EXHIBIT 10.37
EXECUTION COPY
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MASTER LOAN AND SECURITY AGREEMENT
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Dated as of October 29, 1999
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AAMES CAPITAL CORPORATION
as Borrower
and
XXXXXX XXXXXXX MORTGAGE CAPITAL INC.
as Lender
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TABLE OF CONTENTS
Page
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Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . . . 13
Section 2. Loans, Note and Prepayments.
2.01 Loans.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.02 Notes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.03 Procedure for Borrowing.. . . . . . . . . . . . . . . . . . . . . . 14
2.04 Limitation on Types of Loans; Illegality. . . . . . . . . . . . . . 15
2.05 Repayment of Loans; Interest. . . . . . . . . . . . . . . . . . . . 15
2.06 Mandatory Prepayments or Pledge.. . . . . . . . . . . . . . . . . . 16
2.07 Extension of Termination Date . . . . . . . . . . . . . . . . . . . 16
Section 3. Payments; Computations; Etc.
3.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.02 Computations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.03 Requirements of Law.. . . . . . . . . . . . . . . . . . . . . . . . 17
3.04 Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4. Collateral Security.
4.01 Collateral; Security Interest.. . . . . . . . . . . . . . . . . . . 18
4.02 Further Documentation . . . . . . . . . . . . . . . . . . . . . . . 19
4.03 Changes in Locations, Name, etc . . . . . . . . . . . . . . . . . . 20
4.04 Lender's Appointment as Attorney-in-Fact. . . . . . . . . . . . . . 20
4.05 Performance by Lender of Borrower's Obligations . . . . . . . . . . 21
4.06 Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.07 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.08 Limitation on Duties Regarding Preservation of Collateral . . . . . 23
4.09 Powers Coupled with an Interest . . . . . . . . . . . . . . . . . . 23
4.10 Release of Security Interest. . . . . . . . . . . . . . . . . . . . 23
4.11 Interest Rate Protection Agreements . . . . . . . . . . . . . . . . 23
Section 5. Conditions Precedent.
5.01 Initial Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.02 Initial and Subsequent Loans. . . . . . . . . . . . . . . . . . . . 25
Section 6. Representations and Warranties
6.01 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . 27
6.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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6.05 Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.07 Margin Regulations. . . . . . . . . . . . . . . . . . . . . . . . . 28
6.08 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.09 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . 29
6.10 Collateral; Collateral Security.. . . . . . . . . . . . . . . . . . 29
6.11 Chief Executive Office/Jurisdiction of Organization . . . . . . . . 29
6.12 Location of Books and Records . . . . . . . . . . . . . . . . . . . 29
6.13 True and Complete Disclosure. . . . . . . . . . . . . . . . . . . . 29
6.14 Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . 30
6.15 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.16 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.17 Xxxxxx. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7. Covenants of the Borrower
7.01 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 30
7.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.03 Existence, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.04 Prohibition of Fundamental Changes. . . . . . . . . . . . . . . . . 34
7.05 Borrowing Base Deficiency . . . . . . . . . . . . . . . . . . . . . 34
7.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.07 Hedging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.08 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.09 Underwriting Guidelines . . . . . . . . . . . . . . . . . . . . . . 35
7.10 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . 35
7.11 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . 35
7.12 Limitation on Guarantees. . . . . . . . . . . . . . . . . . . . . . 35
7.13 Limitation on Distributions . . . . . . . . . . . . . . . . . . . . 35
7.14 Maintenance of Tangible Net Worth . . . . . . . . . . . . . . . . . 35
7.15 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth. . 36
7.16 Maintenance of Profitability. . . . . . . . . . . . . . . . . . . . 36
7.17 Servicer; Servicing Tape. . . . . . . . . . . . . . . . . . . . . . 36
7.18 Required Filings. . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.19 No Adverse Selection. . . . . . . . . . . . . . . . . . . . . . . . 36
7.20 Computer Systems. . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.21 Remittance of Prepayments . . . . . . . . . . . . . . . . . . . . . 36
Section 8. Events of Default
Section 9. Remedies Upon Default.
Section 10. No Duty of Lender
Section 11. Miscellaneous.
11.01 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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11.03 Indemnification and Expenses. . . . . . . . . . . . . . . . . . . . 40
11.04 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.05 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 41
11.06 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.07 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.08 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.09 Loan Agreement Constitutes Security Agreement; Governing Law. . . . 41
11.10 Submission To Jurisdiction; Waivers . . . . . . . . . . . . . . . . 42
11.11 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . 42
11.12 Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.13 Hypothecation or Pledge of Loans. . . . . . . . . . . . . . . . . . 43
11.14 Servicing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.15 Periodic Due Diligence Review . . . . . . . . . . . . . . . . . . . 44
11.16 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.17 Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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SCHEDULES
SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
SCHEDULE 3 Capitalization
SCHEDULE 4 Servicing Fields
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Request for Borrowing
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT F Underwriting Guidelines
EXHIBIT G Form of Servicer Notice
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MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of October 29 1999,
between AAMES CAPITAL CORPORATION, a California corporation (the "Borrower"),
and XXXXXX XXXXXXX MORTGAGE CAPITAL INC., a New York corporation (the
"Lender").
RECITALS
The Borrower has requested that the Lender from time to time make
revolving credit loans to it to finance certain residential mortgage loans
owned by the Borrower, including certain defaulted residential mortgage
loans, and the Lender is prepared to make such revolving credit loans upon
the terms and conditions hereof. Accordingly, the parties hereto agree as
follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or
in other provisions of this Loan Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"AFFILIATE" shall mean with respect to any Person, any "affiliate"
of such Person, as such term is defined in the Bankruptcy Code.
"APPLICABLE COLLATERAL PERCENTAGE" shall mean, with respect to each
Eligible Mortgage Loan, the applicable collateral percentage set forth in the
chart below opposite the applicable product type:
Product Type Applicable
Collateral
Percentage
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First Lien Loan that is a 95%
Performing Loan and has been
included in the Borrowing
Base for 120 days or less
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First Lien Loan that is a 85%
Performing Loan and has been
included in the Borrowing
Base for longer than 120 days
but less than 270 days
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Second Lien Loan that is a 95%
Performing Loan and has been
included in the Borrowing
Base for 120 days or less
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Second Lien Loan that is a 85%
Performing Loan and has been
included in the Borrowing
Base for longer than 120 days
but less than 270 days
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First Lien Loan or Second 80%
Lien Loan that is a Class A
Defaulted Loan and has been
included in the Borrowing
Base for 120 days or less
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First Lien Loan or Second 75%
Lien Loan that is a Class B
Defaulted Loan and has been
included in the Borrowing
Base for 120 days or less
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First Lien Loan or Second 50%
Lien Loan that is a Class C
Defaulted Loan, prior to
receipt by the Lender of a
BPO for such Class C
Defaulted Loan and has been
included in the Borrowing
Base for 364 days or less
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First Lien Loan or Second 65%
Lien Loan that is a Class C
Defaulted Loan, after receipt
by the Lender of a BPO for
such Class C Defaulted Loan
and has been included in the
Borrowing Base for 364 days
or less
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"APPLICABLE MARGIN" shall mean the sum of the weighted average of
the applicable rates per annum for each product type of Eligible Mortgage
Loan for each day that Loans shall be secured by such Eligible Mortgage
Loans, determined by multiplying (a) for each product type set forth in the
table below, a fraction equal to the Collateral Value of all Eligible
Mortgage Loans of such product type divided by the Collateral Value of all
Eligible Mortgage Loans, TIMES (b) for each product type set forth in the
following table below, the percentage set forth below opposite such product
type:
Product Type Applicable Margin
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0.95%
First Lien Loan that is a
Performing Loan and has been
included in the Borrowing
Base for 120 days or less
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First Lien Loan that is a 1.15%
Performing Loan and has been
included in the Borrowing
Base for longer than 120 days
but less than 270 days
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Second Lien Loan that is a 0.95%
Performing Loan and has been
included in the Borrowing
Base for 120 days or less
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Second Lien Loan that is a 1.15%
Performing Loan and has been
included in the Borrowing
Base for longer than 120 days
but less than 270 days
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First Lien Loan or Second 1.20%
Lien Loan that is a Class A
Defaulted Loan and has been
included in the Borrowing
Base for 120 days or less
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First Lien Loan or Second 1.20%
Lien Loan that is a Class B
Defaulted Loan and has been
included in the Borrowing
Base for 120 days or less
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First Lien Loan or Second 1.50%
Lien Loan that is a Class C
Defaulted Loan and has been
included in the Borrowing
Base for 364 days or less
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Code of
1978, as amended from time to time.
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"BORROWER" shall have the meaning provided in the heading hereof.
"BORROWING BASE" shall mean the aggregate Collateral Value of all
Eligible Mortgage Loans; provided, that the following limitations shall apply:
(i) the aggregate Collateral Value included in the Borrowing Base
at any time of First Lien Loans that are Performing Loans and which have
been included in the Borrowing Base for greater than 180 days but less than
270 days shall not exceed $10,000,000;
(ii) the aggregate Collateral Value included in the Borrowing Base
at any time of Second Lien Loans that are Performing Loans shall not exceed
$25,000,000;
(iii) the aggregate Collateral Value included in the Borrowing Base
at any time of First Lien Loans or Second Lien Loans that are Class A
Defaulted Loans shall not exceed $10,000,000;
(iv) the aggregate Collateral Value included in the Borrowing Base
at any time of First Lien Loans or Second Lien Loans that are Class B
Defaulted Loans shall not exceed $10,000,000;
(v) the aggregate Collateral Value included in the Borrowing Base
at any time of First Lien Loans or Second Lien Loans that are Class C
Defaulted Loans shall not exceed $10,000,000; and
(vi) the Collateral Value shall be deemed to be zero with respect to
each Mortgage Loan:
(1) in respect of which there is a breach of a
representation and warranty set forth on Schedule 1 (assuming each
representation and warranty is made as of the date the Borrowing Base
is determined);
(2) other than any Class C Defaulted Loan, which remains
pledged to the Lender hereunder later than 270 days after the date on
which it is first included in the Collateral;
(3) which is a Class C Defaulted Loan and which remains
pledged to the Lender hereunder later than 364 days after the date on
which it is first included in the Collateral;
(4) which has been released from the possession of the
Custodian under the Custodial Agreement to the Borrower for a period
in excess of 10 days, except in the case of a release to a prospective
purchaser under the terms of a bailee letter in accordance with the
Custodial Agreement, then in excess of 14 days;
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(5) which exceed the limitations on Collateral Value set
forth in (i) through (v) above; or
(6) which is a Class C Defaulted Loan for which a BPO is
unable to be obtained following reasonable efforts to obtain the same,
determined in the sole discretion of the Lender.
"BORROWING BASE DEFICIENCY" shall have the meaning provided in Section
2.06 hereof.
"BPO" shall mean a broker's price opinion relating to the Mortgaged
Property securing an Eligible Mortgage Loan, in form and substance
satisfactory to the Lender in its sole discretion from a broker chosen by the
Lender.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or
Sunday or (ii) a day on which the New York Stock Exchange, the Federal
Reserve Bank of New York or the Custodian is authorized or obligated by law
or executive order to be closed.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this Loan
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"CLASS" shall mean, as to any Defaulted Loan, its status as a Class A
Defaulted, Loan, Class B Defaulted Loan or a Class C Defaulted Loan.
"CLASS A DEFAULTED LOAN" shall mean an Eligible Mortgage Loan for
which the related Mortgagor is 30 to 59 days delinquent in scheduled payments of
principal and interest as at the end of the preceding calendar month.
"CLASS B DEFAULTED LOAN" shall mean an Eligible Mortgage Loan for
which the related Mortgagor is 60 to 89 days delinquent in scheduled payments of
principal and interest as at the end of the preceding calendar month.
"CLASS C DEFAULTED LOAN" shall mean an Eligible Mortgage Loan for
which the related Mortgagor is 90 days or more delinquent in scheduled payments
of principal and interest or which is subject to foreclosure proceedings as at
the end of the preceding calendar month.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COLLATERAL" shall have the meaning provided in Section 4.01(b)
hereof.
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"COLLATERAL VALUE" shall mean, with respect to each Eligible
Mortgage Loan, the lesser of (a) the Applicable Collateral Percentage of the
Market Value of such Eligible Mortgage Loan, except in the case of any Class
C Defaulted Loan prior to the receipt by the Lender of a BPO relating
thereto, in which case the Applicable Collateral Percentage of the
outstanding principal balance of such Eligible Mortgage Loan, and (b) 98% of
the outstanding principal balance of such Eligible Mortgage Loan.
"CUSTODIAL AGREEMENT" shall mean the Custodial Agreement, dated as of
the date hereof, among the Borrower, the Custodian and the Lender, substantially
in the form of Exhibit B hereto, as the same shall be modified and supplemented
and in effect from time to time.
"CUSTODIAN" shall mean Bankers Trust Company, as custodian under
the Custodial Agreement, and its successors and permitted assigns thereunder.
"DEFAULT" shall mean an Event of Default or an event that with notice
or lapse of time or both would become an Event of Default.
"DEFAULTED LOAN" shall mean a Class A Defaulted Loan, a Class B
Defaulted Loan or a Class C Defaulted Loan.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"DUE DILIGENCE REVIEW" shall mean the performance by the Lender of any
or all of the reviews permitted under Section 11.15 hereof with respect to any
or all of the Mortgage Loans, as desired by the Lender from time to time.
"EFFECTIVE DATE" shall mean the date upon which the conditions
precedent set forth in Section 5.01 shall have been satisfied.
"ELIGIBLE MORTGAGE LOAN" shall mean a Mortgage Loan secured by a first
mortgage lien or a second mortgage lien on a one-to-four family residential
property, as to which the representations and warranties in Section 6.10 and
Part I of Schedule 1 hereof are correct; provided that, in no event shall any
Eligible Mortgage Loan be a security for purposes of any securities or blue-sky
laws.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business that
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Borrower is a member.
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"EURODOLLAR RATE" shall mean, with respect to each day during any
calendar month a Loan is outstanding, the rate per annum equal to the rate
appearing at page 5 of the Telerate Screen as one-month LIBOR as of the
Remittance Date occurring in such calendar month; provided, that (x) if such
date is not a Business Day, the Eurodollar Rate for such calendar month shall be
the Eurodollar Rate in effect on the Business Day immediately preceding such
date and (y) if the Funding Date for any Loan shall occur on any date other than
the Remittance Date, the initial Eurodollar Rate for such Loan until the first
Remittance Date to occur after the related Funding Date shall be determined as
of the related Funding Date for such Loan; provided, further, that if such rate
shall not be so quoted, the Eurodollar Rate shall mean the rate per annum at
which the Lender is offered Dollar deposits at or about 10:00 A.M., New York
City time, as of the Remittance Date occurring in such calendar month by prime
banks in the interbank eurodollar market where the eurodollar and foreign
currency exchange operations in respect of its Loans are then being conducted
for delivery on such day for a period of 30 days and in an amount comparable to
the amount of the Loans to be outstanding on such day.
"EVENT OF DEFAULT" shall have the meaning provided in Section 8
hereof.
"FEDERAL FUNDS RATE" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Lender from three
federal funds brokers of recognized standing selected by it.
"FIRST LIEN LOAN" shall mean an Eligible Mortgage Loan for which the
related Mortgage constitutes a first priority lien on the related Mortgaged
Property.
"FUNDING DATE" shall mean the date on which a Loan is made hereunder.
"GAAP" shall mean generally accepted accounting principles as in
effect from time to time in the United States.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over the Borrower,
any of its Subsidiaries or any of its properties.
"GUARANTEE" shall mean, as to any Person, any obligation of such
Person directly or indirectly guaranteeing any Indebtedness of any other Person
or in any manner providing for the payment of any Indebtedness of any other
Person or otherwise protecting the holder of such Indebtedness against loss
(whether by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, or to take-or-pay or otherwise);
provided that the term "Guarantee" shall not include (i) endorsements for
collection or deposit in the ordinary course of business, or (ii) obligations to
make servicing
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advances for delinquent taxes and insurance or other obligations in respect
of a Mortgaged Property, to the extent required by the Lender. The amount of
any Guarantee of a Person shall be deemed to be an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith. The terms "Guarantee" and "Guaranteed" used as verbs shall have
correlative meanings.
"INDEBTEDNESS" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements, sale/buy-back agreements
or like arrangements; (g) Indebtedness of others Guaranteed by such Person;
(h) all obligations of such Person incurred in connection with the acquisition
or carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.
"INTEREST RATE PROTECTION AGREEMENT" shall mean, with respect to any
or all of the Mortgage Loans, any short sale of US Treasury Security, or futures
contract, or mortgage related security, or Eurodollar futures contract, or
options related contract, or interest rate swap, cap or collar agreement or
similar arrangements providing for protection against fluctuations in interest
rates or the exchange of nominal interest obligations, either generally or under
specific contingencies, entered into by the Borrower and an Affiliate of the
Lender, and acceptable to the Lender.
"LENDER" shall have the meaning provided in the heading hereto.
"LIEN" shall mean any mortgage, lien, pledge, charge, security
interest or similar encumbrance.
"LOAN" shall have the meaning provided in Section 2.01(a) hereof.
"LOAN AGREEMENT" shall mean this Master Loan and Security Agreement,
as the same may be amended, supplemented or otherwise modified from time to
time.
