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EXHIBIT 10.8
PURCHASE AND SALE AGREEMENT dated as of December 17, 1996, among
CONTITRADE SERVICES L.L.C., a Delaware limited liability company, as purchaser,
and CMG FUNDING CORP., a Delaware corporation, and CONTINENTAL MORTGAGE GROUP,
L.C., a Utah limited liability company, as seller.
WHEREAS, the Seller desires to sell from time to time to the
Purchaser certain Eligible Assets (as hereinafter defined), and the Purchaser
desires to purchase such Eligible Assets, each in accordance with the terms and
conditions set forth in this Purchase Agreement.
NOW, THEREFORE, the parties, in consideration of good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Purchase Agreement, the following terms shall
have the following meanings:
"Adjusted Tranche Amount": As of any date of determination in
respect of any Purchase, the difference between (i) the Initial Tranche Amount
with respect thereto and (ii) all payments of principal received by the
Purchaser in respect of the related Eligible Assets on or prior to such date.
"Affiliate": Any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with such Person; (b)
which directly or indirectly beneficially owns or holds five percent (5%) or
more of the voting stock of such Person; or (c) five percent (5%) or more of the
voting stock of which is directly or indirectly beneficially owned or held by
such Person. The term control means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Adjusted Tranche Amount": At any date, the sum of the
Adjusted Tranche Amounts as of such date, in
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respect of Purchases as to which the related Eligible Assets have not been
disposed of by the Purchaser (other than in connection with a Repurchase
Transaction or to an affiliate of the Purchaser pursuant to this Purchase
Agreement).
"Appraised Value": With respect to any Mortgaged Property, the
value of such Mortgaged Property as determined at the time of origination in
accordance with the appraisal policies in the Securitization Program Mortgage
Loan Underwriting Guidelines or the Conforming Mortgage Loan Underwriting
Guidelines.
"ARM Loan": A Mortgage Loan which accrues interest at an
adjustable interest rate pursuant to the terms of the related Mortgage Note.
"Assignment of Mortgage": An assignment of the Mortgage, notice
of transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to
reflect the transfer of the Mortgage to the Purchaser.
"Available Amount": The Maximum Available Amount less the
then-outstanding Aggregate Adjusted Tranche Amount.
"B/C Loan": A Securitization Program Mortgage Loan which is of
non-conforming credit quality is are of a type and quality that is eligible for
inclusion in a securitized mortgage loan pool which would qualify for credit
enhancement by a Monoline Insurance Company and which would be expected to issue
a security which would be rated in one of the investment grade generic rating
categories by any nationally recognized statistical rating agency other than a
Standard A Loan or a Special Program Loan.
"Bonus Compensation": With respect to any employee the amount by
which the total compensation, excluding Fringe Benefits, for such employee
during any year exceeds such employee's base salary.
"Business Day": Any day, other than a Saturday or Sunday, that is
neither a legal holiday, nor a day on which banking institutions are authorized
or required by law or regulation to close, in the City of New York or State of
Utah.
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"CFS": ContiFinancial Services Corporation, a Delaware
corporation, its successors in interest and its permitted assigns.
"Change of Control": Any of:
(a) without the prior written consent of the Purchaser, the
issuance, distribution, sale or transfer by the Seller or by any
Affiliate of the Seller, including, without limitation, the Controlling
Shareholders of the Seller's capital stock or securities other than (i)
the sale of the Seller's common stock to the Purchaser occurring upon
the exercise of the Conversion Privileges, (ii) the pledge of the
Seller's capital stock to the Purchaser, (iii) the transfer of the
Seller's capital stock for estate planning purposes or pursuant to a
domestic relations settlement or order, (iv) the transfer of the
Purchaser's Common Stock pursuant to the Stock Option Plan for a price
greater than or equal to the Share Fair Market Value, (v) pursuant to a
buy/sell agreement solely among the Purchaser's existing shareholders or
(vi) the sale, transfer or issuance of no more than five (5%) percent of
the Seller's Common Stock (which percentage shall be determined on a
cumulative basis together with all other sales, transfers or issuances
of the Seller's Common Stock under this clause (vi) from the date of
this Agreement) at a price at least equal to Share Fair Market Value
with the prior written consent of the Purchaser;
(b) a sale or voluntary transfer or, in the aggregate, sales or
voluntary transfers, of more than five per cent (5%) of the Seller's
assets (as set forth in the Seller's most recently audited or unaudited
financial statement) other than the sale of loans in the ordinary course
of business, whether on a flow or pool basis; or
(c) the resignation, termination or departure of Xxxxx X. Xxxx or
Xxxx X. Xxx from the employ of the Seller, or the reassignment of Xxxxx
X. Xxxx or Xxxx X. Xxx to a position of significantly reduced
responsibility within the Seller.
