafter, cause all instruments, chattel paper, monies or other proceeds of
Pledged Loans, Receivables, Dealer Claims or other Collateral Payments
transmitted to or otherwise received by the Collateral Agent pursuant to any of
the provisions of Sections 16(a), 16(b) or 16(c) hereof to be deposited, handled
and administered by the Collateral Agent in and through the Remittance Account
(or other accounts maintained by the Collateral Agent at a commercial bank or
banks selected by the Collateral Agent) and the Company acknowledges that the
maintenance of such Remittance Account or accounts by the Collateral Agent is
solely for the Collateral Agent's own convenience and that the Company does not
have any right, title. or interest therein or any amounts at any time standing
to the credit thereof. When final payment of checks, instruments or other items
so received by the Lender as collections of the Collateral Payments have been
received by the Collateral Agent in cash or final solvent credits at its
principal office, acceptable to the Collateral Agent as such, the same shall be
given to the Lender and applied in payment of the Secured Obligations, whether
or not then due and payable, in such amounts, in such manner and order. as set
forth in the Credit Agreement (provided, however, that the Collateral Agent may
at the Lender's direction credit uncollected funds in payment of the Secured
Obligations, provided further that the Company shall be liable for and pay upon
demand any overdraft caused thereby, together with interest thereon at the
Default Rate). Neither the Collateral Agent nor the Lender shall be required to
make such applications more frequently than once per week.
17. Power of Attorney. In addition to any other powers of attorney
contained herein, the Company appoints the Lender and the Collateral Agent and
each of them individually their respective nominees, or any other person whom
the Lender or the Collateral Agent may designate as the Company's attorney in
fact, with full power (i) to endorse the Company's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into the Lender' or the Collateral Agent's possession and (ii) to sign the
Company' name on drafts against customers, on schedules and assignments of
Collateral payments, on notices of assignment and on public records, on
verifications of accounts, and on
-13-
notices to customers, to notify the post office authorities to change the
address for delivery of the Company's mail to an address designated by the
Lender or Collateral Agent, and to receive, open and dispose of all mail
addressed to the Company, provided that the Lender and the Collateral Agent each
agrees, as a special covenant, to exercise such rights set forth in clauses (i)
and (ii) only upon the occurrence and during the continuance of an Event of
Default hereunder. The Collateral Agent or the Lender may send requests for
verification of Collateral Payments to customers or account debtors, and do all
things necessary to carry out this Agreement. The Company hereby ratifies and
approves all acts of any such attorney and agrees that neither the Collateral
Agent, the Lender nor any such attorney will be liable for any acts or omissions
nor for any error of judgment or mistake of fact or law other than their gross
negligence or willful misconduct. The foregoing power of attorney, being coupled
with an interest, is irrevocable until the Secured Obligations have been fully
satisfied and the commitments of the Lender to extend credit to the Company
under the Credit Agreement have terminated. The Lender may file one or more
financing statements disclosing its security interest in any or all of the
Collateral without the Company's signature appearing thereon. The Company also
hereby grants the Lender and the Collateral Agent a power of attorney to execute
any such financing statement, or amendments and supplements to financing
statements, on behalf of the Company without notice thereof to the Company,
which power of attorney is coupled with an interest and is irrevocable until the
Secured Obligations have been fully satisfied and the commitments of the
Lender to extend credit to the Company under the Credit Agreement have
terminated.
18. Defaults and Remedies.
(a) The occurrence of any event or the existence of any condition which
is specified as an Event of Default or Default under the Credit Agreement shall
constitute an "Event Of Default" or "Default" hereunder.