"LOAN DOCUMENTS" shall mean, collectively, this Loan Agreement, the
Note and the Custodial Agreement.
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"MARKET VALUE" shall mean, (a) with respect to any Eligible Mortgage
Loan other than a Class C Defaulted Loan, as of any date in respect of such
Eligible Mortgage Loan, the price at which such Eligible Mortgage Loan could
readily be sold, as determined in good faith by the Lender in its sole
discretion, which price may be determined to be zero, and (b) with respect to
any Eligible Mortgage Loan that is a Class C Defaulted Loan, the market value
thereof determined as follows (the Lender's determination of Market Value shall,
with respect to both clause (a) and (b), in all cases be conclusive upon the
parties absent manifest error on the part of the Lender). Promptly following
the inclusion of an Eligible Mortgage Loan in the Borrowing Base as a Class C
Defaulted Loan, the Lender shall seek to obtain a BPO for the related Mortgaged
Property at the expense of the Borrower. The Lender shall also seek to obtain a
new BPO for the related Mortgaged Property at the expense of the Borrower
promptly after such Class C Defaulted Loan shall have been pledged to the Lender
and included in the Borrowing Base for more than 180 days. The Lender shall
determine the market value of such Class C Defaulted Loan based upon the net
proceeds that the Lender, in its sole discretion exercised in good faith,
determines are reasonably likely to be obtained upon a sale of such Mortgaged
Property in light of the results of the most recently obtained related BPO and
the Lender's determination of all ancillary and related costs to be paid prior
to or in connection with the maintenance and disposition of such Mortgaged
Property.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition or prospects of the
Borrower, (b) the ability of the Borrower to perform its obligations under any
of the Loan Documents to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the Lender under
any of the Loan Documents, (e) the timely payment of the principal of or
interest on the Loans or other amounts payable in connection therewith or
(f) the Collateral.
"MAXIMUM CREDIT" shall mean $250,000,000.
"MOODY'S" shall mean Xxxxx'x Investors Service, Inc.
"MORTGAGE" shall mean the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first or second lien on the fee in
real property securing the Mortgage Note.
"MORTGAGE FILE" shall have the meaning assigned thereto in the
Custodial Agreement.
"MORTGAGE LOAN" shall mean a mortgage loan which the Custodian has
been instructed to hold for the Lender pursuant to the Custodial Agreement, and
which Mortgage Loan includes, without limitation, a Mortgage Note and related
Mortgage.
"MORTGAGE LOAN DOCUMENTS" shall mean, with respect to a Mortgage Loan,
the documents comprising the Mortgage File for such Mortgage Loan.
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"MORTGAGE LOAN SCHEDULE" shall have the meaning assigned thereto in
the Custodial Agreement.
"MORTGAGE LOAN SCHEDULE AND EXCEPTION REPORT" shall mean the mortgage
loan schedule and exception report prepared by the Custodian pursuant to the
Custodial Agreement.
"MORTGAGE LOAN TAPE" shall mean a computer-readable file containing
information with respect to each Mortgage Loan, to be delivered by the Borrower
to the Lender pursuant to Section 2.03(a) hereof which tape fields are
identified on Annex I to the Custodial Agreement.
"MORTGAGE NOTE" shall mean the original executed promissory note or
other evidence of the indebtedness of a mortgagor/borrower with respect to a
Mortgage Loan.
"MORTGAGED PROPERTY" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"MORTGAGOR" shall mean the obligor on a Mortgage Note.
"MS & CO." shall mean Xxxxxx Xxxxxxx & Co. Incorporated, a registered
broker-dealer.
"MS INDEBTEDNESS" shall mean any indebtedness of the Borrower
hereunder and under any other arrangement between the Borrower on the one hand
and the Lender or an Affiliate of the Lender on the other hand.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been or are required to be
made by the Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA.
"NET INCOME" shall mean, for any period, the net income of the
Borrower for such period as determined in accordance with GAAP.
"1934 ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"NOTE" shall have the meaning provided in Section 2.02(a) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERFORMING LOAN" shall mean an Eligible Mortgage Loan for which the
related Mortgagor is current or fewer than 30 days delinquent in scheduled
payments of principal and interest as at the end of the preceding calendar
month.
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"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"PLAN" shall mean an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and covered by Title IV of
ERISA, other than a Multiemployer Plan.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Loan or any other amount under this Loan Agreement, the Note or any other Loan
Document that is not paid when due to the Lender (whether at stated maturity, by
acceleration, by mandatory prepayment or otherwise, but not including by
optional prepayment), a rate per annum during the period from and including the
due date to but excluding the date on which such amount is paid in full equal to
4% per annum plus the Prime Rate.
"PRIME RATE" shall mean the prime rate announced to be in effect from
time to time, as published as the average rate in The Wall Street Journal.
"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"REGULATIONS T, U AND X" shall mean Regulations T, U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the same
may be modified and supplemented and in effect from time to time.
"REMITTANCE DATE" shall have the meaning provided in Section 2.05(b)
hereof.
"RESPONSIBLE OFFICER" shall mean, as to any Person, the chief
executive officer, the chief financial officer or Senior Vice President of
Finance of such Person.
"REQUIREMENT OF LAW" shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"S&P" shall mean Standard and Poor's Ratings Services.
"SECOND LIEN LOAN" shall mean an Eligible Mortgage Loan for which the
related Mortgage constitutes a second priority lien on the related Mortgaged
Property.
"SECURED OBLIGATIONS" shall have the meaning provided in Section
4.01(c) hereof.
"SERVICER" shall have the meaning provided in Section 11.14(c) hereof.
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"SERVICING AGREEMENT" shall have the meaning provided in Section
11.14(c) hereof.
"SERVICING RECORDS" shall have the meaning provided in Section
11.14(b) hereof.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"SYSTEM" shall mean all hardware or software, or any system consisting
of one or more thereof, including, without limitation, any and all enhancements,
upgrades, customizations, modifications, maintenance and the like utilized by
any Person for the benefit of such Person to perform its obligations and to
administer and track, store, process, provide, and where appropriate, insert,
true and accurate dates and calculations for dates and spans with respect to the
Mortgage Loans.
"TANGIBLE NET WORTH" shall mean, as of a particular date,
(a) all amounts which would be included under capital on a balance
sheet of the Borrower at such date, determined in accordance with GAAP, LESS
(b) (i) amounts owing to the Borrower from Affiliates and (ii)
intangible assets (for purposes of clarification only, intangible assets (as
used in this definition) shall not include interest only strips or servicing
rights).
"TERMINATION DATE" shall mean October 27, 2000 or such earlier date on
which this Loan Agreement shall terminate in accordance with the provisions
hereof or by operation of law.
"TEST PERIOD" shall have the meaning provided in Section 7.16 hereof.
"TOTAL INDEBTEDNESS" shall mean, for any period, the aggregate
Indebtedness of the Borrower during such period LESS the amount of any
nonspecific balance sheet reserves maintained in accordance with GAAP.
"UNDERWRITING GUIDELINES" shall mean the underwriting guidelines
attached as Exhibit F hereto, as modified from time to time in accordance with
Section 7.09.
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"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York; provided that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"YEAR 2000 COMPLIANT" shall mean the ability of a System to continue
its normal functions including and following January 1, 2000 and the ability of
such System to support its continued normal usage such that neither the
performance nor the correct functioning of such System will be affected by the
approach, and passing into, the year 2000.
1.02 ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lender hereunder shall be
prepared, in accordance with GAAP.
Section 2. LOANS, NOTE AND PREPAYMENTS.
2.01 LOANS.
(a) The Lender agrees to make, on the terms and conditions of
this Loan Agreement, loans (individually, a "LOAN" and, collectively, the
"LOANS") to the Borrower in Dollars, from and including the Effective Date to
and including the Termination Date in an aggregate principal amount at any
one time outstanding up to but not exceeding the lesser of (i) the Maximum
Credit and (ii) the Borrowing Base as in effect from time to time.
(b) Subject to the terms and conditions of this Loan Agreement,
during such period the Borrower may borrow, repay and reborrow hereunder;
PROVIDED, that, notwithstanding the foregoing, the Lender shall have no
obligation to make Loans to the Borrower in excess of the Maximum Credit and,
in the event the obligation of the Lender to make Loans to the Borrower is
terminated as permitted hereunder, the Lender shall have no further
obligation to make additional Loans hereunder.
(c) In no event shall a Loan be made when any Default or Event
of Default has occurred and is continuing.
2.02 NOTES.
(a) The Loans made by the Lender shall be evidenced by a single
promissory note of the Borrower substantially in the form of EXHIBIT A hereto
(the "NOTE"), dated the date hereof, payable to the Lender in a principal
amount equal to the amount of the Maximum Credit as originally in effect and
otherwise duly completed. The Lender shall have the right to have its Note
subdivided, by exchange for promissory notes of lesser denominations or
otherwise.
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(b) The date, amount and interest rate of each Loan made by the
Lender to the Borrower, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any
transfer of the Note, endorsed by the Lender on the schedule attached to the
Note or any continuation thereof; PROVIDED, that the failure of the Lender to
make any such recordation or endorsement shall not affect the obligations of
the Borrower to make a payment when due of any amount owing hereunder or
under the Note in respect of the Loans.
2.03 PROCEDURE FOR BORROWING.
(a) The Borrower may request a borrowing hereunder, on any
Business Day during the period from and including the Effective Date to and
including the Termination Date, by delivering to the Lender, with a copy to
the Custodian, a written request for borrowing, substantially in the form of
EXHIBIT D attached hereto, which request must be received by the Lender prior
to 4:00 p.m., New York City time, one (l) Business Day prior to the requested
Funding Date. Such request for borrowing shall (i) attach a schedule
identifying the Eligible Mortgage Loans that the Borrower proposes to pledge
to the Lender and to be included in the Borrowing Base in connection with
such borrowing, (ii) specify the requested Funding Date, (iii) include a
Mortgage Loan Tape containing information with respect to the Eligible
Mortgage Loans that the Borrower proposes to pledge to the Lender and to be
included in the Borrowing Base in connection with such borrowing, and (iv)
attach an officer's certificate signed by a Responsible Officer of the
Borrower as required by Section 5.02(b) hereof.
(b) The Borrower shall release to the Custodian no later than
4:00 p.m., New York City time, two (2) Business Days prior to the requested
Funding Date, the Mortgage File pertaining to each Eligible Mortgage Loan to
be pledged to the Lender and included in the Borrowing Base on such requested
Funding Date, in accordance with the terms and conditions of the Custodial
Agreement.
(c) Pursuant to the Custodial Agreement, the Custodian shall
deliver to the Lender and the Borrower, no later than 12:00 noon, New York
city time, on a Funding Date, a Trust Receipt (as defined in the Custodial
Agreement) in respect of all Mortgage Loans pledged to the Lender on such
Funding Date, and a Mortgage Loan Schedule and Exception Report.
(d) Upon the Borrower's request for a borrowing pursuant to
Section 2.03(a), and upon satisfaction of all conditions precedent set forth
in Section 5.01 and 5.02 with respect thereto, subject to Section 2.03(f)
below, the Lender shall make a Loan to the Borrower on the requested Funding
Date, in the amount so requested.
(e) Subject to Section 5 hereof, such borrowing will then be
made available to the Borrower by the Lender transferring, via wire transfer,
to the following account of the Borrower: Sanwa Bank California, for the A/C
of Aames Capital Corporation, ABA# 000-000-000, Attn: Aames Capital
Corporation, in the aggregate amount of such borrowing in funds immediately
available to the Borrower, or such other account as the Borrower may direct
in writing to the Lender.
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(f) In the case of any Loan made with respect to any Class C
Defaulted Loan for which a BPO has not been delivered to the Lender on or
prior to the related Funding Date or with respect to any Mortgage Loan that
at any time becomes a Class C Defaulted Loan, the Lender shall transmit an
invoice to the Borrower on a monthly basis in the amount of $100 for each
such Class C Defaulted Loan to be applied to the cost of obtaining a BPO for
each such Class C Defaulted Loan (any excess remaining after payment of the
cost of such BPO to be remitted to the Borrower, and any shortfall towards
payment of the BPO to be paid by the Borrower to the Lender promptly
following demand therefor). Any amounts so invoiced by the Lender to the
Borrower shall be payable promptly (and in any event no later than 10
Business Days following receipt thereof).
2.04 LIMITATION ON TYPES OF LOANS; ILLEGALITY. Anything herein
to the contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate:
(a) the Lender determines in good faith, which determination
shall be conclusive, that quotations of interest rates for the relevant
deposits referred to in the definition of "Eurodollar Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Loans as
provided herein; or
(b) the Lender determines, which determination shall be
conclusive, that the relevant rate of interest referred to in the definition
of "Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate
of interest for Loans is to be determined is not likely adequately to cover
the cost to the Lender of making or maintaining Loans; or
(c) it becomes unlawful for the Lender to honor its obligation
to make or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrower prompt notice thereof and, so long as
such condition remains in effect, the Lender shall be under no obligation to
make additional Loans, and the Borrower shall, either prepay all such Loans
as may be outstanding or pay interest on such Loans at a rate per annum equal
to the Federal Funds Rate plus 0.50% plus the Applicable Margin.
2.05 REPAYMENT OF LOANS; INTEREST.
(a) The Borrower hereby promises to repay in full on the
Termination Date the then aggregate outstanding principal amount of the Loans.
(b) The Borrower hereby promises to pay to the Lender interest
on the unpaid principal amount of each Loan for the period from and including
the date of such Loan to but excluding the date such Loan shall be paid in
full, at a rate per annum equal to the Eurodollar Rate PLUS the Applicable
Margin. Notwithstanding the foregoing, the Borrower hereby promises to pay to
the Lender interest at the applicable Post-Default Rate on any principal of
any Loan and on any other amount payable by the Borrower hereunder or under
the Note that shall not be paid in full when due (whether at stated maturity,
by acceleration or
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by mandatory prepayment or otherwise) for the period from and including the
due date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable monthly on the fifth Business Day of
each month and for the last month of the Loan Agreement on the fifth Business
Day of such last month and on the Termination Date (each a "REMITTANCE
DATE"); provided, that, the Lender may, in its sole discretion, require
accrued interest to be paid simultaneously with any prepayment of principal
made by the Borrower on account of any of the Loans outstanding. Interest
payable at the Post-Default Rate shall accrue daily and shall be payable upon
such accrual.
(c) It is understood and agreed that, unless and until a Default
or Event of Default shall have occurred and be continuing, the Borrower shall
be entitled to the proceeds of the Mortgage Loans pledged to the Lender
hereunder. At any time while a Default has occurred and is continuing, upon
notice from the Lender, the Borrower shall promptly deliver all proceeds of
the Mortgage Loans pledged to the Lender hereunder to the Lender. At any
time while an Event of Default has occurred and is continuing the Borrower
shall promptly deliver all proceeds of the Mortgage Loans pledged to the
Lender hereunder to the Lender
2.06 MANDATORY PREPAYMENTS OR PLEDGE.
(a) If at any time the aggregate outstanding principal amount of
Loans exceeds the Borrowing Base (a "BORROWING BASE DEFICIENCY"), as
determined by the Lender and notified to the Borrower on any Business Day,
the Borrower shall no later than one Business Day after receipt of such
notice, either prepay the Loans in part or in whole or pledge additional
Eligible Mortgage Loans (which Collateral shall be in all respects acceptable
to the Lender) to the Lender, such that after giving effect to such
prepayment or pledge the aggregate outstanding principal amount of the Loans
does not exceed the Borrowing Base.
(b) The Borrower shall prepay the Loans in the amounts of
prepayments remitted to the Lender in accordance with Section 7.21 hereof.
(c) If at any time MS & Co.'s corporate bond rating has been
lowered or downgraded to a rating below A- by S&P or A3 by Moody's and the
Borrower shall repay all amounts owing to the Lender under this Agreement,
the Note and the other Loan Documents within 90 days following such downgrade.
2.07 EXTENSION OF TERMINATION DATE. At the request of the
Borrower made at least thirty (30) days, but in no event earlier than ninety
(90) days, prior to the then current Termination Date, the Lender may in its
sole discretion extend the Termination Date for a period to be determined by
Lender in its sole discretion by giving written notice of such extension to
the Borrower no later than twenty (20) days, but in no event earlier than
thirty (30) days, prior to the then current Termination Date. Any failure by
the Lender to deliver such notice of extension shall be deemed to be the
Lender's determination not to extend the then current Termination Date.
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Section 3. PAYMENTS; COMPUTATIONS; ETC.
3.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments
of principal, interest and other amounts to be made by the Borrower under
this Loan Agreement and the Note, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender at
the following account maintained by the Lender: Account No. 00000000, for
the account of MSMCI, Citibank, N.A., ABA No. 000000000, Attn: Whole Loan
Operations, not later than 5:00 p.m., New York City time, on the date on
which such payment shall become due (and each such payment made after such
time on such due date shall be deemed to have been made on the next
succeeding Business Day). The Borrower acknowledges that it has no rights of
withdrawal from the foregoing account.
(b) Except to the extent otherwise expressly provided herein, if
the due date of any payment under this Loan Agreement or the Note would
otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable
for any principal so extended for the period of such extension.
3.02 COMPUTATIONS. Interest on the Loans shall be computed on
the basis of a 360-day year for the actual days elapsed (including the first
day but excluding the last day) occurring in the period for which payable.