"Closing Date": The date on which the Mortgage Loan made by the
Seller to the Obligor is funded by the Seller.
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"CLTV": With respect to a Mortgage Loan, the aggregate principal
amount of such Mortgage Loan together with all senior obligations of the Obligor
secured by a lien on the related Mortgaged Property divided by the Appraised
Value of the related Mortgaged Property.
"CMGFC": CMG Funding Corp., a Delaware corporation, and its
successors.
"CMLC": Continental Mortgage Group, L.C., a Utah limited
liability company, or its successors.
"Collateral": As defined in Section 6.07 hereof.
"Common Stock" means shares of the Common Stock of the Seller, a
class of capital stock of the Seller which (i) possesses full voting rights, and
(ii) is the sole class which fully participates in the income and value of the
Seller.
"Conforming Mortgage Loan": A mortgage loan originated pursuant
to, and which complies with, the Conforming Mortgage Loan Underwriting
Guidelines and is, or was, the subject of a Purchase hereunder.
"Conforming Mortgage Loan Underwriting Guidelines": The
underwriting guidelines for mortgage loans, which conform to FNMA, FHLMC, GNMA,
FHA, or VA guidelines or are jumbo loans of an "A" quality Obligor and attached
hereto as Exhibit B, as may be amended from time to time by the Seller and, with
respect to any Material Changes, after obtaining the Purchaser's prior written
consent regarding such Material Changes.
"Consumer Credit Laws": Real Estate Settlement Procedures Act of
1974, as amended, Trust in Lending Act of 1969, the Consumer Credit Protection
Act, as amended, the Financial Institutions Reform, Recovery & Enforcement Act
of 1989, the Depository Institutions Deregulation & Monetary Control Act of
1980, the Community Reinvestment Act, the Equal Credit Opportunity Act of 1974,
the Fair Credit Reporting Act, the Home Mortgage Disclosure Act and Regulation
Z.
"Controlling Shareholders": Xxxx X. Xxx or Xxxxx X. Xxxx.
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"Conversion Privileges": The rights which the Purchaser has
pursuant to the terms of the (i) Subordinated Debt Agreement to convert to
Preferred Stock of the Seller and (ii) the Preferred Stock to convert to Common
Stock of the Seller.
"Custody Agent": First Security Bank, N.A. and its successors.
"Custody Agreement": The Custody Agreement, dated as of December
17, 1996, by and among the Custody Agent, the Purchaser and the Seller.
"Default Rate": LIBOR on the related LIBOR Reset Date plus 6.00%.
"Detailed Mortgage Loan Schedule": The schedule of Mortgage Loans
i-dentifying each Mortgage Loan by the address of the Mortgaged Property and the
name of the mortgagor and setting forth as to each Mortgage Loan all of the
information set forth in Exhibit F-2 hereof.
"Eligible Assets": Mortgage Loans.
"Extension Notice": The notice given by the Purchaser, in its
sole discretion, to offer to extend the Termination Date, by written notice to
the Seller at least ninety days prior to the date of expiration, which the
Seller shall accept by written notice to the Purchaser.
"Event of Termination": As defined in Article VIII hereof.
"FHA": The Federal Housing Administration or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation or any
successor thereto.
"Fixed Rate Mortgage Loan": A Mortgage Loan which accrues
interest at a fixed rate of interest pursuant to the terms of the related
Mortgage Note.
"FNMA": The Federal National Mortgage Association or any
successor thereto.
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"Forbearance Waiver": As defined in Section 3.01(e).
"Fringe Benefits": The payment of premiums for health insurance,
life insurance, xxxxxxx'x compensation, disability insurance and the payment of
payroll taxes for social security and Medicare.
"GAAP": Generally accepted accounting principles in the United
States, consistently applied.
"Gain Amount": With respect to any sale of Eligible Assets by the
Purchaser hereunder, that portion of the realized net proceeds inclusive of
accrued interest in excess of the sum of (i) the related Adjusted Tranche Amount
thereof (computed as of the date of such sale) and (ii) the Net Securities
Amount with respect thereto, which amount the Purchaser shall remit to the
Seller pursuant to Section 4.03. The Gain Amount shall be calculated for each
Tranche sold by the Purchaser.