(b) Upon the occurrence and during the continuation of any Event of
Default hereunder, the Lender shall have, in addition to all other rights
provided herein or by law, the rights and remedies of a secured party under the
Code (regardless of whether the Code is the law of the jurisdiction where the
rights or remedies are asserted), and further the Lender may, without demand and
without advertisement or notice, all of which the Company hereby waives, at any
time or times, sell and deliver any or all Collateral held by it or the
Collateral Agent or for its public or private sale, for cash, upon credit or
otherwise, at such prices and upon such terms as the Lender deems advisable, in
its sole discretion. In addition to all other sums due the Collateral Agent or
the Lender hereunder, the Company shall pay the Collateral Agent and the Lender
all costs and expenses incurred by the Collateral Agent or the Lender, including
a reasonable allowance for attorneys' fees and court costs, in obtaining,
liquidating or enforcing payment of Collateral or Secured Obligations or in the
prosecution or defense of any action or proceeding by or against the Collateral
Agent, the Lender or the Company concerning any matter arising out of or
connected with this Agreement or the Collateral or Secured Obligations,
including without limitation any of the foregoing arising in, arising under or
related to a case under the United States Bankruptcy Code. Any requirement of
reasonable notice shall be met if such notice is personally served on or mailed,
postage prepaid, to the Company at the mailing address shown at the beginning
hereof at least 10 days before the time of sale or other event giving rise to
the requirement of such notice. The Collateral Agent or the Lender may be the
-14-
purchaser at any such sale. The Company hereby waives all of its rights of
redemption from any such sale. Subject to the provisions of applicable law, the
Lender may postpone or cause the postponement of the sale of all or any portion
of the Collateral by announcement at the time and place of such sale, and such
sale may, without further notice, be made at the time and place to which the
sale was postponed or the Lender may further postpone such sale by announcement
made at such time and place.
(c) Failure by the Lender or the Collateral Agent to exercise any
right, remedy or option under this Agreement or any other agreement between the
Company and the Lender or the Collateral Agent or provided by law, or delay by
the Lender or Collateral Agent in exercising the same, shall not operate as a
waiver; no waiver by the Collateral Agent shall be effective unless it is in
writing, signed by the Lender or the Collateral Agent at the direction of the
Lender and then only to the extent specifically stated. For purposes of this
Agreement, a Default or Event of Default hereunder shall be construed as
continuing after its occurrence until the same is waived in writing by the
Lender. Neither the Collateral Agent, nor the Lender, nor any party acting as
attorney for the Collateral Agent or the Lender, shall be liable hereunder for
any acts or omissions or for any error of judgment or mistake of fact or law
other than their gross negligence or willful misconduct. The rights and remedies
of the Lender and the Collateral Agent under this Agreement shall be cumulative
and not exclusive of any other right or remedy which the Collateral Agent or the
Lender may have.
19. Application of Proceeds. The proceeds and avails of the Collateral
at any time received by the Lender or Collateral Agent shall, (if received by
the Collateral Agent in cash or its equivalent be transmitted to the Lender and
applied by the Lender in reduction of the Secured Obligations as set forth in
Section 3.3 of the Credit Agreement except as otherwise expressly provided
herein. The Company shall remain liable to the Collateral Agent and the Lender
for any deficiency. Any surplus remaining after the full payment and
satisfaction of the Secured Obligations shall be returned to the Company or to
whomsoever the Lender reasonably determine to be lawfully entitled thereto.
20. Continuing Agreement. This Agreement shall be a continuing agreement
in every respect and shall remain in full force and effect until all of the
Secured Obligations, both for principal and interest, have been fully paid and
satisfied and any Commitment of the Lender to extend any credit to the Company
under the Credit Agreement shall have terminated. Upon such termination of this
Agreement, the Lender shall, upon the request and at the expense of the Company,
forthwith release all its liens and security interests hereunder.
21. The Collateral Agent.
(a) The Lender hereby appoints the Collateral Agent as the agent for
the Lender hereunder and under the other Loan Documents and authorizes the
Collateral Agent as its agent to take such action on its behalf under the
provisions of this Agreement and to exercise such powers and perform such
duties as are expressly delegated thereto by the terms of this Agreement,
together with such other powers as are reasonably incidental thereto and which
the Collateral Agent is expressly directed to undertake by the Lender. The
Collateral Agent shall have no duties or responsibilities except those
expressly set forth herein, and no implied
-15-
covenants, responsibilities, obligations or liabilities shall be read into the
Loan Documents or otherwise exist against the Collateral Agent.