3.03 REQUIREMENTS OF LAW.
(a) If any Requirement of Law (other than with respect to any
amendment made to the Lender's certificate of incorporation and by-laws or
other organizational or governing documents) or any change in the
interpretation or application thereof or compliance by the Lender with any
request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to the date
hereof:
(i) shall subject the Lender to any tax of any kind whatsoever with
respect to this Loan Agreement, the Note or any Loan made by it (excluding
net income taxes) or change the basis of taxation of payments to the Lender
in respect thereof;
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory Loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, Loans or
other extensions of credit by, or any other acquisition of funds by, any
office of the Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder;
(iii) shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount which the Lender deems to be material, of making, continuing or
maintaining any Loan or to reduce any amount due or owing hereunder in respect
thereof, then, in any such case, the Borrower
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shall promptly pay the Lender such additional amount or amounts as will
compensate the Lender for such increased cost or reduced amount receivable.
(b) If the Lender shall have determined that the adoption of or
any change in any Requirement of Law (other than with respect to any
amendment made to the Lender's certificate of incorporation and by-laws or
other organizational or governing documents) regarding capital adequacy or in
the interpretation or application thereof or compliance by the Lender or any
corporation controlling the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof shall have the
effect of reducing the rate of return on the Lender's or such corporation's
capital as a consequence of its obligations hereunder to a level below that
which the Lender or such corporation could have achieved but for such
adoption, change or compliance (taking into consideration the Lender's or
such corporation's policies with respect to capital adequacy) by an amount
deemed by the Lender to be material, then from time to time, the Borrower
shall promptly pay to the Lender such additional amount or amounts as will
compensate the Lender for such reduction.
(c) If the Lender becomes entitled to claim any additional
amounts pursuant to this Section, it shall promptly notify the Borrower of
the event by reason of which it has become so entitled. A certificate as to
any additional amounts payable pursuant to this Section submitted by the
Lender to the Borrower shall be conclusive in the absence of manifest error.
3.04 FACILITY FEE. The Borrower agrees to pay to the Lender on
or prior to the Effective Date a facility fee equal to $325,000, such payment
to be made in Dollars, in immediately available funds, without deduction,
set-off or counterclaim, to the Lender at the account set forth in Section
3.01(a) hereof; PROVIDED, that in the event that the Lender fails to fund any
Loan solely because of the failure to satisfy any condition precedent
contained in Section 5.02(h) or (i) hereof or if the Lender requires a
prepayment of any Loan pursuant to Section 2.06(c) hereof, the Lender shall
refund to the Borrower a portion of the facility fee pro rated for the period
during which the Lender fails to fund for such reason.
Section 4. COLLATERAL SECURITY.
4.01 COLLATERAL; SECURITY INTEREST.
(a) Pursuant to the Custodial Agreement, the Custodian shall
hold the Mortgage Loan Documents as exclusive bailee and agent for the Lender
pursuant to terms of the Custodial Agreement and shall deliver to the Lender
Trust Receipts (as defined in the Custodial Agreement) each to the effect
that it has reviewed such Mortgage Loan Documents in the manner and to the
extent required by the Custodial Agreement and identifying any deficiencies
in such Mortgage Loan Documents as so reviewed.
(b) All of the Borrower's right, title and interest in, to and
under each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, is
hereinafter referred to as the "COLLATERAL":
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(i) all Mortgage Loans;
(ii) all Mortgage Loan Documents, including without limitation all
promissory notes, and all Servicing Records, servicing agreements and any
other collateral pledged or otherwise relating to such Mortgage Loans,
together with all files, documents, instruments, surveys, certificates,
correspondence, appraisals, computer programs, computer storage media,
accounting records and other books and records relating thereto;
(iii) all mortgage guaranties and insurance (issued by governmental
agencies or otherwise) and any mortgage insurance certificate or other
document evidencing such mortgage guaranties or insurance relating to any
Mortgage Loan and all claims and payments thereunder;
(iv) all other insurance policies and insurance proceeds relating to
any Mortgage Loan or the related Mortgaged Property;
(v) all Interest Rate Protection Agreements, relating to or
constituting any and all of the foregoing;
(vi) all collateral, however defined, under any other agreement
between the Borrower or any of its Affiliates on the one hand and the
Lender or any of its Affiliates on the other hand;
(vii) all "general intangibles", "accounts" and "chattel paper" as
defined in the Uniform Commercial Code relating to or constituting any and
all of the foregoing; and
(viii) any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing.
(c) The Borrower hereby assigns, pledges and grants a security
interest in all of its right, title and interest in, to and under the
Collateral to the Lender to secure the MS Indebtedness including without
limitation the repayment of principal of and interest on all Loans and all
other amounts owing to the Lender hereunder, under the Note and under the
other Loan Documents (collectively, the "SECURED OBLIGATIONS"). The Borrower
agrees to xxxx its accounting computer records and tapes to evidence the
interests granted to the Lender hereunder.
4.02 FURTHER DOCUMENTATION. At any time and from time to time,
upon the written request of the Lender, and at the sole expense of the
Borrower, the Borrower will promptly and duly execute and deliver, or will
promptly cause to be executed and delivered, such further instruments and
documents and take such further action as the Lender may reasonably request
for the purpose of obtaining or preserving the full benefits of this Loan
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in
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effect in any jurisdiction with respect to the Liens created hereby. The
Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of the Borrower to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Loan Agreement shall be sufficient as a financing statement for filing
in any jurisdiction.
4.03 CHANGES IN LOCATIONS, NAME, etc. The Borrower shall not (i)
change the location of its chief executive office/chief place of business
from that specified in Section 6 hereof or (ii) change its name, identity or
corporate structure (or the equivalent) or (iii) unless it shall have given
the Lender at least 30 days prior written notice thereof and shall have
delivered to the Lender all Uniform Commercial Code financing statements and
amendments thereto as the Lender shall request and taken all other actions
deemed necessary by the Lender to continue its perfected status in the
Collateral with the same or better priority.
4.04 LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) The Borrower hereby irrevocably constitutes and appoints the
Lender and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of the Borrower and in the name of the
Borrower or in its own name, from time to time in the Lender's discretion,
for the purpose of carrying out the terms of this Loan Agreement, to take any
and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Loan Agreement, and, without limiting the generality of the foregoing,
the Borrower hereby gives the Lender the power and right, on behalf of the
Borrower, without assent by, but with notice to, the Borrower, if an Event of
Default shall have occurred and be continuing, to do the following:
(i) in the name of the Borrower or its own name, or otherwise, to
take possession of and endorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
mortgage insurance or with respect to any other Collateral and to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Lender for the purpose of
collecting any and all such moneys due under any such mortgage insurance or
with respect to any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, assignments, verifications, notices and other documents in
connection with any of the Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any
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portion thereof and to enforce any other right in respect of any
Collateral; (E) to defend any suit, action or proceeding brought against
the Borrower with respect to any Collateral; (F) to settle, compromise
or adjust any suit, action or proceeding described in clause (E) above
and, in connection therewith, to give such discharges or releases as the
Lender may deem appropriate; and (G) generally, to sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any
of the Collateral as fully and completely as though the Lender were the
absolute owner thereof for all purposes, and to do, at the Lender's
option and the Borrower's expense, at any time, and from time to time,
all acts and things which the Lender deems necessary to protect,
preserve or realize upon the Collateral and the Lender's Liens thereon
and to effect the intent of this Loan Agreement, all as fully and
effectively as the Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(b) The Borrower also authorizes the Lender, at any time and
from time to time, to execute, in connection with any sale provided for in
Section 4.07 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to protect the
Lender's interests in the Collateral and shall not impose any duty upon the
Lender to exercise any such powers. The Lender shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither the Lender nor any of its officers, directors, or employees shall
be responsible to the Borrower for any act or failure to act hereunder,
except for its own gross negligence or willful misconduct.
4.05 PERFORMANCE BY LENDER OF BORROWER'S OBLIGATIONS. If the
Borrower fails to perform or comply with any of its agreements contained in
the Loan Documents and the Lender may itself perform or comply, or otherwise
cause performance or compliance, with such agreement, the expenses of the
Lender incurred in connection with such performance or compliance, together
with interest thereon at a rate per annum equal to the Post-Default Rate,
shall be payable by the Borrower to the Lender on demand and shall constitute
Secured Obligations.
4.06 PROCEEDS. If an Event of Default shall occur and be
continuing, (a) all proceeds of Collateral received by the Borrower consisting
of cash, checks and other near-cash items shall be held by the Borrower in trust
for the Lender, segregated from other funds of the Borrower, and shall forthwith
upon receipt by the Borrower be turned over to the Lender in the exact form
received by the Borrower (duly endorsed by the Borrower to the Lender, if
required) and (b) any and all such proceeds received by the Lender (whether from
the Borrower or otherwise) may, in the sole discretion of the Lender, be held by
the Lender as collateral security for, and/or then or at any time thereafter may
be applied by the Lender against, the Secured Obligations (whether matured or
unmatured), such application to be in
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such order as the Lender shall elect. Any balance of such proceeds remaining
after the Secured Obligations shall have been paid in full and this Loan
Agreement shall have been terminated shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same. For purposes
hereof, proceeds shall include, but not be limited to, all principal and
interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other
income and all other amounts received with respect to the Collateral.
4.07 REMEDIES. If an Event of Default shall occur and be
continuing, the Lender may, at its option, enter into one or more Interest
Rate Protection Agreements covering all or a portion of the Mortgage Loans
pledged to the Lender hereunder, and the Borrower shall be responsible for
all damages, judgments, costs and expenses of any kind which may be imposed
on, incurred by or asserted against the Lender relating to or arising out of
such Interest Rate Protection Agreements; including without limitation any
losses resulting from such Interest Rate Protection Agreements. If an Event
of Default shall occur and be continuing, the Lender may exercise, in
addition to all other rights and remedies granted to it in this Loan
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Secured Obligations, all rights and remedies of a secured
party under the Uniform Commercial Code. Without limiting the generality of
the foregoing, the Lender without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower or any other
Person (each and all of which demands, presentments, protests, advertisements
and notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase,
or otherwise dispose of and deliver the Collateral or any part thereof (or
contract to do any of the foregoing), in one or more parcels or as an
entirety at public or private sale or sales, at any exchange, broker's board
or office of the Lender or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The Lender
shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole
or any part of the Collateral so sold, free of any right or equity of
redemption in the Borrower, which right or equity is hereby waived or
released. The Borrower further agrees, at the Lender's request, to assemble
the Collateral and make it available to the Lender at places which the Lender
shall reasonably select, whether at the Borrower's premises or elsewhere.
The Lender shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care
or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Lender hereunder, including without
limitation reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Secured Obligations, in such order as the Lender may
elect, and only after such application and after the payment by the Lender of
any other amount required or permitted by any provision of law, including
without limitation Section 9-504(1)(c) of the Uniform Commercial Code, need
the Lender account for the surplus, if any, to the Borrower. To the extent
permitted by applicable law, the Borrower waives all claims, damages and
demands it may acquire against the Lender
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arising out of the exercise by the Lender of any of its rights hereunder,
other than those claims, damages and demands arising from the gross
negligence or willful misconduct of the Lender. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such
sale or other disposition. The Borrower shall remain liable for any
deficiency (plus accrued interest thereon as contemplated pursuant to Section
2.05(b) hereof) if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Lender to collect such
deficiency.
4.08 LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL.
The Lender's duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as the Lender deals with similar property for its own account.
Neither the Lender nor any of its directors, officers or employees shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of the Borrower
or otherwise.
4.09 POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
4.10 RELEASE OF SECURITY INTEREST. Upon termination of this Loan
Agreement and repayment to the Lender of all Secured Obligations and the
performance of all obligations under the Loan Documents the Lender shall
release its security interest in any remaining Collateral.
4.11 INTEREST RATE PROTECTION AGREEMENTS. In the event that any
Person (other than the Lender) shall have a Lien on any Interest Rate
Protection Agreement that the Borrower has entered into with respect to both
Mortgage Loans pledged to the Lender hereunder and other loans which are not
pledged to the Lender hereunder, the Lender agrees that in the event that the
Lender shall receive any proceeds, recoveries or other amounts in respect of
such Interest Rate Protection Agreement following the exercise of remedies
hereunder after an Event of Default, the Lender shall remit to any such
Person, as to which the Lender has received notice of such Person's Lien on
such Interest Rate Protection Agreement, any excess proceeds of such Interest
Rate Protection Agreement following repayment of all obligations owing to the
Lender hereunder.
Section 5. CONDITIONS PRECEDENT.
5.01 INITIAL LOAN. The obligation of the Lender to make its
initial Loan hereunder is subject to the satisfaction, immediately prior to
or concurrently with the making of such Loan, of the condition precedent that
the Lender shall have received all of the following items, each of which
shall be satisfactory to the Lender and its counsel in form and substance:
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(a) LOAN DOCUMENTS.
(i) LOAN AGREEMENT. The Loan Agreement, duly executed and
delivered by the Borrower;
(ii) NOTE. The Note, duly executed and delivered by the Borrower;
and
(iii) CUSTODIAL AGREEMENT. The Custodial Agreement, duly executed
and delivered by the Borrower and the Custodian;
(b) ORGANIZATIONAL DOCUMENTS. A good standing certificate and
certified copies of the charter and by-laws (or equivalent documents) of the
Borrower and of all corporate or other authority for the Borrower with
respect to the execution, delivery and performance of the Loan Documents and
each other document to be delivered by the Borrower from time to time in
connection herewith (and the Lender may conclusively rely on such certificate
until it receives notice in writing from the Borrower to the contrary);
(c) LEGAL OPINION. A legal opinion of the in-house counsel,
with respect to corporate matters, and outside counsel to the Borrower, with
respect to enforceability and certain other matters, substantially in the
form attached hereto as EXHIBIT C;
(d) TRUE SALE OPINION. A legal opinion of outside counsel of
the Borrower stating that, in respect of Mortgage Loans purchased by the
Borrower from an Affiliate of the Borrower, in the event of bankruptcy or
other insolvency of the Borrower or any other Person, in a properly litigated
proceeding, the sale of Mortgage Loans from such Person to the Borrower would
constitute a true sale, which shall be in form and substance satisfactory to
the Lender.
(e) SERVICING AGREEMENT(S). Any Servicing Agreement, certified
as a true, correct and complete copy of the original, with the letter of the
applicable Servicer consenting to termination of such Servicing Agreement
upon the occurrence of an Event of Default attached;
(f) FILINGS, REGISTRATIONS, RECORDINGS. Any documents
(including, without limitation, financing statements) required to be filed,
registered or recorded in order to create, in favor of the Lender, a
perfected, first-priority security interest in the Collateral, subject to no
Liens other than those created hereunder, shall have been properly prepared
and executed for filing (including the applicable county(ies) if the Lender
determines such filings are necessary in its sole discretion), registration
or recording in each office in each jurisdiction in which such filings,
registrations and recordations are required to perfect such first-priority
security interest; PROVIDED, that assignments of the Mortgages securing or
related to the Mortgage Loans shall not be required to be recorded prior to
the occurrence of an Event of Default;
(g) SECURITIZATION LETTER. A letter agreement between the Borrower
and MS & Co. granting MS & Co. the option to act as lead underwriter or
placement agent in
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connection with not less than one securitization transaction of the Borrower,
duly executed and delivered by the Borrower and MS & Co., which shall be
satisfactory to the Lender in form and substance;
(h) FACILITY FEE. The facility fee as contemplated by Section
3.04;
(i) FINANCIAL STATEMENTS. The financial statements referenced
in Section 6.02;
(j) UNDERWRITING GUIDELINES. A certified copy of the
Underwriting Guidelines, which shall be in form and substance satisfactory to
the Lender;
(k) CONSENTS, LICENSES, APPROVALS, etc. Copies certified by the
Borrower of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by the Borrower of,
and the validity and enforceability of, the Loan Documents, which consents,
licenses and approvals shall be in full force and effect; and
(l) OTHER DOCUMENTS. Such other documents as the Lender may
reasonably request.
5.02 INITIAL AND SUBSEQUENT LOANS. The making of each Loan to
the Borrower (including the initial Loan) on any Business Day is subject to
the satisfaction of the following further conditions precedent, both
immediately prior to the making of such Loan and also after giving effect
thereto and to the intended use thereof:
(a) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing;
(b) REPRESENTATIONS AND WARRANTIES. Both immediately prior to
the making of such Loan and also after giving effect thereto and to the
intended use thereof, the representations and warranties made by the Borrower
in Section 6 and Schedule 1 hereof, and elsewhere in each of the Loan
Documents, shall be true, correct and complete on and as of the date of the
making of such Loan in all material respects (in the case of the
representations and warranties in Section 6.10 and Schedule 1, solely with
respect to Mortgage Loans included in the Borrowing Base) with the same force
and effect as if made on and as of such date (or, if any such representation
or warranty is expressly stated to have been made as of a specific date, as
of such specific date); and the Lender shall have received an officer's
certificate signed by a Responsible Officer of the Borrower certifying as to
the truth, accuracy and completeness of the above, which certificate shall
specifically include a statement that the Borrower is in compliance with all
governmental licenses and authorizations and is qualified to do business and
in good standing in all required jurisdictions and that the Mortgage Loans
being pledged in connection with such Loan have been sold by the originator
that is an Affiliate of the Borrower thereof to the Borrower in a "true sale"
in accordance with the true sale opinion delivered pursuant to Section
5.01(d) hereof.