"GNMA": The Government National Mortgage Association or any
successor thereto.
"Governmental Approvals": Any authorization, consent, approval,
license or exemption of, registration or filing with or report or notice to, any
Governmental Authority, whether federal, state, local or foreign.
"Governmental Authority": Any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Initial Tranche Amount": With respect to any Purchase hereunder,
the purchase amount paid for the related Eligible Assets by the Purchaser on the
related Purchase Date, such purchase amount being equal to the product of (x)
the Principal of the related Eligible Assets as of such Purchase Date and (y)
the related Purchase Price Percentage.
"Investment Banking Services Agreement": The Investment Banking
Services Agreement dated as of December 17, 1996 among the Seller, the Purchaser
and ContiFinancial Services Corporation, as may be amended from time to time
pursuant to the terms thereof.
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"Law": Any federal, state or local statute, law, rule,
regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including any judicial or administrative order, consent, decree or judgment.
"Letter Agreement": The letter agreement dated as of December 17,
1996, between the Controlling Shareholders or certain transferees as specified
therein and the Purchaser.
"LIBOR": The per annum rate for deposits in Dollars for a period
of one month which appears on Telerate Page 3750 or the Bloomberg Screen as of
11:00 a.m., London time, on the monthly anniversary of the initial Closing Date.
If such rate does not appear on Telerate Page 3750 or the Bloomberg Screen on
such day, the rate will be determined on the basis of the rates at which
deposits in Dollars are offered by the reference banks selected by the Purchaser
at approximately 11:00 a.m., London time, on such day to prime banks on that
day. The Purchaser will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that day will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as requested, the rate
for that day will be the arithmetic mean of the rates quoted by two or more
major banks in New York City selected by the Purchaser, at approximately 11:00
a.m., New York City time, on that day for loans in Dollars to leading European
banks for a period of one month.
"LIBOR Reset Date": With respect to any Tranche Period, unless
otherwise agreed to, the Business Day immediately preceding the start of such
Tranche Period, provided that if such Business Day is not a London Business Day,
then the London Business Day immediately preceding such Business Day.
"London Business Day": Any day, other than a Saturday or Sunday,
that is neither a legal holiday, nor a day on which banking institutions are
authorized or required by law or regulation to close in the city of London.
"Losses": Any and all out-of-pocket losses, claims, damages,
liabilities or expenses (including reasonable
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attorneys' fees and disbursements) directly incurred by any person specified in
this Purchase Agreement, resulting from transactions entered into under this
Purchase Agreement (other than liability for Taxes). Losses must be accounted
for and presented for reimbursement documented in reasonable detail and within a
reasonable time.
"LTV" or "Loan-To-Value": With respect to a Mortgage Loan secured
by a first lien on the related Mortgaged Property, the original principal
balance of the Mortgage Loan divided by the Appraised Value of the related
Mortgaged Property.
"Market Movement Allowance": For each Purchase, the amount of
diminution in the Market Value of the related Eligible Assets (expressed as a
percentage) that may occur before the occurrence of a Required Sale Event with
respect to such Eligible Assets as specified by the Purchaser for such Purchase,
as described in Section 4.02 hereof and Exhibit D hereto.
"Market Value": For each date of determination in respect of a
Purchase, the market value (expressed as a percentage of par of the Principal)
of the related Eligible Asset as determined by the Purchaser (subject to the
provisions of Section 4.02 hereof) and taking into account (i) credit rating;
(ii) credit worthiness of the account debtor, lessee or other obligors
(including third party credit enhancements); (iii) realizable distress sale
liquidation value; (iv) impediments (legal or otherwise) to prompt and effective
enforcement; (v) general industry and overall economic conditions; (vi) current
interest rates; (vii) availability of purchasers; and (viii) such other
considerations as reasonably appropriate in the circumstances.
"Material Change": With respect to the Securitization Program
Mortgage Loan Underwriting Guidelines or the Conforming Mortgage Loan
Underwriting Guidelines, any change to such guidelines other than a change (a)
correcting typographical errors, spelling, grammar or punctuation in such
guidelines or (b) modifying such guidelines provided that such modification does
not lower the quality of the loans underwritten pursuant thereto.
"Maximum Available Amount": $30,000,000.
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"Merger Agreement" means the Plan and Agreement of Merger,
Contribution and Reorganization dated as of December 16, 1996 by and between
Continental Mortgage Group, L.C. and the Seller.