(b) Delegation of Duties. The Collateral Agent may execute any of its
duties under this Agreement by or through agents or attorneys-in-fact and shall
be entitled to advice of counsel concerning such duties. The Collateral Agent
shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care which are reasonably
acceptable to the Lender and the Company.
(c) Exculpatory Provisions. Neither the Collateral Agent nor any of its
officers, directors, employees, agents, counsel, attorneys-in-fact or Affiliates
shall be (1) liable to the Lender, or the Company for any action taken or
omitted to be taken by it or such Person under or in connection with the Loan
Documents (except for its or such Person's own negligence, lack of good faith or
willful misconduct), or (2) responsible in any manner to either of the Lender or
the Company for: (i) any recitals, statements, representations or warranties
made by the Company or any officer thereof contained in the Loan Documents or in
any certificates, report, statement or other document referred to or provided
for in, or received by the Collateral Agent under or in connection with, the
Loan Documents (except such as are prepared by the Collateral Agent and, then,
only to the extent the Collateral Agent is responsible for verification of the
accuracy and completeness of the information contained therein or the facts upon
which such information is based as expressly provided herein) or for the value,
validity, effectiveness, genuineness, enforceability, collectibility or
sufficiency of the Loan Documents or for any failure of the Company to perform
its obligations thereunder or (ii) any action taken or omitted to be taken by
the Collateral Agent with respect to the Collateral in accordance with written
instructions given as permitted under the Loan Documents, or (iii) assuring
compliance of the Loan Documents and the transactions contemplated by the Loan
Documents with any law or regulation binding on such Person, it being expressly
acknowledged, agreed and understood that each such Person has obtained
independent advice satisfactory to it in all such respects. The Collateral Agent
shall be under no obligation to the Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, the Loan Documents (other than agreements required to be complied with by
the Collateral Agent thereunder and subject to the standards of care set forth
therein with respect thereto) or to inspect the properties, books or records of
the Company. The Collateral Agent shall be entitled to refrain from exercising
any discretionary powers or actions under this Agreement or any other Loan
Document until it shall have received the prior written consent of the Lender to
such action.
(d) Reliance by Collateral Agent. The Collateral Agent shall be
entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certification, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by the Collateral
Agent. The Collateral Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Collateral Agent.
The Collateral Agent shall be fully justified in failing or refusing to take any
action hereunder unless
-16-
it shall first receive such advice or concurrence of the Lender or it shall
first be indemnified to its satisfaction by the Lender against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any action (other than liability and expense arising out of
the Collateral Agent's negligence, lack of good faith, or willful misconduct).
The Collateral Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder in accordance with a request of the Lender
absent negligence, lack of good faith or willful misconduct on the part of the
Collateral Agent in the method in which it acts or refrains from acting in
accordance therewith, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Lender.
(e) Notice of Default; Agreement to Advance. The Collateral Agent shall
be deemed to have no knowledge or notice of the occurrence of any Event of
Default or Default under the Credit Agreement or any other Loan Document unless
the Collateral Agent has received notice from the Lender or the Company
referring to the Loan Documents, describing such Event of Default or Potential
Default and stating that such notice is a "notice of default". In the event that
the Collateral Agent receives such a notice, the Collateral Agent shall give
notice thereof to the Company and the Lender. The Collateral Agent shall take
such action with respect to such Event of Default or Potential Default as is set
forth in Section and as shall be reasonably directed by the Lender; provided,
however that unless and until the Collateral Agent shall have received such
directions, the Collateral Agent may (but shall not be obligated to) take such
action or refrain from taking such action (in each case consistent with the
provisions of the Loan Documents), with respect to such Event of Default or Loan
Default, as it shall deem advisable in the best interest of the Lender.