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(c) BORROWING BASE. The aggregate outstanding principal amount of
the Loans shall not exceed the Borrowing Base;
(d) DUE DILIGENCE. Subject to the Lender's right to perform one or
more Due Diligence Reviews pursuant to Section 11.15 hereof, the Lender shall
have completed its due diligence review of the Mortgage Loan Documents for each
Loan and such other documents, records, agreements, instruments, mortgaged
properties or information relating to such Mortgage Loans as the Lender in its
sole discretion deems appropriate to review and such review shall be
satisfactory to the Lender in its sole discretion;
(e) TRUST RECEIPT AND MORTGAGE LOAN SCHEDULE AND EXCEPTION REPORT.
The Lender shall have received a Trust Receipt, substantially in the form of
ANNEX 2 to the Custodial Agreement, dated the Funding Date, from the Custodian,
duly completed, with a Mortgage Loan Schedule and Exception Report attached
thereto including only such exceptions as are acceptable to the Lender in its
sole discretion in respect of Eligible Mortgage Loans to be pledged hereunder on
such Business Day;
(f) RELEASE LETTER. The Lender shall have received from the
Borrower a Warehouse Lender's Release Letter substantially in the form of
EXHIBIT E-2 hereto (or such other form acceptable to the Lender) or a Seller's
Release Letter substantially in the form of EXHIBIT E-1 hereto (or such other
form acceptable to the Lender) covering each Mortgage Loan to be pledged to the
Lender which was previously pledged to another lender;
(g) FEES AND EXPENSES. The Lender shall have received all fees and
expenses of counsel to the Lender as contemplated by Section 11.03(b), which
amount, at the Lender's option, may be netted from any Loan advanced under this
Agreement;
(h) NO MARKET EVENTS. None of the following shall have occurred
and/or be continuing:
(i) an event or events shall have occurred resulting in the
effective absence of a "repo market" or comparable "lending market" for
financing debt obligations secured by mortgage loans or securities or an
event or events shall have occurred resulting in the Lender not being able
to finance any Mortgage Loans through the "repo market" or "lending market"
with traditional counterparties at rates which would have been reasonable
prior to the occurrence of such event or events;
(ii) an event or events shall have occurred resulting in the
effective absence of a "securities market" for securities backed by
mortgage loans or an event or events shall have occurred resulting in the
Lender not being able to sell securities backed by mortgage loans at prices
which would have been reasonable prior to such event or events; or
(iii) there shall have occurred a material adverse change in the
financial condition of the Lender which affects (or can reasonably be
expected to affect)
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materially and adversely the ability of the Lender to fund its
obligations under this Loan Agreement; and
(i) NO LENDER DOWNGRADE. Xxxxxx Xxxxxxx Xxxx Xxxxxx & Co.'s
corporate bond rating as determined by S&P or Xxxxx'x shall not have been
lowered or downgraded to a rating below A- (in the case of S&P) or below A3 (in
the case of Xxxxx'x).
(j) TANGIBLE NET WORTH. Tangible Net Worth shall not be less than
the sum of (i) $360,000,000 plus (ii) an amount equal to 75% of the aggregate
positive Net Income (without deduction for quarterly losses) plus (iii) 80% of
net proceeds from the issuance of any equity securities of the Borrower or the
making of any capital contributions to the Borrower.
Each request for a borrowing by the Borrower hereunder shall constitute a
certification by the Borrower that all the conditions set forth in this Section
5 (other than Section 5.02(h) and (i)) have been satisfied (both as of the date
of such notice, request or confirmation and as of the date of such borrowing).
Section 6. REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants to the Lender that throughout the term of this Loan
Agreement:
6.01 EXISTENCE. The Borrower (a) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite corporate or other power, and has all
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents and
approvals would not be reasonably likely to have a Material Adverse Effect; and
(c) is qualified to do business and is in good standing in all other
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary, except where failure so to qualify would not be
reasonably likely (either individually or in the aggregate) to have a Material
Adverse Effect.
6.02 FINANCIAL CONDITION. The Borrower has heretofore furnished to
the Lender a copy of its consolidated balance sheet and the consolidated balance
sheets of its consolidated Subsidiaries for the fiscal year of the Borrower
ended June 30, 1999 and the related consolidated statements of income and
retained earnings and of cash flows for the Borrower and its consolidated
Subsidiaries for such fiscal year, setting forth in each case in comparative
form the figures for the previous year, with the opinion thereon of Ernst &
Young, LLP. All such financial statements are complete and correct and fairly
present, in all material respects, the consolidated financial condition of the
Borrower and its Subsidiaries and the consolidated results of their operations
as at such dates and for such fiscal periods, all in accordance with GAAP
applied on a consistent basis. Since June 30, 1999 there has been no material
adverse change in the consolidated business, operations or financial condition
of the Borrower and its consolidated Subsidiaries taken as a whole from that set
forth in said financial statements.
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6.03 LITIGATION. There are no actions, suits, arbitrations,
investigations (including, without limitation, any of the foregoing which are
pending or threatened) or other legal or arbitrable proceedings affecting the
Borrower or any of its Subsidiaries or affecting any of the Property of any of
them before any Governmental Authority that (i) questions or challenges the
validity or enforceability of any of the Loan Documents or any action to be
taken in connection with the transactions contemplated hereby, (ii) makes a
claim or claims in an aggregate amount greater than $3,000,000, (iii) which,
individually or in the aggregate, if adversely determined, could reasonably be
likely to have a Material Adverse Effect, or (iv) requires filing with the
Securities and Exchange Commission in accordance with the 1934 Act or any rules
thereunder.
6.04 NO BREACH. Neither (a) the execution and delivery of the Loan
Documents nor (b) the consummation of the transactions therein contemplated in
compliance with the terms and provisions thereof will conflict with or result in
a breach of the charter or by-laws of the Borrower, or any applicable law, rule
or regulation, or any order, writ, injunction or decree of any Governmental
Authority, or any Servicing Agreement or other material agreement or instrument
to which the Borrower or any of its Subsidiaries is a party or by which any of
them or any of their Property is bound or to which any of them is subject, or
constitute a default under any such material agreement or instrument or result
in the creation or imposition of any Lien (except for the Liens created pursuant
to this Loan Agreement) upon any Property of the Borrower or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.
6.05 ACTION. The Borrower has all necessary corporate or other
power, authority and legal right to execute, deliver and perform its obligations
under each of the Loan Documents; the execution, delivery and performance by the
Borrower of each of the Loan Documents have been duly authorized by all
necessary corporate or other action on its part; and each Loan Document has been
duly and validly executed and delivered by the Borrower and constitutes a legal,
valid and binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms.
6.06 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any Governmental Authority or any securities
exchange are necessary for the execution, delivery or performance by the
Borrower of the Loan Documents or for the legality, validity or enforceability
thereof, except for filings and recordings in respect of the Liens created
pursuant to this Loan Agreement.
6.07 MARGIN REGULATIONS. Neither the making of any Loan hereunder,
nor the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulations T, U or X.
6.08 TAXES. The Borrower and its Subsidiaries have filed all
Federal income tax returns and all other material tax returns that are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any of them, except for any such taxes as
are being appropriately contested in good faith by appropriate
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proceedings diligently conducted and with respect to which adequate reserves
have been provided. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes and other governmental
charges are, in the opinion of the Borrower, adequate.
6.09 INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.10 COLLATERAL; COLLATERAL SECURITY.
(a) The Borrower has not assigned, pledged, or otherwise conveyed
or encumbered any Mortgage Loan or other Collateral to any other Person, and
immediately prior to the pledge of such Mortgage Loan or any other Collateral to
the Lender, the Borrower was the sole owner of such Mortgage Loan or such other
Collateral and had good and marketable title thereto, free and clear of all
Liens, in each case except for Liens to be released simultaneously with the
Liens granted in favor of the Lender hereunder.
(b) The provisions of this Loan Agreement are effective to create
in favor of the Lender a valid security interest in all right, title and
interest of the Borrower in, to and under the Collateral.
(c) Upon receipt by the Custodian of each Mortgage Note, endorsed
in blank by a duly authorized officer of the Borrower, the Lender shall have a
fully perfected first priority security interest therein, in the Mortgage Loan
evidenced thereby and in the Borrower's interest in the related Mortgaged
Property.
(d) Upon the filing of financing statements on Form UCC-1 naming
the Lender as "Secured Party" and the Borrower as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on Schedule 2
attached hereto, the security interests granted hereunder in the Collateral will
constitute fully perfected first priority security interests under the Uniform
Commercial Code in all right, title and interest of the Borrower in, to and
under such Collateral which can be perfected by filing under the Uniform
Commercial Code.
6.11 CHIEF EXECUTIVE OFFICE/JURISDICTION OF ORGANIZATION. On the
Effective Date, and during the four months immediately preceding the Effective
Date, the Borrower's chief executive office, is, and has been, located at 000
Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000. On the
Effective Date, the Borrower's jurisdiction of organization is California.
6.12 LOCATION OF BOOKS AND RECORDS. The location where the Borrower
keeps its books and records, including all computer tapes and records relating
to the Collateral is its chief executive office.
6.13 TRUE AND COMPLETE DISCLOSURE. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Borrower to the
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Lender in connection with the negotiation, preparation or delivery of this
Loan Agreement and the other Loan Documents or included herein or therein or
delivered pursuant hereto or thereto, when taken as a whole, do not contain
any untrue statement of material fact or omit to state any material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the date hereof by or on behalf of the Borrower
to the Lender in connection with this Loan Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of
projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to a Responsible
Officer of the Borrower, after due inquiry, that could reasonably be expected
to have a Material Adverse Effect that has not been disclosed herein, in the
other Loan Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Lender for use in
connection with the transactions contemplated hereby or thereby.
6.14 TANGIBLE NET WORTH. On the Effective Date, the Tangible Net
Worth is not less than $430,000,000.
6.15 ERISA. Each Plan to which the Borrower or its Subsidiaries
make direct contributions, and, to the knowledge of the Borrower, each other
Plan and each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in compliance with, the
applicable provisions of ERISA, the Code and any other Federal or State law. No
event or condition has occurred and is continuing as to which the Borrower would
be under an obligation to furnish a report to the Lender under Section 7.01(d)
hereof.
6.16 CAPITALIZATION. Schedule 3 hereto contains a true, complete
and correct list of all issued and outstanding shares of capital stock of all
Subsidiaries of Aames Financial Corporation and the record owner thereof.
6.17 XXXXXX. As of the Effective Date, the Borrower has not
assigned, pledged, granted a security interest in or lien on or otherwise
encumbered any of its rights, title or interest in and to any Interest Rate
Protection Agreement, other than in favor of the Lender.
Section 7. COVENANTS OF THE BORROWER. The Borrower covenants and
agrees with the Lender that, so long as any Loan is outstanding and until
payment in full of all Secured Obligations:
7.01 FINANCIAL STATEMENTS. The Borrower shall deliver to the
Lender:
(a) as soon as available and in any event within 30 days after the
end of each calendar month other than the last month of any fiscal quarter, the
unaudited consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such month and the related unaudited consolidated
statements of income and retained earnings and of cash flows for the Borrower
and its consolidated Subsidiaries for such month and the portion of the
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fiscal year through the end of such month, accompanied by a certificate of a
Responsible Officer of the Borrower, which certificate shall state that said
consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries in accordance with GAAP, consistently applied, as at the end of,
and for, such month (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarterly fiscal periods of each fiscal year of
the Borrower, the unaudited consolidated balance sheets of the Borrower and its
consolidated Subsidiaries as at the end of such period and the related unaudited
consolidated statements of income and retained earnings and of cash flows for
the Borrower and its consolidated Subsidiaries for such period and the portion
of the fiscal year through the end of such period, accompanied by a certificate
of a Responsible Officer of the Borrower, which certificate shall state that
said consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Borrower and its consolidated
Subsidiaries in accordance with GAAP, consistently applied, as at the end of,
and for, such period (subject to normal year-end audit adjustments);
(c) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, the consolidated balance sheets of the
Borrower and its consolidated Subsidiaries as at the end of such fiscal year and
the related consolidated statements of income and retained earnings and of cash
flows for the Borrower and its consolidated Subsidiaries for such year, setting
forth in each case in comparative form the figures for the previous year,
accompanied by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall not be qualified as to scope
of audit or going concern and shall state that said consolidated financial
statements fairly present the consolidated financial condition and results of
operations of the Borrower and its consolidated Subsidiaries as at the end of,
and for, such fiscal year in accordance with GAAP, and a certificate of such
accountants stating that, in making the examination necessary for their opinion,
they obtained no knowledge, except as specifically stated, of any Default or
Event of Default;
(d) from time to time such other information regarding the
financial condition, operations, or business of the Borrower as the Lender may
reasonably request; and
(e) as soon as reasonably possible, and in any event within thirty
(30) days after a Responsible Officer of the Borrower knows, or with respect to
any Plan or Multiemployer Plan to which the Borrower or any of its Subsidiaries
makes direct contributions, has reason to believe, that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan has
occurred or exists, a statement signed by a senior financial officer of the
Borrower setting forth details respecting such event or condition and the
action, if any, that the Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by the Borrower or an ERISA Affiliate with respect to such event
or condition):
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(i) any reportable event, as defined in Section 4043(c) of ERISA
and the regulations issued thereunder, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within thirty (30) days of the occurrence of such
event (PROVIDED that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA, including without
limitation the failure to make on or before its due date a required
installment under Section 412(m) of the Code or Section 302(e) of ERISA,
shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a waiver
under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of ERISA of a notice of
intent to terminate any Plan or any action taken by the Borrower or an
ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Borrower or any ERISA Affiliate
of a notice from a Multiemployer Plan that such action has been taken by
PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
the Borrower or any ERISA Affiliate that results in liability under Section
4201 or 4204 of ERISA (including the obligation to satisfy secondary
liability as a result of a purchaser default) or the receipt by the
Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that would result in
the loss of tax-exempt status of the Plan and trust of which such Plan is a
part if the Borrower or an ERISA Affiliate fails to provide timely security
to such Plan if and as required by the provisions of Section 401(a)(29) of
the Code or Section 307 of ERISA.
The Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraphs (a), (b) and (c) above, a
certificate of a Responsible Officer of the Borrower to the effect that, to the
best of such Responsible Officer's knowledge, the Borrower during such fiscal
period or year has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Loan Agreement and
the other Loan Documents to be observed, performed or satisfied by it, and that
such Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate (and, if any Default or Event of
Default has occurred and is continuing,
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describing the same in reasonable detail and describing the action the
Borrower has taken or proposes to take with respect thereto).
7.02 LITIGATION. The Borrower will promptly, and in any event
within 10 days after service of process on any of the following, give to the
Lender notice of all litigation, actions, suits, arbitrations, investigations
(including, without limitation, any of the foregoing which are pending or
threatened) or other legal or arbitrable proceedings affecting the Borrower or
any of its Subsidiaries or affecting any of the Property of any of them before
any Governmental Authority that (i) questions or challenges the validity or
enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby, (ii) makes a claim or
claims in an aggregate amount greater than $3,000,000, (iii) which, individually
or in the aggregate, if adversely determined, could be reasonably likely to have
a Material Adverse Effect, or (iii) requires filing with the Securities and
Exchange Commission in accordance with the 1934 Act and any rules thereunder.
7.03 EXISTENCE, ETC. The Borrower will:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that nothing in
this Section 7.03(a) shall prohibit any transaction expressly permitted under
Section 7.04 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such requirements
would be reasonably likely (either individually or in the aggregate) to have a
Material Adverse Effect;
(c) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied;
(d) not move its chief executive office from the address referred
to in Section 6.11 or change its jurisdiction of organization from the
jurisdiction referred to in Section 6.11 unless it shall have provided the
Lender 30 days' prior written notice of such change;
(e) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves are
being maintained; and
(f) permit representatives of the Lender, during normal business
hours, to examine, copy and make extracts from its books and records, to inspect
any of its Properties, and to discuss its business and affairs with its
officers, all to the extent reasonably requested by the Lender.
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7.04 PROHIBITION OF FUNDAMENTAL CHANGES. The Borrower shall not
enter into any transaction of merger or consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up
or dissolution) or sell all or substantially all of its assets; PROVIDED,
that the Borrower may merge or consolidate with (a) any wholly owned
subsidiary of the Borrower, or (b) any other Person if the Borrower is the
surviving corporation; and PROVIDED FURTHER, that if after giving effect
thereto, no Default would exist hereunder.
7.05 BORROWING BASE DEFICIENCY. If at any time there exists a
Borrowing Base Deficiency the Borrower shall cure same in accordance with
Section 2.06 hereof.
7.06 NOTICES. The Borrower shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the occurrence
of any Default or Event of Default;
(b) with respect to all Mortgage Loans pledged to the Lender
hereunder, a weekly report delivered on each date on which prepayments are to be
remitted to the Lender pursuant to Section 7.21 hereof, with respect to the
preceding week, detailing any principal prepayments in full of any pledged
Mortgage Loans received during such preceding week;
(c) with respect to any Mortgage Loan pledged to the Lender
hereunder, promptly upon receipt of notice or knowledge that the underlying
Mortgaged Property has been damaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty, or otherwise damaged so
as to materially and adversely affect the Collateral Value of such pledged
Mortgage Loan; and
(d) promptly upon receipt of notice or knowledge of (i) any default
(other than a payment default) related to any Collateral, (ii) any Lien or
security interest (other than security interests created hereby or by the other
Loan Documents) on, or claim asserted against, any of the Collateral or
(iii) any event or change in circumstances which could reasonably be expected to
have a Material Adverse Effect.