"Monoline Insurance Company": Municipal Bond Investors Assurance
Corporation ("MBIA"), Financial Guaranty Insurance Company ("FGIC"), Capital
Markets Assurance Corporation ("CapMAC"), Financial Security Assurance Inc.
("FSA"), GE Mortgage Insurance Company ("GEMICO") or AMBAC Indemnity Corporation
("AMBAC").
"Mortgage": (a) With respect to an ARM Loan, the mortgage, deed
of trust or other instrument creating a first lien on, or first priority
security interest in, the Mortgaged Property securing the obligation evidenced
by the related Mortgage Note and (b) with respect to a Fixed Rate Mortgage Loan
the mortgage, deed of trust or other instrument creating a first or second lien
on, or first or second priority security interest in, the Mortgaged Property
securing the obligation evidenced by the related Mortgage Note.
"Mortgage File": With respect to a Mortgage Loan, the file
containing the following documents relating to such Mortgage Loan:
(a) the related original Mortgage Note, with any intervening
endorsements, endorsed in blank and signed, by facsimile or manual
signature, in the name of the Seller by a responsible officer thereof,
with all prior and intervening endorsements showing a complete chain of
endorsement from the related originator to the Seller, if the Seller was
not such originator;
(b) either: (i) the related original Mortgage, with evidence of
recording thereon, (ii) a copy of such Mortgage certified as a true copy
by a responsible officer of the Seller or by the closing attorney, or by
an officer of the title insurer or agent of the title insurer which
issued the related title insurance policy, or commitment therefor or, if
the original has been transmitted for recording until such time as the
original is returned by the public recording office or (iii) a copy of
such Mortgage certified by the public recording office in those
instances where such original recorded Mortgage has been lost; and in
addition, the Seller shall
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deliver and release to the Purchaser such original recorded Mortgage
within 120 days after the related Purchase Date;
(c) the related original Assignment of Mortgage, executed in
blank, which assignment shall be in form and substance acceptable for
recording in the state or other jurisdiction where the related Mortgaged
Property is located; (subject to the foregoing, and where permitted
under the applicable Law of the jurisdiction where such Mortgaged
Property is located, such Assignments of Mortgage may be made by blanket
assignments for all Mortgage Loans covering related Mortgaged Properties
situated within the same county or other permitted governmental
subdivision);
(d) all related intervening Assignments of Mortgage, if any,
showing a complete chain of assignment from the related originator to
the Seller, including any recorded warehousing assignments, with
evidence of the recording thereon or copies thereof certified by the
related recording offices;
(e) (i) the related original mortgage title insurance policy or
attorney's title of opinion and abstract of title, or if unavailable by
the required delivery date, the related title commitments or binders;
(ii) in addition, the Seller or its designee shall deliver to the
Purchaser the related original policy of title insurance or attorney's
opinion of title and abstract of title within 120 days after the related
Purchase Date; (iii) the policy must be properly endorsed, any necessary
notices of transfer must be forwarded and any other action required to
be taken must be taken in order to fully protect, under the terms of the
policy and applicable law, the Purchaser's interest as the related first
or second mortgagee;
(f) the original of all assumption, extensions and modification
agreements, with evidence of recording thereon or copies thereof
certified by the related recording offices;
(g) the original of any guarantee executed in connection with the
related Mortgage Note; and
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(h) such other documents as may reasonably be requested by the
Purchaser at least two Business Days before the related Purchase Date.
"Mortgage Interest Rate": The interest rate payable by the
Obligor on a Mortgage Loan according to the terms of the Mortgage Note which, in
the case of ARM Loans, may be adjusted periodically as provided in such
Mortgage.
"Mortgage Loan": Either a (1) Securitization Program Mortgage
Loan which are of a type and quality that are eligible for inclusion in a
securitized mortgage loan pool which would qualify for credit enhancement by a
Monoline Insurance Company and which would be expected to issue a security which
would be rated in one of the investment grade generic rating categories by any
nationally recognized statistical rating agency, (ii) a Conforming Mortgage Loan
or (iii) a Wet-Funded Mortgage Loan.
"Mortgage Loan Schedule": Each schedule of Mortgage Loans
delivered by the Seller to the Purchaser and the Custody Agent, such schedule
identifying each Mortgage Loan by the address of the Mortgaged Property and the
name of the mortgagor and setting forth as to each Mortgage Loan the following
information.