(f) Indemnification. The Company agrees to indemnify, defend and hold
harmless the Collateral Agent in its capacity as such and its agents, employees,
officers and directors from and against any and all claims, obligations,
penalties, actions, suits, judgments, reasonable costs and disbursements,
losses, liabilities and damages (including, without limitation, reasonably
attorneys' fees) of any kind whatsoever which may at any time be imposed on,
assessed against or incurred by the Collateral Agent in any way resulting from
any action taken or omitted to be taken by the Lender (so long as the Lender is
entitled to indemnification for such acts or omissions from the Company under
the Credit Agreement) or the Company relating to or arising out of the Loan
Documents or any documents contemplated by or referred to therein or the
transactions contemplated thereby; provided, however, that this Paragraph shall
not relieve the indemnified party from liability for its own negligence, lack of
good faith or wilful misconduct. The Collateral Agent agrees that it will
promptly notify the Company of any such claim, action or suit asserted or
commenced against it and that the Company may assume the defense thereof with
counsel reasonably satisfactory to the Collateral Agent at the Company's sole
expense, that the Collateral Agent will cooperate with the Company on such
defense, and that the Collateral Agent will not settle any such claim, action or
suit without the consent of the Company; provided, however, that in the event
the Collateral Agent is not reasonably satisfied with such defense, the
Collateral Agent after reasonable notice to the Company and their failure to
cure, may assume such defense with counsel satisfactory to the Collateral Agent
and the Company shall be responsible for the reasonable expense thereof. The
Lender agrees to indemnify and hold harmless the Collateral Agent in its
capacity as such to the extent required by the Company pursuant to the terms
hereof and without limiting the obligation of the Company to do so. The
indemnification obligations of the Company and the Lender under this Section 1
shall survive
-17-
termination of the Loan Documents and payment in full of the Obligations;
provided, that the Collateral Agent shall only be entitled to claim such
indemnity based on circumstances specified in a written request submitted to the
Company not later than ninety (90) days after the repayment in full of the
outstanding Loans.
(g) Collateral Agent in Its Individual Capacity. The Collateral Agent
and its Affiliates may take loans to, accept deposits from and generally engage
in any kind of business with the Company as though the Collateral Agent were not
the Collateral Agent hereunder.
(h) Successor Agents. The Collateral Agent may resign as such under the
Credit Documents upon sixty (60) days' prior written notice to the other parties
hereto. The Company may upon sixty (60) days' prior notice remove and discharge
the Collateral Agent, or any successor Collateral Agent thereafter appointed,
from the performance of its duties under this Agreement by written notice from
the Company to the Collateral Agent or the successor Collateral Agent, with
copies thereof to the Company. If the Collateral Agent shall resign or is
removed by the Lender, then, on or before the effective date of such resignation
or removal, the Lender shall appoint a successor agent reasonably acceptable to
the Company (after prior consultation with the Company) or, if the Lender is
unable to appoint a successor agent, the Collateral Agent (after prior
consultation with the Company) shall appoint a successor agent for the
Administrative Agent, which successor agent shall be reasonably acceptable to
the Company. If the Collateral Agent is removed by the Company, then, or before
the effective date of such removal, the Company shall appoint a successor agent
reasonably acceptable to the Lender (after prior consultation with the Lender)
or if the Company is unable to appoint a successor agent, the Collateral Agent
(after prior consultation with the Lender shall appoint a successor agent for
the Company, which successor agent shall be reasonably acceptable to the Lender.
Any such successor agent so appointed shall succeed to the rights, powers and
duties of the Collateral Agent, and the term "Collateral Agent" shall mean such
successor agent effective upon its appoint, and the former Collateral Agent's
rights, powers and duties shall be terminated without any other or further act
or deed on the part of such former Collateral agent or any of the parties to
this Agreement or any of the other Loan Documents or successors thereto. Upon
such appointment, the resigned or removed Collateral Agent will deliver all
Collateral to the successor Collateral Agent and take all other steps deemed
necessary by the Lender to vest the successor Collateral Agent with all rights,
titles, and powers given to the Collateral Agent hereunder. The Company shall,
(i) promptly upon removal of Collateral Agent, pay to the Collateral Agent any
accrued and unpaid fees which may be owing to it and (ii) upon request from the
Collateral agent (provided such request is submitted to the Company no later
than ninety (90) days after removal of the Collateral Agent), pay to the
Collateral Agent any reasonable fees incurred in conjunction with such removal.