(e) promptly upon any material and adverse change in the market
value of all of the Borrower's assets taken as a whole.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower has taken or
proposes to take with respect thereto.
7.07 HEDGING. The Borrower shall deliver to the Lender monthly a
written summary of the notional amount of all outstanding Interest Rate
Protection Agreements.
7.08 REPORTS. The Borrower shall provide the Lender with a
quarterly report, which report shall include, among other items, a summary of
the Borrower's delinquency and loss experience with respect to mortgage loans
serviced by the Borrower, any Servicer or any
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designee of either, plus any such additional reports as the Lender may
reasonably request with respect to the Borrower's or any Servicer's servicing
portfolio or pending originations of mortgage loans.
7.09 UNDERWRITING GUIDELINES. The Borrower shall provide to the
Lender a copy of any material changes to the Underwriting Guidelines prior to
the effectiveness of any such change. The Lender shall use commercially
reasonable efforts to notify the Borrower within seven (7) Business Days
following the Lender's receipt of such changes if such changes are
acceptable. If such changes are not acceptable to the Lender, in its sole
discretion, any Mortgage Loan which is originated in accordance with the
Underwriting Guidelines as so changed shall not constitute an Eligible
Mortgage Loan.
7.10 TRANSACTIONS WITH AFFILIATES. The Borrower will not enter into
any transaction, including without limitation any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Loan Agreement, (b) in
the ordinary course of the Borrower's business and (c) upon fair and reasonable
terms no less favorable to the Borrower than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate, or make a
payment that is not otherwise permitted by this Section 7.10 to any Affiliate.
7.11 LIMITATION ON LIENS. The Borrower will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien,
security interest or claim on or to the Collateral, other than the security
interests created under this Loan Agreement, and the Borrower will defend the
right, title and interest of the Lenders in and to any of the Collateral against
the claims and demands of all persons whomsoever.
7.12 LIMITATION ON GUARANTEES. The Borrower shall not create,
incur, assume or suffer to exist any additional Guarantee at any time when,
after giving effect to such Guarantee, the Borrower shall have defaulted in any
of its obligations under Section 7.14 through 7.16 hereof.
7.13 LIMITATION ON DISTRIBUTIONS. After the occurrence and during
the continuation of any Default, the Borrower shall not make any payment on
account of, or set apart assets for, a sinking or other analogous fund for the
purchase, redemption, defeasance, retirement or other acquisition of any equity
or partnership interest of the Borrower, whether now or hereafter outstanding,
or make any other distribution in respect of any of the foregoing or to any
shareholder or equity owner of the Borrower, either directly or indirectly,
whether in cash or property or in obligations of the Borrower or any of the
Borrower's consolidated Subsidiaries.
7.14 MAINTENANCE OF TANGIBLE NET WORTH. The Borrower shall not
permit Tangible Net Worth at any time to be less than the sum of (i)
$345,000,000 plus (ii) an amount equal to 75% of the aggregate positive Net
Income (without deduction for quarterly losses) plus (iii) 80% of net proceeds
from the issuance of any equity securities of the Borrower or the making of any
capital contributions to the Borrower.
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7.15 MAINTENANCE OF RATIO OF TOTAL INDEBTEDNESS TO TANGIBLE NET
WORTH. The Borrower shall not permit the ratio of Total Indebtedness to
Tangible Net Worth at any time to be greater than 3.00 to 1.00.
7.16 MAINTENANCE OF PROFITABILITY. The Borrower shall not
permit, for any period of two consecutive fiscal quarters (each such period,
a "Test Period"), commencing with the two consecutive fiscal quarters ending
December 31, 1999, Net Income for such Test Period, before income taxes for
such Test Period and distributions made during such Test Period, to be less
than $1.00.
7.17 SERVICER; SERVICING TAPE. The Borrower shall provide to the
Lender on the fifth Business Day of each month a computer readable file
containing servicing information as of the end of the preceding calendar
month, including without limitation those fields listed on Schedule 4 hereto
or otherwise specified by the Lender from time to time, on a loan-by-loan
basis and in the aggregate, with respect to the Mortgage Loans serviced
hereunder by the Borrower or any Servicer; PROVIDED, that in the case of any
fields requested by the Lender other than those listed on Schedule 4 hereto,
the Borrower shall use reasonable efforts to deliver such data in computer
readable form. The Borrower shall not cause the Mortgage Loans to be
serviced by any servicer other than Aames Funding Corporation or another
servicer expressly approved in writing by the Lender.
7.18 REQUIRED FILINGS. The Borrower shall promptly make available
to the Lender copies of all documents which the Borrower or any Affiliate of the
Borrower is required to file with the Securities and Exchange Commission in
accordance with the 1934 Act or any rules thereunder.
7.19 NO ADVERSE SELECTION. The Borrower has not selected the
Collateral in a manner so as to adversely affect the Lender's interests.
7.20 COMPUTER SYSTEMS. The Borrower shall maintain its System in
a manner that permits the Borrower to be Year 2000 Compliant.
7.21 REMITTANCE OF PREPAYMENTS. The Borrower shall remit, with
sufficient detail to enable the Lender to appropriately identify the Mortgage
Loan to which any amount remitted applies, to the Lender on each Thursday (or
the next Business Day if such Thursday is not a Business Day) all principal
prepayments in full (but not in part) that the Borrower has received during the
previous week that are not paid directly to the Lender. All principal amounts
so remitted shall be applied to the prepayment of the Loans pursuant to Section
2.06(b) hereof.
Section 8. EVENTS OF DEFAULT. Each of the following events
shall constitute an event of default (an "EVENT OF DEFAULT") hereunder:
(a) the Borrower shall default in the payment of any principal
of or interest on any Loan when due (whether at stated maturity, upon
acceleration or at mandatory prepayment); or
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(b) the Borrower shall default in the payment of any other
amount payable by it hereunder or under any other Loan Document after
notification by the Lender of such default, and such default shall have
continued unremedied for five Business Days; or
(c) any representation, warranty or certification made or deemed
made herein or in any other Loan Document by the Borrower or any certificate
furnished to the Lender pursuant to the provisions hereof or thereof shall
prove to have been false or misleading in any material respect as of the time
made or furnished (other than the representations and warranties set forth in
Schedule 1, which shall be considered solely for the purpose of determining
the Collateral Value of the Mortgage Loans; unless (i) the Borrower shall
have made any such representations and warranties with knowledge that they
were materially false or misleading at the time made or (ii) any such
representations and warranties have been determined by the Lender in its sole
discretion to be materially false or misleading on a regular basis); or
(d) the Borrower shall fail to comply with the requirements of
Section 7.03(a), Section 7.04, Section 7.05, Section 7.06(a), or Sections
7.09 through 7.21 hereof (excluding Section 7.17 hereof); or the Borrower
shall otherwise fail to comply with the requirements of Section 7.17 hereof
and such default shall continue unremedied for a period of one Business Day;
or the Borrower shall otherwise fail to comply with the requirements of
Section 7.03 hereof and such default shall continue unremedied for a period
of five Business Days; or the Borrower shall fail to observe or perform any
other covenant or agreement contained in this Loan Agreement or any other
Loan Document and such failure to observe or perform shall continue
unremedied for a period of seven (7) Business Days; or
(e) a final judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate shall be rendered against the Borrower
or any of its Affiliates by one or more courts, administrative tribunals or
other bodies having jurisdiction and the same shall not be satisfied,
discharged (or provision shall not be made for such discharge) or bonded, or
a stay of execution thereof shall not be procured, within 30 days from the
date of entry thereof, and the Borrower or any such Affiliate shall not,
within said period of 30 days, or such longer period during which execution
of the same shall have been stayed or bonded, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or
(f) the Borrower shall admit in writing its inability to pay its
debts as such debts become due; or
(g) the Borrower or any of its Affiliates shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator or the like of itself or of all or
a substantial part of its property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary case
under the
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Bankruptcy Code or (vi) take any corporate or other action for the purpose of
effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of the Borrower or any of its Affiliates, in any court
of competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner, liquidator or the like of the
Borrower or any such Affiliate or of all or any substantial part of its
property, or (iii) similar relief in respect of the Borrower or any such
Affiliate under any law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed,
or an order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of 30 or
more days; or an order for relief against the Borrower or any such Affiliate
shall be entered in an involuntary case under the Bankruptcy Code; or
(i) the Custodial Agreement (without provisions for a
replacement custodial agreement acceptable to the Lender) or any Loan
Document shall for whatever reason be terminated or cease to be in full force
and effect, or the enforceability thereof shall be contested by the Borrower;
or
(j) the Borrower shall grant, or suffer to exist, any Lien on
any Collateral except the Liens contemplated hereby; or the Liens
contemplated hereby shall cease to be first priority perfected Liens on the
Collateral in favor of the Lender or shall be Liens in favor of any Person
other than the Lender; or
(k) the Borrower or any of the Borrower's Affiliates shall be in
default under any note, indenture, loan agreement, guaranty, swap agreement
or any other contract to which it is a party, including, without limitation,
any MS Indebtedness, which has an aggregate face or principal amount of
$1,000,000 or more, which default (i) involves the failure to pay a matured
obligation, or (ii) permits the acceleration of the maturity of obligations
by any other party to or beneficiary of such note, indenture, loan agreement,
guaranty, swap agreement or other contract; or
(l) any materially adverse change in the Property, business,
financial condition or prospects of the Borrower or any of its Affiliates
shall occur, in each case as determined by the Lender in its sole discretion,
or any other condition shall exist which, in the Lender's sole discretion,
constitutes a material impairment of the Borrower's ability to perform its
obligations under this Loan Agreement, the Note or any other Loan Document; or
(m) Aames Financial Corporation's corporate bond rating has been
lowered or downgraded to a rating below CCC by S&P or Caa2 by Xxxxx'x; or
(n) the discovery by the Lender of a condition or event which
existed at or prior to the execution hereof and which the Lender, in its sole
discretion, determines materially and adversely affects: (i) the condition
(financial or otherwise) of the Borrower, its
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Subsidiaries or Affiliates; or (ii) the ability of the Borrower to fulfill
its respective obligations under this Loan Agreement.
SECTION 9. REMEDIES UPON DEFAULT.
(a) An Event of Default shall be deemed to be continuing unless
expressly waived by the Lender in writing. Upon the occurrence of one or
more Events of Default hereunder, the Lender's obligation to make additional
Loans to the Borrower shall automatically terminate without further action by
any Person. Upon the occurrence of one or more Events of Default other than
those referred to in Section 8(g) or (h), the Lender may immediately declare
the principal amount of the Loans then outstanding under the Note to be
immediately due and payable, together with all interest thereon and fees and
expenses accruing under this Loan Agreement. Upon the occurrence of an Event
of Default referred to in Sections 8(g) or (h), such amounts shall
immediately and automatically become due and payable without any further
action by any Person. Upon such declaration or such automatic acceleration,
the balance then outstanding on the Note shall become immediately due and
payable, without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
(b) Upon the occurrence of one or more Events of Default, the
Lender shall have the right to obtain physical possession of the Servicing
Records and all other files of the Borrower relating to the Collateral and
all documents relating to the Collateral which are then or may thereafter
come in to the possession of the Borrower or any third party acting for the
Borrower and the Borrower shall deliver to the Lender such assignments as the
Lender shall request. The Lender shall be entitled to specific performance
of all agreements of the Borrower contained in this Loan Agreement.
Section 10. NO DUTY OF LENDER. The powers conferred on the
Lender hereunder are solely to protect the Lender's interests in the
Collateral and shall not impose any duty upon it to exercise any such powers.
The Lender shall be accountable only for amounts that it actually receives
as a result of the exercise of such powers, and neither it nor any of its
officers, directors, employees or agents shall be responsible to the Borrower
for any act or failure to act hereunder, except for its or their own gross
negligence or willful misconduct.
Section 11. MISCELLANEOUS.
11.01 WAIVER. No failure on the part of the Lender to exercise
and no delay in exercising, and no course of dealing with respect to, any
right, power or privilege under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under any Loan Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.
11.02 NOTICES. Except as otherwise expressly permitted by this Loan
Agreement, all notices, requests and other communications provided for herein
and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests
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or consents under, this Loan Agreement) shall be given or made in writing
(including without limitation by telex or telecopy) delivered to the intended
recipient at the "Address for Notices" specified below its name on the
signature pages hereof or thereof); or, as to any party, at such other
address as shall be designated by such party in a written notice to each
other party provided, that a copy of all notices given under Section 7.01
shall simultaneously be delivered to Credit Department, Xxxxxx Xxxxxxx Xxxx
Xxxxxx, 1221 Avenue of the Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000;
Attention: Xxxxxxx Xxxxxxx. Except as otherwise provided in this Loan
Agreement and except for notices given under Section 2 (which shall be
effective only on receipt), all such communications shall be deemed to have
been duly given when transmitted by telex or telecopy or personally delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.
11.03 INDEMNIFICATION AND EXPENSES.
(a) The Borrower agrees to hold the Lender, and its Affiliates
and their officers, directors, employees, agents and advisors (each an
"INDEMNIFIED PARTY") harmless from and indemnify any Indemnified Party
against all liabilities, losses, damages, judgments, costs and expenses of
any kind which may be imposed on, incurred by or asserted against such
Indemnified Party (collectively, the "COSTS") relating to or arising out of
this Loan Agreement, the Note, any other Loan Document or any transaction
contemplated hereby or thereby, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Loan Agreement, the
Note, any other Loan Document or any transaction contemplated hereby or
thereby, that, in each case, results from anything other than any Indemnified
Party's gross negligence or willful misconduct. Without limiting the
generality of the foregoing, the Borrower agrees to hold any Indemnified
Party harmless from and indemnify such Indemnified Party against all Costs
with respect to all Mortgage Loans relating to or arising out of any
violation or alleged violation of any environmental law, rule or regulation
or any consumer credit laws, including without limitation the Truth in
Lending Act and/or the Real Estate Settlement Procedures Act, that, in each
case, results from anything other than such Indemnified Party's gross
negligence or willful misconduct. In any suit, proceeding or action brought
by an Indemnified Party in connection with any Mortgage Loan for any sum
owing thereunder, or to enforce any provisions of any Mortgage Loan, the
Borrower will save, indemnify and hold such Indemnified Party harmless from
and against all expense, loss or damage suffered by reason of any defense,
set-off, counterclaim, recoupment or reduction or liability whatsoever of the
account debtor or obligor thereunder, arising out of a breach by the Borrower
of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account
debtor or obligor or its successors from the Borrower. The Borrower also
agrees to reimburse an Indemnified Party as and when billed by such
Indemnified Party for all such Indemnified Party's costs and expenses
incurred in connection with the enforcement or the preservation of such
Indemnified Party's rights under this Loan Agreement, the Note, any other
Loan Document or any transaction contemplated hereby or thereby, including
without limitation the reasonable fees and disbursements of its counsel. The
Borrower hereby acknowledges that, notwithstanding the fact that the Note is
secured by the Collateral, the obligation of the Borrower under the Note is a
recourse obligation of the Borrower.
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(b) The Borrower agrees to pay as and when billed by the Lender
all of the out-of-pocket costs and expenses incurred by the Lender in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Loan Agreement, the Note, any
other Loan Document or any other documents prepared in connection herewith or
therewith. The Borrower agrees to pay as and when billed by the Lender all of
the out-of-pocket costs and expenses incurred in connection with the
consummation and administration of the transactions contemplated hereby and
thereby including without limitation (i) all the reasonable fees,
disbursements and expenses of counsel to the Lender, (ii) all the due
diligence, inspection, testing and review costs and expenses incurred by the
Lender with respect to Collateral under this Loan Agreement, including, but
not limited to, those costs and expenses incurred by the Lender pursuant to
Sections 11.03(a), 11.14 and 11.15 hereof and (iii) all reasonable costs and
expenses incurred by the Lender in connection with the underwriting or
re-underwriting of any Mortgage Loan from time to time.
11.04 AMENDMENTS. Except as otherwise expressly provided in this
Loan Agreement, any provision of this Loan Agreement may be modified or
supplemented only by an instrument in writing signed by the Borrower and the
Lender and any provision of this Loan Agreement may be waived by the Lender.
11.05 SUCCESSORS AND ASSIGNS. This Loan Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
11.06 SURVIVAL. The obligations of the Borrower under Sections 3.03
and 11.03 hereof shall survive the repayment of the Loans and the termination of
this Loan Agreement. In addition, each representation and warranty made or
deemed to be made by a request for a borrowing, herein or pursuant hereto shall
survive the making of such representation and warranty, and the Lender shall not
be deemed to have waived, by reason of making any Loan, any Default that may
arise because any such representation or warranty shall have proved to be false
or misleading, notwithstanding that the Lender may have had notice or knowledge
or reason to believe that such representation or warranty was false or
misleading at the time such Loan was made.
11.07 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Loan Agreement.