"Mortgage Note": The original executed note or other evidence of
indebtedness evidencing the indebtedness of the related Obligor under the
related Mortgage Loan.
"Mortgaged Property": The underlying property securing the
related Mortgage Loan consisting of a fee simple estate or leasehold in a parcel
of real property improved by any of (a) a detached or semi-detached single
family dwelling, (b) a two-to-four-unit dwelling, (c) a townhouse or, (d) a unit
in a condominium or a planned unit development, none of which is a co-operative
unit or a mobile or manufactured home (other than a manufactured home secured to
a permanent foundation).
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"Net Securities Amount": With respect to any Tranche Period which
has terminated, the amount produced for the related Tranche corresponding to
such Tranche Period by application of the following:
TR x TA x AD
--
365
Where
TR = the Tranche Rate applicable to such Tranche
TA = the Adjusted Tranche Amount with respect to such Tranche
AD = the actual number of days elapsed during such Tranche Period;
provided, however, that no provision of this Purchase Agreement shall require
the payment or permit the collection of any Net Securities Amount in excess of
the maximum permitted by applicable law; and provided, further, that Net
Securities Amount shall not be considered paid if at any time payment is
rescinded or must be returned for any reason.
"Obligor": The person or persons obligated to pay the debt
evidenced by the related Mortgage Note.
"Person": An individual, general partnership, limited
partnership, limited liability partnership, corporation, business trust, joint
stock company, limited liability company, trust, unincorporated association,
joint venture, Governmental Authority, or other entity of whatever nature.
"Preferred Stock": Any shares of the Class A Preferred Stock of
the Seller, a class of capital stock of the Seller which (i) possesses full
voting rights, and (ii) is the sole class preferred as to the payment of
dividends and payment upon liquidation.
"Preferred Stock Purchase Agreement" means the Preferred Stock
Purchase Agreement dated as of December 17, 1996, between CMGFC and
ContiFinancial Corporation.
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"Principal": With respect to any Eligible Asset as of any date of
determination, the unamortized principal balance of such Eligible Asset as of
such date.
"Proceeds Shortfall": As defined in Section 4.05 hereof.
"Purchase": Any purchase of Eligible Assets by the Purchaser from
the Seller pursuant to the terms hereof and of the applicable Purchase Request.
"Purchase Agreement": This Purchase and Sale Agreement, dated as
of December 17, 1996 between the Purchaser and the Seller, as may be amended
from time to time pursuant to the terms hereof.
"Purchase Date": With respect to any Purchase, the date on which
the Purchaser purchases the related Eligible Assets from the Seller.
"Purchase Price Percentage": With respect to any Purchase and
Eligible Asset, the percentage (expressed as a percentage of par) of the
Principal with respect to any Eligible Assets equal to the lesser of (a) 100% of
fair market value of such Eligible Asset or (b)(i) 102% of the Principal of such
Eligible Asset, with respect to B/C Loans, (ii) 100% of the Principal of such
Eligible Asset, with respect to Standard A Loans, or (iii) 100% of the Principal
of such Eligible Asset, with respect to Special Program Loans, as set forth in
the related Purchase Request.
"Purchase Request": A request for the purchase of Eligible Assets
in the form of Exhibit D hereto.
"Purchaser": ContiTrade Services L.L.C., a Delaware limited
liability company, its successors in interest and its permitted assigns.
"Quick Certification" means the certification for Quick-Funded
Mortgage Loans, form of which is attached hereto as Exhibit M.
"Quick-Funded Mortgage Loan" means a mortgage loan (a) originated
pursuant to either the Securitization Program Mortgage Loan Underwriting
Guidelines or the Conforming Mortgage Loan Underwriting Guidelines, (b) the
subject of a
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Purchase hereunder and (c) with respect to which the original executed Mortgage
Note and Assignment of Mortgage were delivered to the Custody Agent on or prior
to the Purchase Date.
"Recourse Amount": As of any date of determination, the
difference between (a) 10 percent of the Aggregate Adjusted Tranche Amount as of
such date; provided, however, that clause (a) of the Recourse Amount shall be
fixed upon the earlier of (i) the first date on which a Required Sale Event has
occurred and (ii) the first date on which an Event of Termination has occurred,
and (b) the sum of the amounts of all payments previously made by the Seller
hereunder in respect of amounts payable hereunder which are limited by, or equal
to, the Recourse Amount.