After the Collateral Agent's resignation hereunder, the provisions of this
Section 21 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent hereunder.
22. Miscellaneous.
(a) This Agreement cannot be changed or terminated orally. This
Agreement shall create a continuing security interest in the Collateral and
shall be binding upon the Company, its successors and assigns and shall inure,
together with the rights and remedies of the Collateral Agent hereunder, to the
benefit of the Collateral Agent, the Lender and their successors and
-18-
assigns; provided, however, that the Company may not assign its rights or
delegate its duties hereunder without the Collateral Agent's and under's prior
written consent. The Company hereby releases the Lender and the Collateral Agent
from any liability for any act or omission relating to the Collateral or this
Agreement, except the Lender's or Collateral Agent's, as appropriate, gross
negligence or willful misconduct.
(b) All communications provided for herein shall be in writing, except as
otherwise specifically provided for hereinabove, and shall be given and deemed
to have been made if given in accordance with the provisions of Section 9.6 of
the Credit Agreement, addressed as follows: If to the Company or the Lender at
the addresses specified in Section 9.6 of the Credit Agreement.
If to the Collateral Agent:
First Union Bank of North Carolina, N.A.
One First Xxxxx Xxxxxx
XX-0
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telephone: 000-000-0000
Telecopy: 000-000-0000
(c) In the event that any provision hereof shall be deemed to be
invalid by reason of the operation of any law or by reason of the interpretation
placed thereon by any court, this Agreement shall be construed as not containing
such provision, but only as to such jurisdictions where such law or
interpretation is operative, and the invalidity of such provision shall not
affect the validity of any remaining provision hereof, and any and all other
provisions hereof which are otherwise lawful and valid shall remain in full
force and effect.
(d) This Agreement shall, to the extent permitted by applicable law, be
deemed to have been made in the State of Illinois and shall be governed by and
construed in accordance with the laws of the State of Illinois, without regard
to principles of conflicts of laws. All terms which are used in this Agreement
which are defined in the Code shall have the same meanings herein as said terms
do in the Code unless this Agreement shall otherwise specifically provide. The
headings in this instrument are for convenience of reference only and shall not
limit or otherwise affect the meaning of any provision hereof.
(e) The Company, by its execution hereof, acknowledges and agrees that
it is and remains liable for the performance of any and all of its obligations
under the Collateral to the same extent as though this Agreement had not been
made. The Company acknowledges that this Agreement constitutes an assignment of
rights of the Company and not an assignment of any duties or obligations of the
Company with respect to the Collateral, it being understood that neither the
Collateral Agent nor the Under shall in any manner be responsible for the
performance of any such duties or obligations.
-19-
(f) This Agreement may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each constituting an
original, but all together one and the same instrument.
-20-
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed of the date first above written.
WESTMARK MORTGAGE CORPORATION
By:/s/ Xxxx Shaftlein
--------------------------
Its: Xxxx Shaftlein
President
Accepted and agreed to in Chicago, Illinois as of the date first above
written.
FIRST UNION BANK OF NORTH CAROLINA,
N.A., as Collateral Agent
By: /s/ illegible
------------------------------
Its: illegible
HOUSEHOLD FINANCIAL SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------
Xxxxxxx X. Xxxxxxxx
Its: Vice President
-21-
Schedule of Exhibits
to
Security Agreement
EXHIBIT DOCUMENT
------- --------
A Required Review Steps
B Form of Trust Receipt
C Trust Receipt Procedures
D Form of Shipping Request
E Form of Whole Loan Sale Transmittal Letter
F Form of Transmittal for Pool Formation
G Form of Collateral Report
Exhibit A
Required Review Steps
A. Mortgage Loans
1. All submitted documents, including the report and certificate of
the Company accompanying the pledged Mortgage Loans are consistent
as to borrower name, property address, loan face amount, loan
interest rate, loan term and Company loan number.