11.08 COUNTERPARTS. This Loan Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any of the parties hereto may execute this Loan Agreement
by signing any such counterpart.
11.09 LOAN AGREEMENT CONSTITUTES SECURITY AGREEMENT; GOVERNING
LAW. This Loan Agreement shall be governed by New York law without reference
to choice of law doctrine (other than Section 5-1401 of the New York General
Obligations Law), and shall constitute a security agreement within the
meaning of the Uniform Commercial Code.
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11.10 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT
COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET
FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE LENDER
SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT
TO XXX IN ANY OTHER JURISDICTION.
11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
11.12 ACKNOWLEDGMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Loan Agreement, the Note and the other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrower, and
the relationship between the Borrower and the Lender is solely that of debtor
and creditor; and
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(c) no joint venture exists between the Lender and the Borrower.
11.13 HYPOTHECATION OR PLEDGE OF LOANS. The Lender shall have free
and unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude the Lender from engaging in repurchase transactions with the Collateral
or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrower.
11.14 SERVICING.
(a) The Borrower covenants to maintain or cause the servicing of
the Mortgage Loans to be maintained in conformity with accepted and prudent
servicing practices in the industry for the same type of mortgage loans as the
Mortgage Loans and in a manner at least equal in quality to the servicing the
Borrower provides for mortgage loans which it owns. In the event that the
preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an Event of Default, (ii) the date on which all the Secured
Obligations have been paid in full or (iii) the transfer of servicing approved
by the Borrower.
(b) If the Mortgage Loans are serviced by the Borrower, (i) the
Borrower agrees that the Lender is the collateral assignee of all servicing
records, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Mortgage Loans (the "SERVICING RECORDS"), and (ii)
the Borrower grants the Lender a security interest in all servicing fees and
rights relating to the Mortgage Loans and all Servicing Records to secure the
obligation of the Borrower or its designee to service in conformity with this
Section and any other obligation of the Borrower to the Lender. The Borrower
covenants to safeguard such Servicing Records and to deliver them promptly to
the Lender or its designee (including the Custodian) at the Lender's request.
(c) If the Mortgage Loans are serviced by a third party servicer
other than Aames Funding Corporation (such third party servicer, the
"SERVICER"), the Borrower (i) shall provide a copy of the servicing agreement to
the Lender, which shall be in form and substance acceptable to the Lender (the
"SERVICING AGREEMENT"); (ii) shall provide a Servicer Notice to the Servicer
substantially in the form of EXHIBIT G hereto, and (iii) hereby irrevocably
assigns to the Lender and the Lender's successors and assigns all right, title,
interest of the Borrower in, to and under, and the benefits of, any Servicing
Agreement with respect to the Mortgage Loans. Any successor to the Master
Servicer shall be approved in writing by the Lender prior to such successor's
assumption of servicing obligations with respect to the Mortgage Loans.
(d) If the servicer of the Mortgage Loans is the Borrower or the
Servicer is an Affiliate of the Borrower, the Borrower shall provide to the
Lender a letter from the Borrower or the Servicer, as the case may be, to the
effect that upon the occurrence of an Event of Default, the Lender may terminate
any Servicing Agreement and transfer servicing to
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its designee, at no cost or expense to the Lender, it being agreed that the
Borrower will pay any and all fees required to terminate the Servicing
Agreement and to effectuate the transfer of servicing to the designee of the
Lender.
(e) After the Funding Date, until the pledge of any Mortgage Loan
is relinquished by the Custodian, the Borrower will have no right to modify or
alter the terms of such Mortgage Loan and the Borrower will have no obligation
or right to repossess such Mortgage Loan or substitute another Mortgage Loan,
except as provided in the Custodial Agreement.
(f) In the event the Borrower or its Affiliate is servicing the
Mortgage Loans, the Borrower shall permit the Lender to inspect the Borrower's
or its Affiliate's servicing facilities, as the case may be, for the purpose of
satisfying the Lender that the Borrower or its Affiliate, as the case may be,
has the ability to service the Mortgage Loans as provided in this Loan
Agreement.
(g) The Borrower shall ensure that the Servicer will maintain the
Servicer's System in a manner that permits the Servicer to be Year 2000
Compliant.
11.15 PERIODIC DUE DILIGENCE REVIEW. The Borrower acknowledges
that the Lender has the right to perform continuing due diligence reviews
with respect to the Mortgage Loans, for purposes of verifying compliance with
the representations, warranties and specifications made hereunder, or
otherwise, and the Borrower agrees that upon reasonable (but no less than one
(1) Business Day's) prior notice to the Borrower, the Lender or its
authorized representatives will be permitted during normal business hours to
examine, inspect, and make copies and extracts of, the Mortgage Files and any
and all documents, records, agreements, instruments or information relating
to such Mortgage Loans in the possession or under the control of the Borrower
and/or the Custodian. The Borrower also shall make available to the Lender a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Mortgage Files and the Mortgage Loans. Without
limiting the generality of the foregoing, the Borrower acknowledges that the
Lender may make Loans to the Borrower based solely upon the information
provided by the Borrower to the Lender in the Mortgage Loan Tape and the
representations, warranties and covenants contained herein, and that the
Lender, at its option, has the right at any time to conduct a partial or
complete due diligence review on some or all of the Mortgage Loans securing
such Loan, including without limitation ordering new credit reports and new
appraisals on the related Mortgaged Properties and otherwise re-generating
the information used to originate such Mortgage Loan. The Lender may
underwrite such Mortgage Loans itself or engage a mutually agreed upon third
party underwriter to perform such underwriting. It is understood that, in
the case of Class C Defaulted Loans, such underwriting is expected to occur
quarterly with respect to 10-20% of the Class C Defaulted Loans then included
in the Borrowing Base. The Borrower agrees to cooperate with the Lender and
any third party underwriter in connection with such underwriting, including,
but not limited to, providing the Lender and any third party underwriter with
access to any and all documents, records, agreements, instruments or
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information relating to such Mortgage Loans in the possession, or under the
control, of the Borrower.
11.16 SET-OFF. In addition to any rights and remedies of the Lender
provided by this Loan Agreement and by law, the Lender shall have the right,
without prior notice to the Borrower, any such notice being expressly waived by
the Borrower to the extent permitted by applicable law, upon any amount becoming
due and payable by the Borrower hereunder (whether at the stated maturity, by
acceleration or otherwise) to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Lender or any Affiliate
thereof to or for the credit or the account of the Borrower. The Lender agrees
promptly to notify the Borrower after any such set-off and application made by
the Lender; PROVIDED, that the failure to give such notice shall not affect the
validity of such set-off and application.
11.17 INTENT. The parties recognize that each Loan is a "securities
contract" as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed and delivered as of the day and year first above written.
BORROWER
AAMES CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Name: Xxxxx X. Xxxxx
Title: EVP-Finance and CFO
ADDRESS FOR NOTICES:
000 Xxxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Telecopier No.: 000-000-0000
Telephone No: 000-000-0000
WITH A COPY TO:
General Counsel
LENDER
XXXXXX XXXXXXX MORTGAGE
CAPITAL INC.
By: /s/ Xxxx Xxxxxxx
---------------------------------
Title: Vice President
ADDRESS FOR NOTICES:
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxxx
Telecopier No.: 000-000-0000
Telephone No.: 000-000-0000
Schedule 1
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Part I. ELIGIBLE RESIDENTIAL MORTGAGE LOANS
As to each residential Mortgage Loan included in the Borrowing Base
on a Funding Date (and the related Mortgage, Mortgage Note, Assignment of
Mortgage and Mortgaged Property), the Borrower shall be deemed to make the
following representations and warranties to the Lender as of such date and as
of each date the Borrowing Base is determined (certain defined terms used
herein and not otherwise defined in the Loan Agreement appearing in Part II
to this Schedule 1):
(a) MORTGAGE LOANS AS DESCRIBED. The information set forth in the
Mortgage Loan Schedule with respect to the Mortgage Loan is complete, true and
correct in all material respects.
(b) PAYMENTS CURRENT. Except in the case of a Defaulted Loan and
to the extent contemplated by the definition of the applicable Class of
Defaulted Loan, not more than one payment required under the Mortgage Loan is
delinquent. Except in the case of a Defaulted Loan, the first Monthly Payment
shall be made, or shall have been made, with respect to the Mortgage Loan on its
Due Date or within the grace period, all in accordance with the terms of the
related Mortgage Note.
(c) NO OUTSTANDING CHARGES. Except in the case of a Defaulted
Loan, there are no defaults in complying with the terms of the Mortgage
securing the Mortgage Loan, and all taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid, or an
escrow of funds has been established in an amount sufficient to pay for every
such item which remains unpaid and which has been assessed but is not yet due
and payable. Neither the Borrower nor the originator from which the Borrower
acquired the Mortgage Loan has advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the Mortgagor,
directly or indirectly, for the payment of any amount required under the
Mortgage Loan, except for interest accruing from the date of the Mortgage
Note or date of disbursement of the proceeds of the Mortgage Loan, whichever
is earlier, to the day which precedes by one month the Due Date of the first
installment of principal and interest thereunder.
(d) ORIGINAL TERMS UNMODIFIED. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of origination; except by a written instrument which has been
recorded, if necessary to protect the interests of the Lender, and which has
been delivered to the Custodian and the terms of which are reflected in the
Mortgage Loan Schedule. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required, and
its terms are reflected on the Mortgage Loan Schedule. No Mortgagor in respect
of the Mortgage Loan has
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been released, in whole or in part, except in connection with an assumption
agreement approved by the title insurer, to the extent required by such
policy, and which assumption agreement is part of the Mortgage File delivered
to the Custodian and the terms of which are reflected in the Mortgage Loan
Schedule.
(e) NO DEFENSES. The Mortgage Loan is not subject to any right
of rescission, set-off, counterclaim or defense, including without limitation
the defense of usury, nor will the operation of any of the terms of the
Mortgage Note or the Mortgage, or the exercise of any right thereunder,
render either the Mortgage Note or the Mortgage unenforceable and, except as
permitted by the Underwriting Guidelines, no Mortgagor in respect of the
Mortgage Loan was a debtor in any state or Federal bankruptcy or insolvency
proceeding at the time the Mortgage Loan was originated. The Borrower has no
knowledge nor has it received any notice that any Mortgagor in respect of the
Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency
proceeding.
(f) HAZARD INSURANCE. The Mortgaged Property is insured by a
fire and extended perils insurance policy, issued by a generally acceptable
insurance carrier, and such other hazards as are customary in the area where
the Mortgaged Property is located, and to the extent required by the Borrower
as of the date of origination consistent with the Underwriting Guidelines,
against earthquake and other risks insured against by Persons operating like
properties in the locality of the Mortgaged Property, in an amount not less
than the greatest of (i) 100% of the replacement cost of all improvements to
the Mortgaged Property, (ii) the outstanding principal balance of the
Mortgage Loan, or (iii) the amount necessary to avoid the operation of any
co-insurance provisions with respect to the Mortgaged Property, and
consistent with the amount that would have been required as of the date of
origination in accordance with the Underwriting Guidelines. If any portion
of the Mortgaged Property is in an area identified by any federal
Governmental Authority as having special flood hazards, and flood insurance
is available, a flood insurance policy meeting the current guidelines of the
Federal Emergency Management Agency is in effect with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least
of (1) the outstanding principal balance of the Mortgage Loan, (2) the full
insurable value of the Mortgaged Property, and (3) the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as
amended by the Flood Disaster Protection Act of 1974. All such insurance
policies (collectively, the "hazard insurance policy") contain a standard
mortgagee clause naming the Borrower, its successors and assigns (including
without limitation, subsequent owners of the Mortgage Loan), as mortgagee,
and may not be reduced, terminated or canceled without 30 days' prior written
notice to the mortgagee. No such notice has been received by the Borrower.
All premiums on such insurance policy have been paid. The related Mortgage
obligates the Mortgagor to maintain all such insurance and, at such
Mortgagor's failure to do so, authorizes the mortgagee to maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from such Mortgagor. Where required by state law or regulation, the
Mortgagor has been given an opportunity to choose the carrier of the required
hazard insurance, provided the policy is not a "master" or "blanket" hazard
insurance policy covering a condominium, or any hazard insurance policy
covering the common facilities of a planned unit development. The hazard
insurance policy is
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the valid and binding obligation of the insurer and is in full force and
effect. The Borrower has not engaged in, and has no knowledge of the
Mortgagor's having engaged in, any act or omission which would impair the
coverage of any such policy, the benefits of the endorsement provided for
herein, or the validity and binding effect of either including, without
limitation, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or
realized by any attorney, firm or other Person, and no such unlawful items
have been received, retained or realized by the Borrower.
(g) COMPLIANCE WITH APPLICABLE LAWS. Any and all material
requirements of any federal, state or local law including, without
limitation, usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan have been complied with, the consummation of
the transactions contemplated hereby will not involve the violation of any
such laws or regulations, and the Borrower shall maintain or shall cause its
agent to maintain in its possession, available for the inspection of the
Lender, and shall deliver to the Lender, upon demand, evidence of compliance
with all such requirements.
(h) NO SATISFACTION OF MORTGAGE. The Mortgage has not been
satisfied, canceled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in
whole or in part, nor has any instrument been executed that would effect any
such release, cancellation, subordination or rescission. The Borrower has
not waived the performance by the Mortgagor of any action, if the Mortgagor's
failure to perform such action would cause the Mortgage Loan to be in
default, nor has the Borrower waived any default resulting from any action or
inaction by the Mortgagor.
(i) LOCATION AND TYPE OF MORTGAGED PROPERTY. The Mortgaged
Property consists of a single parcel of real property with a detached single
family residence erected thereon, or a two- to four-family dwelling, or an
individual condominium unit in a condominium project of not more than four
stories or such greater number of stories as shall be common for condominium
projects in the location of such Mortgaged Property, or an individual unit in
a planned unit development or a de minimis planned unit development,
provided, however, that any condominium unit or planned unit development
shall conform with the applicable FNMA and FHLMC requirements regarding such
dwellings.
(j) VALID FIRST OR SECOND LIEN. The Mortgage is a valid,
subsisting, enforceable and perfected first lien, in the case of a First Lien
Loan, or second lien, in the case of a Second Lien Loan, on the real property
included in the Mortgaged Property, including all buildings on the Mortgaged
Property and all installations and mechanical, electrical, plumbing, heating
and air conditioning systems located in or annexed to such buildings, and all
additions, alterations and replacements made at any time with respect to the
foregoing. The lien of the Mortgage is subject only to:
(1) the lien of current real property taxes and assessments not yet
due and payable;
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(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to prudent mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered
to the originator of the Mortgage Loan and (a) referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan or
(b) which do not adversely affect the Appraised Value of the Mortgaged
Property set forth in such appraisal;
(3) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property; and
(4) in the case of any Second Lien Loan, the lien of the related
primary mortgage.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first lien and first priority security interest on
the property described therein and the Borrower has full right to pledge and
assign the same to the Lender.
(k) VALIDITY OF MORTGAGE DOCUMENTS. The Mortgage Note and the
Mortgage and any other agreement executed and delivered by a Mortgagor or
guarantor, if applicable, in connection with a Mortgage Loan are genuine, and
each is the legal, valid and binding obligation of the maker thereof
enforceable in accordance with its terms. All parties to the Mortgage Note,
the Mortgage and any other such related agreement had legal capacity to enter
into the Mortgage Loan and to execute and deliver the Mortgage Note, the
Mortgage and any such agreement, and the Mortgage Note, the Mortgage and any
other such related agreement have been duly and properly executed by such
related parties. No fraud, error, omission, misrepresentation, negligence or
similar occurrence with respect to a Mortgage Loan has taken place on the
part of any Person, including, without limitation, the Mortgagor, any
appraiser, any builder or developer, or any other party involved in the
origination of the Mortgage Loan. The Borrower has reviewed all of the
documents constituting the Servicing File and has made such inquiries as it
deems necessary to make and confirm the accuracy of the representations set
forth herein.
(l) FULL DISBURSEMENT OF PROCEEDS. All costs, fees and expenses
incurred in making or closing the Mortgage Loan and the recording of the
Mortgage were paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due under the Mortgage Note or Mortgage.
(m) OWNERSHIP. The Borrower is the sole owner and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged, and the
Borrower has good, indefeasible and marketable title thereto, and has full
right to transfer, pledge and assign the Mortgage Loan to the Lender free and
clear of any encumbrance, equity, participation interest, lien, pledge,
charge, claim or security interest, and has full right and authority subject
to no
1-4
interest or participation of, or agreement with, any other party, to assign,
transfer and pledge each Mortgage Loan pursuant to this Loan Agreement and
following the pledge of each Mortgage Loan, the Lender will hold such
Mortgage Loan free and clear of any encumbrance, equity, participation
interest, lien, pledge, charge, claim or security interest except any such
security interest created pursuant to the terms of this Loan Agreement.
(n) DOING BUSINESS. All parties which have had any interest in
the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are
(or, during the period in which they held and disposed of such interest,
were) (i) in compliance with any and all applicable licensing requirements of
the laws of the state wherein the Mortgaged Property is located, and (ii)
either (A) organized under the laws of such state, (B) qualified to do
business in such state, (C) a federal savings and loan association, a savings
bank or a national bank having a principal office in such state, or (D) not
doing business in such state.