"Registration Rights Agreement": The Registration Rights
Agreement dated as of December 17, 1996 between the Seller and the Purchaser, as
may be amended from time to time pursuant to the terms thereof.
"Release Fee": As defined in Section 6.04(b) hereof.
"Repurchase Transaction": A transaction in which parties contract
to sell and subsequently repurchase securities or other assets at a specified
date and price.
"Required Sale Event": A sale of Eligible Assets pursuant to
Section 4.03.
"Residualholder": CMG Funding Securities Corp., a Delaware
corporation, and its successors.
"SEC": The Securities and Exchange Commission and any successor
thereto.
"Securitization": A Mortgage Loan securitization transaction in
which CFS is the lead or sole underwriter or placement agent.
"Securitization Program Mortgage Loan": A Mortgage Loan
originated pursuant to, and which complies with, the Securitization Program
Mortgage Loan Underwriting Guidelines and is, or was, the subject of a Purchase
hereunder.
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"Securitization Program Mortgage Loan Underwriting Guidelines":
The underwriting guidelines for mortgage loans, attached hereto as Exhibit A, as
may be amended from time to time by the Seller and, with respect to any Material
Changes, after obtaining the Purchaser's prior written consent regarding such
Material Changes.
"Seller" means CMGFC or CMLC.
"Senior Officers" means the Chairman of the Board, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer, the
General Counsel, the Controller, the President, the Executive Vice President,
the Senior Vice President for Administration, the Senior Vice President for
Secondary Marketing, the Senior Vice President for Retail Production, the Senior
Vice President Wholesale Production of the Seller and any other Senior Vice
President of the Seller and any other Person who performs similar policy-making
functions for the Seller on a regular basis.
"Servicer": ContiMortgage Corporation, a Delaware corporation,
its successors in interest and its permitted assigns.
"Servicing Agreement": The Servicing Agreement dated as of
December 17, 1996 between the Servicer, and the Purchaser, as may be amended
from time to time pursuant to the terms hereof.
"Share Fair Market Value" means, as of any date of determination,
a price per share of Common Stock determined by dividing (x) the product of (i)
the pretax profits of the Seller for the twelve (12) month period ended as of
the most recent fiscal quarter and (ii) five (5) by (y) the number of shares of
Common Stock outstanding on the date of grant (on a fully diluted basis assuming
the conversion of all convertible securities of the Seller and the exercise of
all options to purchase the Common Stock or other securities of the Seller which
have been granted); provided, however in no event shall such price per share be
less than $3.96 per share of Common Stock.
"Shareholders' Equity": The aggregate "assets" of the Seller less
the aggregate "liabilities" of the Seller, with the term "asset" having the
meaning ascribed to such term by GAAP and the term "liabilities" being those
obligations or
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liabilities of the Seller, which, in accordance with GAAP, would be included on
the liability side of the Seller's balance sheet.
"Significant Documents": The Standby Agreement, this Purchase
Agreement, the Subordinated Debt Agreement, the Registration Rights Agreement,
the Investment Banking Services Agreement, the Secured Notes under both the
Standby Agreement and the Subordinated Debt Agreement, the Custody Agreement,
the Merger Agreement and the Servicing Agreement.
"Special Program Loan": A Conforming Mortgage Loan originated
under one of the VA, FHA or FNMA government programs.
"Standard A Loans": A Conforming Mortgage Loan which is of other
than a Special Program Loan.
"Standby Agreement": The Standby and Working Capital Financing
Agreement dated as of December 17, 1996 among the Seller, the Residualholder and
the Purchaser, as may be amended from time to time pursuant to the terms
thereof.
"Stock Option Plan" means the employee stock option plan of the
Seller which appears as Exhibit F to the Standby Agreement and which has been
approved by the management of CMGFC and by the Purchaser.
"Subordinated Debt Agreement": The Subordinated Debt Agreement
dated as of December 17, 1996 between the Seller and the Purchaser, as may be
amended from time to time pursuant to the terms thereof.
"Taxes": As defined in Section 7.02 hereof.
"Termination Date": The later to occur of (a) December 17, 1997,
or (b) the second anniversary of such date, which occurs following the date of
the most recent Extension Notice, if any.
"Tranche": The Eligible Assets specified on any particular
Purchase Request.