2. The note and mortgage/deed of trust each bears an original
signature or signatures which appear to be those of the person or
persons named as the maker and mortgagor/trustor, or, in the case
of a certified copy of the mortgage/deed of trust, such copy bears
what appears to be a reproduction of such signature or signatures.
3. Except for (a) the endorsement to Company of the note in the
event such loan was purchased by Company and (b) the endorsement
in blank of the note by Borrower, neither the note, the
mortgage/deed of trust, nor the assigmnent(s) of the mortgage/deed
of trust contain any irregular writings which appear on their face
to affect the validity of any such endorsement or to restrict the
enforceability of the document on which they appear.
4. The note is endorsed in blank and such endorsement bears an
original signature of an authorized officer of Company, based on
the current list of such officers supplied by Company.
5. The assignment of the mortgage/deed of trust bears an original
signature of an authorized officer of Company, based on the
current list of such officers supplied by Company.
Exhibit B
Form of Trust Receipt
Date _______________, 19__
The undersigned, Westmark Mortgage Corporation, a ____________________
corporation (the "Company"), acknowledges receipt from First Union Bank of North
Carolina, acting as agent, bailee and custodian (in such capacity "Collateral
Agent") for the exclusive benefit of the Lender (as such term is defined in the
Security Agreement) pursuant to the Security Agreement (as those terms and
capitalized terms not otherwise defined herein are defined in that certain
Security and Collateral Agency Agreement dated as of ____________, 1997, among
the Lender, the Company, and the Collateral Agent, or from its duly appointed
sub-agent, of the following described documentation for the identified Mortgage
Loans (the "Collateral Documents"), possession of which is herewith entrusted to
the Company solely for the purpose of correcting documentary defects relating
thereto:
Loan Document
Borrower Name Loan Number Note Amount Delivered
------------- ----------- ----------- -------------
It is hereby acknowledged that a security interest pursuant to the
Illinois Uniform Commercial Code in the Collateral hereinabove described and in
the Proceeds of said Collateral has been granted to under pursuant to the
Security Agreement.
The Company hereby represents and warrants that (a) the unpaid
principal amount of the Mortgage Loans the Collateral Documents for which are
requested to be released hereunder when added to the unpaid principal amount of
all other Mortgage Loans included in the computation of the Borrowing Base the
Collateral Documents for which have been similarly released does not exceed
$__________________ and (b) no Default or Event of Default has occurred under
the Credit Agreement.
In consideration of the aforesaid delivery by Collateral Agent (or by
its duly appointed sub-agent), the Company hereby agrees to hold said Collateral
in trust for Collateral Agent on behalf of the Lender as provided under and in
accordance with all provisions of the Security Agreement and to return said
Collateral to Collateral Agent no later than the close of business on the tenth
day following the date hereof or, if such day is not a Business Day, on the
immediately succeeding Business Day.
WESTMARK MORTGAGE CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
Exhibit C
Trust Receipt Procedures
The Company and Collateral Agent will adhere to the following procedures with
respect to trust receipts:
Collateral Agent will maintain all original trust receipts in a vault, drawer
or other suitable depositary maintained and controlled solely by Collateral
Agent.