(o) LTV. No Mortgage Loan which is a First Lien Loan has an LTV
greater than 90% unless such Mortgage Loan is insured under a mortgage
guaranty insurance policy providing coverage to an LTV of not greater than
90%. No Mortgage Loan which is a Second Lien Loan has an LTV greater than
100% (determined by taking the sum of the first mortgage loan on the related
Mortgaged Property and the unpaid principal balance of the Second Lien Loan
and treating such amount as the amount of the Mortgage Loan).
(p) TITLE INSURANCE. The Mortgage Loan is covered by either (i)
an attorney's opinion of title and abstract of title, the form and substance
of which is acceptable to prudent mortgage lending institutions making
mortgage loans in the area wherein the Mortgaged Property is located or (ii)
an ALTA lender's title insurance policy or other generally acceptable form of
policy or insurance acceptable to FNMA or FHLMC and each such title insurance
policy is issued by a title insurer acceptable to FNMA or FHLMC and qualified
to do business in the jurisdiction where the Mortgaged Property is located,
insuring the Borrower, its successors and assigns, as to the first priority
lien of the Mortgage in the original principal amount of the Mortgage Loan
(or to the extent a Mortgage Note provides for negative amortization, the
maximum amount of negative amortization in accordance with the Mortgage),
subject only to the exceptions contained in clauses (1), (2) and (3) of
paragraph (j) of this Part I of Schedule 1, and in the case of adjustable
rate Mortgage Loans, against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage
providing for adjustment to the Mortgage Interest Rate and Monthly Payment.
Where required by state law or regulation, the Mortgagor has been given the
opportunity to choose the carrier of the required mortgage title insurance.
Additionally, such lender's title insurance policy affirmatively insures
ingress and egress and against encroachments by or upon the Mortgaged
Property or any interest therein. The title policy does not contain any
special exceptions (other than the standard exclusions) for zoning and uses
and has been marked to delete the standard survey exception or to replace the
standard survey exception with a specific survey reading. The Borrower, its
successors and assigns, are the sole insureds of such lender's title
insurance policy, and such lender's title insurance policy is valid and
remains in full force and effect and will be in force and effect upon the
consummation of the transactions contemplated by this Loan Agreement. No
claims have been made under such lender's title
1-5
insurance policy, and no prior holder or servicer of the related Mortgage,
including the Borrower, has done, by act or omission, anything which would
impair the coverage of such lender's title insurance policy, including,
without limitation, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or
realized by any attorney, firm or other Person, and no such unlawful items
have been received, retained or realized by the Borrower.
(q) NO DEFAULTS. Other than payment delinquencies, there is no
default, breach, violation or event of acceleration existing under the Mortgage
or the Mortgage Note and no event has occurred which, with the passage of time
or with notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration, and neither the Borrower
nor its predecessors have waived any default, breach, violation or event of
acceleration.
(r) NO MECHANICS' LIENS. There are no mechanics' or similar liens
or claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage.
(s) LOCATION OF IMPROVEMENTS; NO ENCROACHMENTS. All
improvements which were considered in determining the Appraised Value of the
Mortgaged Property lie wholly within the boundaries and building restriction
lines of the Mortgaged Property, and no improvements on adjoining properties
encroach upon the Mortgaged Property. No improvement located on or being
part of the Mortgaged Property is in violation of any applicable zoning and
building law, ordinance or regulation.
(t) ORIGINATION; PAYMENT TERMS. Principal payments on the
Mortgage Loan commenced no more than 60 days after funds were disbursed in
connection with the Mortgage Loan. The Mortgage Interest Rate is adjusted,
with respect to adjustable rate Mortgage Loans, on each Interest Rate
Adjustment Date to equal the Index plus the Gross Margin (rounded up or down
to the nearest .125%), subject to the Mortgage Interest Rate Cap. The
Mortgage Note is payable monthly in equal monthly installments of principal
and interest (other than in the case of balloon loans), which installments of
interest, with respect to adjustable rate Mortgage Loans, are subject to
change due to the adjustments to the Mortgage Interest Rate on each Interest
Rate Adjustment Date, with interest calculated and payable in arrears,
sufficient to amortize the Mortgage Loan fully by the stated maturity date,
over an original term of not more than 30 years from commencement of
amortization. The due date of the first payment under the Mortgage Note is
no more than 60 days from the date of the Mortgage Note.
(u) CUSTOMARY PROVISIONS. The Mortgage Note has a stated
maturity. The Mortgage contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including, (i) in the case of a Mortgage designated as a
deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure.
Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or
trustee's sale of, the
1-6
Mortgaged Property pursuant to the proper procedures, the holder of the
Mortgage Loan will be able to deliver good and merchantable title to the
Mortgaged Property. There is no homestead or other exemption available to a
Mortgagor which would interfere with the right to sell the Mortgaged Property
at a trustee's sale or the right to foreclose the Mortgage.
(v) CONFORMANCE WITH UNDERWRITING GUIDELINES AND AGENCY
STANDARDS. The Mortgage Loan was underwritten in accordance with the
Underwriting Guidelines. The Mortgage Note and Mortgage are on forms similar
to those used by FHLMC or FNMA, except with respect to prepayment penalties,
and the Borrower has not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used.
(w) OCCUPANCY OF THE MORTGAGED PROPERTY. As of the Funding Date
the Mortgaged Property is lawfully occupied under applicable law. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property and, with respect
to the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, have been made
or obtained from the appropriate authorities. The Borrower has not received
notification from any Governmental Authority that the Mortgaged Property is
in material non-compliance with such laws or regulations, is being used,
operated or occupied unlawfully or has failed to have or obtain such
inspection, licenses or certificates, as the case may be. The Borrower has
not received notice of any violation or failure to conform with any such law,
ordinance, regulation, standard, license or certificate.
(x) NO ADDITIONAL COLLATERAL. The Mortgage Note is not and has
not been secured by any collateral except the lien of the corresponding
Mortgage and the security interest of any applicable security agreement or
chattel mortgage referred to in clause (j) above.
(y) DEEDS OF TRUST. In the event the Mortgage constitutes a
deed of trust, a trustee, authorized and duly qualified under applicable law
to serve as such, has been properly designated and currently so serves and is
named in the Mortgage, and no fees or expenses are or will become payable by
the Custodian or the Lender to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the Mortgagor.
(z) DELIVERY OF MORTGAGE DOCUMENTS. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other documents required to be
delivered under the Custodial Agreement for each Mortgage Loan have been
delivered to the Custodian. The Borrower or its agent is in possession of a
complete, true and accurate Mortgage File in compliance with the Custodial
Agreement, except for such documents the originals of which have been
delivered to the Custodian.
(aa) TRANSFER OF MORTGAGE LOANS. The Assignment of Mortgage is
in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
1-7
(bb) DUE-ON-SALE. The Mortgage contains an enforceable provision
for the acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event that the Mortgaged Property is sold or transferred
without the prior written consent of the mortgagee thereunder.
(cc) NO BUYDOWN PROVISIONS; NO GRADUATED PAYMENTS OR CONTINGENT
INTERESTS. The Mortgage Loan does not contain provisions pursuant to which
Monthly Payments are paid or partially paid with funds deposited in any
separate account established by the Borrower, the Mortgagor, or anyone on
behalf of the Mortgagor, or paid by any source other than the Mortgagor nor
does it contain any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and
the Mortgage Loan does not have a shared appreciation or other contingent
interest feature.
(dd) CONSOLIDATION OF FUTURE ADVANCES. Any future advances made
to the Mortgagor prior to the Funding Date have been consolidated with the
outstanding principal amount secured by the Mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term. The lien of the Mortgage securing the consolidated principal
amount is expressly insured as having first lien priority, in the case of a
first Mortgage, or second lien priority, in the case of a second mortgage, by
a title insurance policy, an endorsement to the policy insuring the
mortgagee's consolidated interest or by other title evidence acceptable to
FNMA and FHLMC. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan.
(ee) MORTGAGED PROPERTY UNDAMAGED. The Mortgaged Property is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect adversely the value of the
Mortgaged Property as security for the Mortgage Loan or the use for which the
premises were intended and each Mortgaged Property is in good repair. There
have not been any condemnation proceedings with respect to the Mortgaged
Property and the Borrower has no knowledge of any such proceedings.
(ff) COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE
ADJUSTMENTS. The origination and collection practices used by the
originator, each servicer of the Mortgage Loan and the Borrower with respect
to the Mortgage Loan have been in all respects in compliance with Accepted
Servicing Practices, applicable laws and regulations, and have been in all
respects legal and proper. With respect to escrow deposits and Escrow
Payments, all such payments are in the possession of, or under the control
of, the Borrower and there exist no deficiencies in connection therewith for
which customary arrangements for repayment thereof have not been made. All
Escrow Payments have been collected in material compliance with state and
federal law. An escrow of funds is not prohibited by applicable law and has
been established in an amount sufficient to pay for every item that remains
unpaid and has been assessed but is not yet due and payable. No escrow
deposits or Escrow Payments or other charges or payments due the Borrower
have been capitalized under the Mortgage or the Mortgage Note. All Mortgage
Interest Rate adjustments have been made in compliance with state and federal
law and the terms of the related Mortgage Note. Any interest required to be
paid pursuant to state, federal and local law has been properly paid and
credited.
1-8
(gg) CONVERSION TO FIXED INTEREST RATE. With respect to
adjustable rate Mortgage Loans, the Mortgage Loan is not convertible to a
fixed interest rate Mortgage Loan.
(hh) OTHER INSURANCE POLICIES. No action, inaction or event has
occurred and no state of facts exists or has existed that has resulted or
will result in the exclusion from, denial of, or defense to coverage under
any applicable special hazard insurance policy, PMI Policy or bankruptcy
bond, irrespective of the cause of such failure of coverage. In connection
with the placement of any such insurance, no commission, fee, or other
compensation has been or will be received by the Borrower or by any officer,
director, or employee of the Borrower or any designee of the Borrower or any
corporation in which the Borrower or any officer, director, or employee had a
financial interest at the time of placement of such insurance.
(ii) SOLDIERS' AND SAILORS' CIVIL RELIEF ACT. The Mortgagor has
not notified the Borrower, and the Borrower has no knowledge, of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940.
(jj) APPRAISAL. The Mortgage File contains an appraisal of the
related Mortgaged Property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, duly appointed by the Borrower, who had
no interest, direct or indirect in the Mortgaged Property or in any loan made
on the security thereof, and whose compensation is not affected by the
approval or disapproval of the Mortgage Loan, and the appraisal and appraiser
both satisfy the requirements of FNMA or FHLMC and Title XI of the Federal
Institutions Reform, Recovery, and Enforcement Act of 1989 as amended and the
regulations promulgated thereunder, all as in effect on the date the Mortgage
Loan was originated.
(kk) DISCLOSURE MATERIALS. The Mortgagor has received all
disclosure materials required by applicable law with respect to the making of
adjustable rate mortgage loans, and the Borrower maintains such statement in
the Mortgage File.
(ll) CONSTRUCTION OR REHABILITATION OF MORTGAGED PROPERTY. No
Mortgage Loan was made in connection with the construction or rehabilitation
of a Mortgaged Property or facilitating the trade-in or exchange of a
Mortgaged Property.
(mm) NO DEFENSE TO INSURANCE COVERAGE. No action has been taken
or failed to be taken, no event has occurred and no state of facts exists or
has existed on or prior to the Funding Date (whether or not known to the
Borrower on or prior to such date) which has resulted or will result in an
exclusion from, denial of, or defense to coverage under any private mortgage
insurance (including, without limitation, any exclusions, denials or defenses
which would limit or reduce the availability of the timely payment of the
full amount of the loss otherwise due thereunder to the insured) whether
arising out of actions, representations, errors, omissions, negligence, or
fraud of the Borrower, the related Mortgagor or any party involved in the
application for such coverage, including the appraisal, plans and
specifications and other exhibits or documents submitted therewith to the
insurer under such insurance policy, or for any other reason under such
coverage, but not including the failure of such insurer to pay by reason of
such insurer's breach of such insurance policy or such insurer's financial
inability to pay.
1-9
(nn) CAPITALIZATION OF INTEREST. The Mortgage Note does not by
its terms provide for the capitalization or forbearance of interest.
(oo) NO EQUITY PARTICIPATION. No document relating to the
Mortgage Loan provides for any contingent or additional interest in the form
of participation in the cash flow of the Mortgaged Property or a sharing in
the appreciation of the value of the Mortgaged Property. The indebtedness
evidenced by the Mortgage Note is not convertible to an ownership interest in
the Mortgaged Property or the Mortgagor and the Borrower has not financed nor
does it own directly or indirectly, any equity of any form in the Mortgaged
Property or the Mortgagor.
(pp) WITHDRAWN MORTGAGE LOANS. If the Mortgage Loan has been
released to the Borrower pursuant to a Request for Release as permitted under
Section 5 of the Custodial Agreement, then the promissory note relating to
the Mortgage Loan was returned to the Custodian within 10 days (or if such
tenth day was not a Business Day, the next succeeding Business Day).
(qq) ORIGINATION DATE. The Origination Date is no earlier than
twelve months prior to the date the Mortgage Loan is first included in the
Borrowing Base.
(rr) NO EXCEPTION. The Custodian has not noted any material
exceptions on an Exception Report (as defined in the Custodial Agreement)
with respect to the Mortgage Loan which would materially adversely affect the
Mortgage Loan or the Lender's security interest, granted by the Borrower, in
the Mortgage Loan.
(ss) MORTGAGE SUBMITTED FOR RECORDATION. The Mortgage either has
been or will promptly be submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged
Property is located.
(tt) XXXXXX ACT. The Mortgage Loans is not classified as a "high
cost" loan under the Home Ownership and Equity Protection Act of 1994 and is
not subject to the provisions of Section 226.32 of the Federal Reserve Board
Regulation Z.
1-10
Part II. DEFINED TERMS
In addition to terms defined elsewhere in the Loan Agreement, the
following terms shall have the following meanings when used in this Schedule 1:
"ACCEPTABLE STATE" shall mean any state notified by the Borrower to
the Lender from time to time and approved in writing by the Lender, which
approval has not been revoked by the Lender in their sole discretion, any such
notice of revocation to be given no later than 10 Business Days prior to its
intended effective date.
"ACCEPTED SERVICING PRACTICES" shall mean, with respect to any
Mortgage Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loans in the jurisdiction where the related Mortgaged Property is located.
"ALTA" means the American Land Title Association.
"APPRAISED VALUE" shall mean the value set forth in an appraisal made
in connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
"BEST'S" means Best's Key Rating Guide, as the same shall be amended
from time to time.
"DUE DATE" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.
"ESCROW PAYMENTS" means with respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"GROSS MARGIN" means with respect to each adjustable rate Mortgage
Loan, the fixed percentage amount set forth in the related Mortgage Note.
"INDEX" means with respect to each adjustable rate Mortgage Loan, the
index set forth in the related Mortgage Note for the purpose of calculating the
interest rate thereon.
1-11
"INSURANCE PROCEEDS" means with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
"INTEREST RATE ADJUSTMENT DATE" means with respect to each adjustable
rate Mortgage Loan, the date, specified in the related Mortgage Note and the
Mortgage Loan Schedule, on which the Mortgage Interest Rate is adjusted.
"LOAN-TO-VALUE RATIO" or "LTV" means with respect to any Mortgage
Loan, the ratio of the original outstanding principal amount of the Mortgage
Loan to the lesser of (a) the Appraised Value of the Mortgaged Property at
origination or (b) in the case of a purchase money mortgage loan, the purchase
price of the Mortgaged Property.
"MONTHLY PAYMENT" means the scheduled monthly payment of principal and
interest on a Mortgage Loan as adjusted in accordance with changes in the
Mortgage Interest Rate pursuant to the provisions of the Mortgage Note for an
adjustable rate Mortgage Loan.
"MORTGAGE INTEREST RATE" means the annual rate of interest borne on a
Mortgage Note, which shall be adjusted from time to time with respect to
adjustable rate Mortgage Loans.
"MORTGAGE INTEREST RATE CAP" means with respect to an adjustable rate
Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth
in the related Mortgage Note.
"MORTGAGEE" means the Borrower or any subsequent holder of a Mortgage
Loan.
"ORIGINATION DATE" shall mean, with respect to each Mortgage Loan, the
date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by the Borrower with respect to such Mortgage Loan,
in which case the Origination Date shall be deemed to be the date that is 40
days prior to the date of the first payment under the Mortgage Note relating to
such Mortgage Loan.
"PMI POLICY" or "PRIMARY INSURANCE POLICY" means a policy of primary
mortgage guaranty insurance issued by a Qualified Insurer.
"QUALIFIED INSURER" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Property is located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and approved as an insurer by FNMA
and FHLMC and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best's with respect to
hazard and flood insurance.
"SERVICING FILE" means with respect to each Mortgage Loan, the file
retained by the Borrower consisting of originals of all documents in the
Mortgage File which are not
1-12
delivered to a Custodian and copies of the Mortgage Loan Documents set forth
in Section 2 of the Custodial Agreement.