"Tranche Period": The period commencing on the day the Purchaser
receives a payment of principal or interest with respect to the Eligible Assets
in the related Tranche and
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ending on (and including) the day preceding the day on which the next such
payment is received. For purposes of the initial Tranche Period, the Purchaser
shall be deemed to have received such a payment with respect to the Eligible
Assets in the related Tranche on the related Purchase Date. The date upon which
the Purchaser disposes of an Eligible Asset (other than in connection with a
Repurchase Transaction or to an affiliate of the Purchaser pursuant to this
Purchase Agreement) shall also end the Tranche Period with respect thereto.
"Tranche Rate": The Tranche Rate shall equal LIBOR plus 225 basis
points. The Tranche Rate shall reset on the LIBOR Reset Date.
"Tranche Selection Notice": As defined in Section 2.05 hereof.
"Tranche Term": With respect to a Tranche, a period of one, two
or three months, or such other period as may be mutually agreeable to the
parties hereto, commencing on a Business Day selected by the Seller and the
Purchaser pursuant to this Purchase Agreement.
"Trust Receipt": A Certificate delivered by the Custody Agent to
the Purchaser, in a form acceptable to the Purchaser, to the effect that, as to
each Mortgage Loan set forth on the related Mortgage Loan Schedules, the Custody
Agent is in receipt of a Mortgage Loan File, endorsed to the Custody Agent.
"VA": The Veteran's Administration or any successor thereto.
"Wet Certification" means the certification for Wet-Funded
Mortgage Loans, form of which is attached hereto as Exhibit M.
"Wet-Funded Mortgage Loan" means a Securitization Program
Mortgage Loan or a Wholesale Mortgage Loan funded pursuant to a Wet-Funding and
with respect to which the Mortgage Note has not yet been received by the Custody
Agent.
"Wet-Funding" means a Purchase, or any part thereof, which is
made against an executed Wet-Funding Escrow Agreement and, subject to the
closing of the Mortgage Loan which is the
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subject of the Wet-Funding Escrow Agreement, is secured by such Mortgage Loan.
"Wet-Funding Escrow Agent" means, with respect to an agent
involved in any Wet-Funding, such agent as (a) may be approved by the Seller
consistent with the Seller's internal written policies and prudent lending
practices and (b) is acceptable to the Purchaser.
"Wet-Funding Escrow Agreement" means a fully completed and
executed Escrow Letter Agreement in substantially the form attached hereto as
Exhibit N, relating to the closing of a loan underlying the Wet-Funding.
"Wet-Funding Limit" means $3,000,000 to be used to fund B/C Loans
after other lines have been fully utilized for Wet-Funded Mortgage Loans.
Capitalized terms which are not otherwise defined herein shall
have the meanings ascribed thereto in the Standby Agreement.
ARTICLE II.
PROCEDURES FOR PURCHASES OF ELIGIBLE ASSETS;
CONDITIONS PRECEDENT; SETTLEMENTS
Section 1.021 Obligation to Purchase. Subject to Section 2.03 and
the other terms and conditions of this Purchase Agreement, at the request of the
Seller, the Purchaser from time to time shall purchase Eligible Assets from the
Seller at the related Initial Tranche Amount for any such Eligible Assets;
provided, however, that each Initial Tranche Amount shall be at least
$1,000,000; and provided, further, that the Purchaser shall purchase Eligible
Assets if, (i) all of the conditions set forth herein have been satisfied and
(ii) immediately following such purchase, the Available Amount would not be less
than zero.