Exhibit D
Form of Shipping Request
(For Delivery In Connection With Pooled Loan Sales or Securitizations)
Date:________________________
First Union National Bank of North Carolina, as Collateral Agent
_____________________________
_____________________________
Attention:___________________
This letter is to serve as authorization for you to endorse and ship the
following loans:
Loan Number Borrower Name Note Amount
----------- ------------- -----------
to the following address under Take-Out Commitment # _______ (the "Commitment"):
Name:__________________________
Address:_______________________
_______________________
Attention:_____________________
Please endorse the notes as follows:
Please ship the loan documents either by _______________________ or by
such other courier service as we have designated to you as "approved". The
courier shall act as an independent contractor bailee acting solely on your
behalf as Collateral Agent for the Lender under (and as defined in) that certain
Security and Collateral Agency Agreement dated as of ______________, 1997, as
the same may be amended, extended or replaced from time to time, but we
acknowledge and agree that you are not responsible for any delays in shipment or
any other actions or inactions of the courier; however, because the Commitment
expires on ________________, 199_, we ask that you deliver the loan documents to
the courier no later than ___________, 199_.
We hereby certify that the net proceeds to be received by us from the
transaction contemplated by the Commitment are not less than $_________________.
D-1
Please have the courier xxxx us by using our acct. #__________________.
If you should have any questions, or should feel the need for additional
documentation, please do not hesitate to call _________________.
WESTMARK MORTGAGE CORPORATION
By_________________________________
Name:______________________________
Title:_____________________________
D-2
Exhibit E
Form of Loan Sale Transmittal Letter
[Letterhead of Collateral Agent]
Date:________________________
[Approved Investor]
_________________________
_________________________
Re: Westmark Mortgage Corporation:
Sale of Mortgage Loans
Attached please find those mortgage loans listed separately on the
attached schedule ("Mortgage Loans"), which Mortgage Loans are owned by Westmark
Mortgage Corporation (the "Company") and are being delivered to you for
purchase.
The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined herein are
defined in) that certain Security and Collateral Agency Agreement (the "Security
Agreement") dated as of _______, 1997, as the same may from time to time be
amended by and among the Company, the Collateral Agent and the Lender
thereunder. Each of the Mortgage Loans is subject to a security interest in
favor of for whom we act as collateral agent for the benefit of the Lender
(the Lender and the Collateral Agent are hereinafter referred to as the "Secured
Parties"), which security interest shall be automatically released upon your
remittance of the full amount of the required Release Price of such Mortgage
Loans (as set forth on the schedule attached hereto) (the "Release Price") by
wire transfer to the following account maintained for the benefit of the
Company:
wire instructions to remittance account:
_______________________________________
_______________________________________
_______________________________________
Pending your purchase of each Mortgage Loan and until the Release Price
therefor is received, the aforesaid security interest therein will remain in
full force and effect, and you shall hold possession of such Collateral and the
documentation evidencing same as custodian, agent and bailee for and on behalf
of the Secured Parties. In the event any Mortgage Loan is unacceptable for
purchase, return the rejected item directly to the Collateral Agent at the
address set forth below. In no event shall any Mortgage Loan be returned or
sales proceeds remitted to the Company except to the extent that such sales
proceeds exceed the Release Price for such Mortgage Loan. The Mortgage Loan must
be so returned or sales proceeds in an amount equal to the Release Price
remitted in full no later than fourteen (14) days from the date hereof. If you
are unable to comply with the above instructions, please so advise the
undersigned immediately.
E-1
Note: By accepting the Mortgage Loans delivered to you with this letter, you
consent to be the custodian, agent and bailee for the Secured Parties on the
terms described in this letter. The undersigned, as Collateral Agent, requests
that you acknowledge receipt of the enclosed Mortgage Loans and this letter by
signing and returning the enclosed copy of this letter to the undersigned;
however, your failure to do so does not nullify such consent.
Sincerely,
WESTMARK MORTGAGE CORPORATION
By: _________________________
Title: _________________________
Address: _________________________
_________________________
Attention: _________________________
The undersigned Company agrees to and acknowledges the terms of this
letter and, notwithstanding any contrary understanding with or instructions to
you, the addressee of this letter, the Company instructs you to act according to
the instructions set forth in this letter. These instructions cannot be altered
except by written instructions executed by Collateral Agent.