1-13
Schedule 2
FILING JURISDICTIONS AND OFFICES
Secretary of State, California
2-1
Schedule 3
CAPITALIZATION
2-1
Schedule 4
SERVICING FIELDS
- Loan ID
- Name
- Paid To Date
- Current Balance
- P&I
- Rate
1-2
EXHIBIT A
FORM OF PROMISSORY NOTE
$250,000,000 October 29, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, AAMES CAPITAL CORPORATION, a California
corporation (the "BORROWER"), hereby promises to pay to the order of XXXXXX
XXXXXXX MORTGAGE CAPITAL INC. (the "LENDER"), at the principal office of the
Lender at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, in lawful money of the
United States, and in immediately available funds, the principal sum of TWO
HUNDRED AND FIFTY MILLION DOLLARS ($250,000,000) (or such lesser amount as
shall equal the aggregate unpaid principal amount of the Loans made by the
Lender to the Borrower under the Loan Agreement), on the dates and in the
principal amounts provided in the Loan Agreement, and to pay interest on the
unpaid principal amount of each such Loan, at such office, in like money and
funds, for the period commencing on the date of such Loan until such Loan
shall be paid in full, at the rates per annum and on the dates provided in
the Loan Agreement.
The date, amount and interest rate of each Loan made by the Lender
to the Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of
this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof; PROVIDED, that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower to make a payment when due of any amount owing under the Loan
Agreement or hereunder in respect of the Loans made by the Lender.
This Note is the Note referred to in the Master Loan and Security
Agreement dated as of October 29, 1999 (as amended, supplemented or otherwise
modified and in effect from time to time, the "LOAN AGREEMENT") between the
Borrower and the Lender, and evidences Loans made by the Lender thereunder.
Terms used but not defined in this Note have the respective meanings assigned
to them in the Loan Agreement.
The Borrower agrees to pay all the Lender's costs of collection and
enforcement (including reasonable attorneys' fees and disbursements of
Lender's counsel) in respect of this Note when incurred, including, without
limitation, reasonable attorneys' fees through appellate proceedings.
Notwithstanding the pledge of the Collateral, the Borrower hereby
acknowledges, admits and agrees that the Borrower's obligations under this
Note are recourse obligations of the Borrower to which the Borrower pledges
its full faith and credit.
The Borrower, and any indorsers or guarantors hereof, (a) severally
waive diligence, presentment, protest and demand and also notice of protest,
demand, dishonor and nonpayments of this Note, (b) expressly agree that this
Note, or any payment hereunder, may be extended from time to time, and
consent to the acceptance of further Collateral, the release
A-1
of any Collateral for this Note, the release of any party primarily or
secondarily liable hereon, and (c) expressly agree that it will not be
necessary for the Lender, in order to enforce payment of this Note, to first
institute or exhaust the Lender's remedies against the Borrower or any other
party liable hereon or against any Collateral for this Note. No extension of
time for the payment of this Note, or any installment hereof, made by
agreement by the Lender with any person now or hereafter liable for the
payment of this Note, shall affect the liability under this Note of the
Borrower, even if the Borrower is not a party to such agreement; PROVIDED,
HOWEVER, that the Lender and the Borrower, by written agreement between them,
may affect the liability of the Borrower.
Any reference herein to the Lender shall be deemed to include and
apply to every subsequent holder of this Note. Reference is made to the Loan
Agreement for provisions concerning optional and mandatory prepayments,
Collateral, acceleration and other material terms affecting this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE) WHOSE LAWS
THE BORROWER EXPRESSLY ELECTS TO APPLY TO THIS NOTE. THE BORROWER AGREES
THAT ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS NOTE
MAY BE COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW YORK, BOROUGH OF
MANHATTAN, OR IN XXX XXXXXXXX XXXXX XX XXX XXXXXX XXXXXX FOR THE SOUTHERN
DISTRICT OF NEW YORK.
AAMES CAPITAL CORPORATION
By:
---------------------------------
Name:
Title:
A-2
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Loan
Agreement to the Borrower, on the dates, in the principal amounts and bearing
interest at the rates set forth below, and subject to the payments and
prepayments of principal set forth below:
PRINCIPAL UNPAID
AMOUNT INTEREST AMOUNT PAID PRINCIPAL NOTATION
DATE MADE OF LOAN RATE OR PREPAID AMOUNT MADE BY
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A-3
EXHIBIT B
FORM OF CUSTODIAL AGREEMENT
[STORED AS A SEPARATE DOCUMENT]
B-1
EXHIBIT C
FORM OF OPINION OF COUNSEL TO BORROWER
(date)
Xxxxxx Xxxxxxx Mortgage Capital Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs and Mesdames:
You have requested our opinion, as counsel to Aames Capital
Corporation, a California corporation (the "BORROWER"), with respect to
certain matters in connection with that certain Master Loan and Security
Agreement, dated October 29, 19999 (the "LOAN AND SECURITY AGREEMENT"), by
and between the Borrower and Xxxxxx Xxxxxxx Mortgage Capital Inc. (the
"LENDER"), being executed contemporaneously with a Promissory Note, dated
October 29, 1999 , from the Borrower to the Lender (the "NOTE"), a Custodial
Agreement, dated as of October 29, 1999 (the "CUSTODIAL AGREEMENT"), by and
among the Borrower, Bankers Trust Company (the "CUSTODIAN"), and the Lender.
Capitalized terms not otherwise defined herein have the meanings set forth in
the Loan and Security Agreement.
We have examined the following documents:
1. the Loan and Security Agreement;
2. the Note;
3. Custodial Agreement;
4. unfiled copies of the financing statements listed on SCHEDULE 1
(collectively, the "FINANCING STATEMENTS") naming the Borrower
as Debtor and the Lender as Secured Party and describing the
Collateral (as defined in the Loan and Security Agreement) as
to which security interests may be perfected by filing under
the Uniform Commercial Code of the States listed on SCHEDULE 1
(the "FILING COLLATERAL"), which we understand will be filed in
the filing offices listed on SCHEDULE 1 (the "FILING OFFICES");
5. the reports listed on SCHEDULE 2 as to UCC financing statements
(collectively, the "UCC SEARCH REPORT");
6. such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
C-1
To the extent we have deemed necessary and proper, we have relied
upon the representations and warranties of the Borrower contained in the Loan
and Security Agreement. We have assumed the authenticity of all documents
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to the originals of all
documents submitted to us as originals.
Based upon the foregoing, it is our opinion that:
1. The Borrower is a California corporation duly organized,
validly existing and in good standing under the laws of California and is
qualified to transact business in, and is in good standing under, the laws of
the California.
2. The Borrower has the corporate power to engage in the
transactions contemplated by the Loan and Security Agreement, the Note, and
the Custodial Agreement and all requisite corporate power, authority and
legal right to execute and deliver the Loan and Security Agreement, the Note,
and the Custodial Agreement and observe the terms and conditions of such
instruments. The Borrower has all requisite corporate power to borrow under
the Loan and Security Agreement and to grant a security interest in the
Collateral under the Loan and Security Agreement.
3. The execution, delivery and performance by the Borrower of
the Loan and Security Agreement, the Note, and the Custodial Agreement, and
the borrowings by the Borrower and the pledge of the Collateral under the
Loan and Security Agreement have been duly authorized by all necessary
corporate action on the part of the Borrower. Each of the Loan and Security
Agreement, the Note and the Custodial Agreement have been executed and
delivered by the Borrower and are legal, valid and binding agreements
enforceable in accordance with their respective terms against the Borrower,
subject to bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the application of the rules of
equity, including those respecting the availability of specific performance,
none of which will materially interfere with the realization of the benefits
provided thereunder or with the Lender's security interest in the Collateral.
4. No consent, approval, authorization or order of, and no
filing or registration with, any court or governmental agency or regulatory
body is required on the part of the Borrower for the execution, delivery or
performance by the Borrower of the Loan and Security Agreement, the Note and
the Custodial Agreement or for the borrowings by the Borrower under the Loan
and Security Agreement or the granting of a security interest to the Lender
in the Collateral, under the Loan and Security Agreement.
5. The execution, delivery and performance by the Borrower of,
and the consummation of the transactions contemplated by, the Loan and
Security Agreement, the Note and the Custodial Agreement do not and will not
(a) violate any provision of the Borrower's charter or by-laws, (b) violate
any applicable law, rule or regulation, (c) violate any order, writ,
injunction or decree of any court or governmental authority or agency or any
arbitral award applicable to the Borrower of which I have knowledge (after
due inquiry) or (d) result in a breach of, constitute a default under,
require any consent under, or result in the acceleration
C-2
or required prepayment of any indebtedness pursuant to the terms of, any
agreement or instrument of which we have knowledge (after due inquiry) to
which the Borrower is a party or by which it is bound or to which it is
subject, or (except for the Liens created pursuant to the Loan and Security
Agreement) result in the creation or imposition of any Lien upon any Property
of the Borrower pursuant to the terms of any such agreement or instrument.
6. There is no action, suit, proceeding or investigation
pending or, to the best of our knowledge, threatened against the Borrower
which, in our judgment, either in any one instance or in the aggregate, would
be reasonably likely to result in any material adverse change in the
properties, business or financial condition, or prospects of the Borrower or
in any material impairment of the right or ability of the Borrower to carry
on its business substantially as now conducted or in any material liability
on the part of the Borrower or which would draw into question the validity of
the Loan and Security Agreement, the Note, the Custodial Agreement or the
Mortgage Loans or of any action taken or to be taken in connection with the
transactions contemplated thereby, or which would be reasonably likely to
impair materially the ability of the Borrower to perform under the terms of
the Loan and Security Agreement, the Note, the Custodial Agreement or the
Mortgage Loans.
7. The Loan and Security Agreement is effective to create, in
favor of the Lender, a valid security interest under the Uniform Commercial
Code in all of the right, title and interest of the Borrower in, to and under
the Collateral as collateral security for the payment of the Secured
Obligations (as defined in the Loan and Security Agreement), except that (a)
such security interests will continue in Collateral after its sale, exchange
or other disposition only to the extent provided in Section 9-306 of the
Uniform Commercial Code, and (b) the security interests in Collateral in
which the Borrower acquires rights after the commencement of a case under the
Bankruptcy Code in respect of the Borrower may be limited by Section 552 of
the Bankruptcy Code.
8. When the Mortgage Notes are delivered to the Custodian,
endorsed in blank by a duly authorized officer of the Borrower, the security
interest referred to in paragraph 7 above in the Mortgage Notes will
constitute a fully perfected first priority security interest in all right,
title and interest of the Borrower therein, in the Mortgage Loan evidenced
thereby and in the Borrower's interest in the related Mortgaged Property.
9. (a) Upon the filing of financing statements on Form
UCC-1 naming the Lender as "Secured Party" and the Borrower as "Debtor", and
describing the Collateral, in the jurisdictions and recording offices listed
on SCHEDULE 1 attached hereto, the security interests referred to in
paragraph 7 above will constitute fully perfected security interests under
the Uniform Commercial Code in all right, title and interest of the Borrower
in, to and under such Collateral, which can be perfected by filing under the
Uniform Commercial Code.
(b) The UCC Search Report sets forth the proper filing
offices and the proper debtors necessary to identify those Persons who have
on file in the jurisdictions listed on SCHEDULE 1 financing statements
covering the Filing Collateral as of the dates and times specified on
SCHEDULE 2. The UCC Search Report identifies no Person who has filed in
C-3
any Filing Office a financing statement describing the Filing Collateral
prior to the effective dates of the UCC Search Report.
10. The Assignments of Mortgage are in recordable form, except
for the insertion of the name of the assignee, and upon the name of the
assignee being inserted, are acceptable for recording under the laws of the
state where each related Mortgaged Property is located.
11. The Borrower is not an "investment company", or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
Very truly yours,
C-4
EXHIBIT D
FORM OF REQUEST FOR BORROWING
Master Loan and Security Agreement, dated as of October 29, 1999 (the
"LOAN AND SECURITY AGREEMENT"), by and between the Borrower and Xxxxxx Xxxxxxx
Mortgage Capital Inc. (the "LENDER"),
Lender: Xxxxxx Xxxxxxx Mortgage Capital Inc.
Borrower: Aames Capital Corporation
Requested Funding Date:
-------------------------------------
Transmission Date:
-------------------------------------
Transmission Time:
Number of Mortgage
Loans to be Pledged:
-------------------------------------
UPB: $
-------------------------------------
Requested Wire Amount: $
-------------------------------------
Wire Instructions:
The Borrower hereby certifies, as of the requested Funding Date, that:
(a) no Default or Event of Default has occurred and is continuing on the date
hereof nor will occur after giving effect to such Loan as a result of such Loan;
(b) each of the representations and warranties made by the Borrower in or
pursuant to the Loan Documents is true and correct in all material respects on
and as of such date (in the case of the representations and warranties in
respect of Mortgage Loans, solely with respect to Mortgage Loans being included
the Borrowing Base on such Funding Date) as if made on and as of the date hereof
(or, if any such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date);
(c) the Borrower is in compliance with all governmental licenses and
authorizations and is qualified to do business and in good standing in all
required jurisdictions; and
(d) the Mortgage Loans being pledged in connection with the requested Loan have
been sold by the originator thereof to the Borrower in a "true sale" in
accordance with the true sale opinion delivered pursuant to Section 5.01(d) of
the Loan and Security Agreement.
D-1
Requested and Certified by:
AAMES CAPITAL CORPORATION
By:
------------------------------------
Name:
Title:
C-2
EXHIBIT E-1
FORM OF BORROWER'S RELEASE LETTER
[Date]
Xxxxxx Xxxxxxx Mortgage Capital Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:
--------------------
Facsimile:
--------------------
Re: Master Loan and Security Agreement, dated as of October 29,
1999 (the "LOAN AND SECURITY AGREEMENT"), by and between Aames
Capital Corporation (the "BORROWER") and Xxxxxx Xxxxxxx
Mortgage Capital Inc. (the "LENDER")
Ladies and Gentlemen:
With respect to the mortgage loans described in the attached
SCHEDULE A (the "MORTGAGE LOANS") we hereby certify to you that the Mortgage
Loans are not subject to a lien of any third party.
Very truly yours,
AAMES CAPITAL CORPORATION
By:
--------------------------------
Name:
Title:
E-1-1
EXHIBIT E-2
FORM OF WAREHOUSE LENDER'S RELEASE LETTER
(Date)
Xxxxxx Xxxxxxx Mortgage Capital Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention:
--------------------
Facsimile:
--------------------
Re: Certain Mortgage Loans Identified on SCHEDULE A hereto and
owned by Aames Capital Corporation
The undersigned hereby releases all right, interest, lien or claim
of any kind with respect to the mortgage loan(s) described in the attached
SCHEDULE A, such release to be effective automatically without any further
action by any party upon payment in one or more installments, in immediately
available funds of $__________________, in accordance with the following wire
instructions:
------------------------------------
------------------------------------
Very truly yours,
[WAREHOUSE LENDER]
By:
---------------------------------
Name:
Title:
E-2-1
EXHIBIT F
UNDERWRITING GUIDELINES
[ATTACHED AS A SEPARATE TAB]
F-1
EXHIBIT G
FORM OF SERVICER NOTICE
, 199
-------- --- --
[SERVICER], as Servicer
[ADDRESS]
Attention:
-------------
Re: Master Loan and Security Agreement, dated as of October 29,
1999 (the "LOAN AND SECURITY AGREEMENT"), by and between Aames
Capital Corporation (the "BORROWER") and Xxxxxx Xxxxxxx
Mortgage Capital Inc. (the "LENDER").
Ladies and Gentlemen:
[SERVICER] (the "SERVICER") is servicing certain mortgage loans for
the Borrower pursuant to certain Servicing Agreements between the Servicer and
the Borrower. Pursuant to the Loan Agreement between the Lender and the
Borrower, the Servicer is hereby notified that the Borrower has pledged to the
Lender certain mortgage loans which are serviced by Servicer which are subject
to a security interest in favor of the Lender.
Upon receipt of a Notice of Event of Default from the Lender in which
the Lender shall identify the mortgage loans which are then pledged to Lender
under the Loan Agreement (the "MORTGAGE LOANS"), the Servicer shall segregate
all amounts collected on account of such Mortgage Loans, hold them in trust for
the sole and exclusive benefit of the Lender, and remit such collections in
accordance with the Lender's written instructions. Following such Notice of
Event of Default, Servicer shall follow the instructions of Lender with respect
to the Mortgage Loans, and shall deliver to Lender any information with respect
to the Mortgage Loans reasonably requested by Lender.
Notwithstanding any contrary information which may be delivered to the
Servicer by the Borrower, the Servicer may conclusively rely on any information
or Notice of Event of Default delivered by the Lender, and the Borrower shall
indemnify and hold the Servicer harmless for any and all claims asserted against
it for any actions taken in good faith by the Servicer in connection with the
delivery of such information or Notice of Event of Default.
No provision of this letter may be modified or amended without the
prior written consent of the Lender. The Lender is an intended third party
beneficiary of this letter.
H-1
Please acknowledge receipt of this instruction letter by signing in
the signature block below and forwarding an executed copy to the Lender promptly
upon receipt. Any notices to the Lender should be delivered to the following
address: 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000; Attention: Xx. Xxxxxx
Xxxxxx, with a copy to Mr. Xxxx Xxxxxx; Telephone: (000) 000-0000; Facsimile:
(000) 000-0000.
Very truly yours,
AAMES CAPITAL CORPORATION
By:
----------------------------
Name:
Title:
ACKNOWLEDGED:
--------------------------
as Servicer
By:
--------------------------
Title:
Telephone:
Facsimile:
H-2