_____________________________________, a ________________ corporation
By:____________________________
Title:_________________________
Address:_______________________
Acknowledgement of Receipt
[Approved Investor]
By:____________________________
Title:_________________________
Address:_______________________
Date:__________________________
E-2
Exhibit F
Form of Transmittal Letter for Pool Formations
[Collateral Agent Letterhead]
[Certificating Custodian]
____________________________
____________________________
Re:____________________________
Shipment of Mortgage Loans for Pool Formation
Attached please find those mortgage loans listed separately on the
attached schedule ("Mortgage Loans"), which are owned by Westmark Mortgage
Corporation (the "Company"), and are being delivered to you, as
custodian/trustee (the "Certificating Custodian"), for certification in
connection with the formation of a mortgage pool supporting the issuance of a
mortgage-backed security (the "MBS") described as follows______________________.
The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined herein are
defined in) that certain Security and Collateral Agency Agreement dated as of
1997, as the same may from time to time be amended by and among the Company, the
Collateral Agent, and the Lender. Each of the Mortgage Loans is subject to a
security interest in favor of Lender for whom we act as Collateral Agent for the
benefit of the Lender (the Lender and the Collateral Agent are hereinafter
referred to as the "Secured Parties"), which security interest shall be
automatically released upon your remittance of the full amount of the required
Release Price of such Mortgage Loans (as set forth on the schedule attached
hereto) (the "Release Price") by wire transfer to the following account
maintained for the benefit of the Company:
wire instructions to remittance account:
_______________________________________
_______________________________________
_______________________________________
Pending issuance and sale of the MBS and until the Release Price
therefor is received, the aforesaid security interest in each Mortgage Loan will
remain in full force and effect, and you shall hold possession of such
Collateral and the documentation evidencing the same as custodian, agent and
bailee for and on behalf of the Secured Parties. In the event any Mortgage Loan
is unacceptable for pool formation, return the rejected item directly to the
undersigned, as Collateral Agent, at the address set forth below. Each Mortgage
Loan must be so returned or proceeds from the sale of the MBS in an amount equal
to the Release Price remitted in full no later than fourteen (14) days from the
date hereof. In no event shall any Mortgage Loan be returned or proceeds
relating thereto be remitted to the Company except to the extent that such
proceeds exceed the Release Price for such Mortgage Loan. If you are unable to
comply with the above instructions, please so advise the undersigned
immediately.
F-1
Note: By accepting the Mortgage Loans delivered to you with this letter, you
consent to be the custodian, agent and bailee for the Secured Parties on the
terms described in this letter. The undersigned, as Collateral Agent, requests
that you acknowledge receipt of the enclosed Mortgage Loans and this letter by
signing and returning the enclosed copy of this letter to the undersigned;
however, your failure to do so does not nullify such consent.
Sincerely,
WESTMARK MORTGAGE CORPORATION
By: _________________________
Title: _________________________
Address: _________________________
_________________________
Attention: _________________________
The undersigned Company agrees to and acknowledges the terms of this
letter and, notwithstanding any contrary understanding with or instructions to
you, the addressee of this letter, the Company instructs you to act according to
the instructions set forth in this letter. These instructions cannot be altered
except by written instructions executed by the Collateral Agent.
_____________________________________, a ________________ corporation
By:____________________________
Name:__________________________
Title:_________________________
Acknowledgement of Receipt
(Approved Investor)
By:____________________________
Name:__________________________
Title:_________________________
Date:__________________________
F-2
Exhibit G
Form of Collateral Report
Westmark Mortgage Corporation as of ___/___/___
1. Unpaid principal amount of aggregate pledged Mortgage $________________
Loans as detailed on Schedule I hereto
2. Less:
(a) Mortgage Loans with a payment more than 30 $________________
days past due _____________
(b) Otherwise Ineligible__________
(c) Included in Borrowing Base more than sixty
(60) days_______
3. Sum of Lines 2(a)-(c) $________________
4. Line 1 minus Line 3 $________________
5. Line 4 x 100% $________________