Section 1.022 Delivery of Documents; Initial Purchase of Eligible
Assets. Prior to the initial Purchase of Eligible Assets:
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(a) (i) with respect to each Mortgage Loan other that a
Quick-Funded Mortgage Loan or a Wet-Funded Mortgage Loan, the Seller
shall have delivered, or caused to be delivered, to the Custody Agent
the Mortgage Files for each of the Eligible Assets, (ii) with respect to
each Quick-Funded Mortgage Loan, the Seller shall have delivered, or
caused to be delivered, to the Custody Agent the related original
executed Mortgage Note and Assignment of Mortgage in accordance with
clauses (a) and (c) of the definition of Mortgage File, and (iii) with
respect to each Wet-Funded Mortgage Loan, the Seller shall have
delivered, or caused to be delivered, to the Custody Agent on behalf of
the Purchaser a completed Wet-Funding Escrow Agreement, executed by the
Seller and the Wet-Funding Escrow Agent; provided, however, that in the
case of Eligible Assets with Mortgaged Properties located in
Pennsylvania and Florida, the Seller shall also have delivered the
documents required under Section 3(b)(2) and 3(b)(3)(ii) of the Custody
Agreement;
(b) the Purchaser shall have received a Mortgage Loan Schedule
pertaining to the related Eligible Assets;
(c) the Purchaser shall have received copies of the resolutions
of the Board of Directors of the Seller, certified by its Secretary,
approving this Purchase Agreement;
(d) the Purchaser shall have received the Certificate of
Incorporation of the Seller certified by the Secretary of State of
Delaware;
(e) the Purchaser shall have received a certificate of the
Secretary or Assistant Secretary of the Seller, as set forth in Exhibit
G hereto, certifying (i) the names and signatures of the officers
authorized on its behalf to execute this Purchase Agreement, and any
other documents to be delivered by it hereunder (on which the Purchaser
may conclusively rely until such time as the Purchaser shall receive
from the Seller a revised certificate meeting the requirements of this
item (e)) and (ii) a copy of the Seller's Bylaws;
(f) (i) the Purchaser shall have received a Trust Receipt and a
certificate from the Custody Agent certifying that it has reviewed the
Mortgage Files
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relating to the Eligible Assets and has found no discrepancies between
the information listed on the related Mortgage Loan Schedule and the
information set forth in such Mortgage Files, (ii) with respect to each
Quick-Funded Mortgage Loan, the Purchaser shall have received a Quick
Certification, and (iii) with respect to each Wet-Funded Mortgage Loan,
the Purchaser shall have received a Wet Certification;
(g) the Purchaser shall have received an opinion of counsel to
the Seller, in substantially the form of Exhibit E hereto;
(h) the Seller shall have instructed the applicable debtor,
trustee, paying agent, authenticating agent, transfer agent, registrar,
predecessor in interest, owner (if the Purchase Agreement is
recharacterized as a security agreement), or servicer, if any, in
respect of the related Eligible Assets to reflect on their books and
records the transfer of such Eligible Assets to the Purchaser, as owner
or secured party (if the Purchase Agreement is recharacterized as a
security agreement);
(i) if ContiMortgage Corporation should no longer be the
Servicer, the Purchaser shall have received the most recent available
servicing or like reports, if any, with respect to all of the mortgages
in the Seller's portfolio similar to the Eligible Assets;
(j) On any Purchase Date for a Purchase proposed to be secured by
Wet-Funded Mortgage Loans, the amount to be paid under such Purchase
together with the aggregate of all Purchase with respect to Wet-Funded
Mortgage Loans which remain as such on such date shall not exceed the
Wet-Funding Limit.
(k) On any Purchase Date, the amounts paid and to be paid with
respect to the Standard A Loans and the Wet-Funded Mortgage Loans with
respect to such proposed Purchase and all Outstanding Purchases shall
not exceed $15,000,000;
(l) the bond power or transfer instrument for the related
Eligible Asset shall be executed by appropriate officers of the Seller;
and
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(m) the Purchaser shall have received from KPMG Peat Marwick, an
audit of the Seller's June 1996 financial statements which the Purchaser
finds to be satisfactory in its sole discretion (the costs associated
with such audit shall be paid by the Seller).
Section 1.023 Delivery of Documents; Subsequent Purchases of
Eligible Assets. Prior to any Purchase of Eligible Assets after the initial
Purchase of Eligible Assets, the actions, conditions and deliveries specified in
subsections 2.02(a), (b), (f), (h), (i), (j), (k) and (l) shall have been taken
or made, as the case may be.
Section 1.024 Purchase Requests. (a) Seller shall deliver to the
Purchaser a Purchase Request at least five Business Days prior to the proposed
Purchase Date for any Purchase (unless otherwise agreed by the parties). The
Purchaser shall indicate its acceptance or declination of each Purchase Request
by completing the appropriate section of the Purchase Request and returning the
copy thereof to the Seller; provided, however, that the Purchaser hereby agrees
to accept each Purchase Request if such acceptance would not cause the Aggregate
Adjusted Tranche Amount to exceed the Available Amount and if all of the
conditions to such Purchase provided for in this Purchase Agreement (including,
without limitation, Section 2.02 hereof) have been satisfied.
(b) With respect to all Purchase Requests, if the Purchaser does
not send a copy of a completed Purchase Request to the Seller within at least
three Business Days prior to the proposed Purchase Date (five Business Days, if
the related Purchase Request was received by the Purchaser at least two calendar
weeks prior to the proposed Purchase Date), the Purchaser shall be deemed to
have declined such Purchase Request. Each Purchase Request accepted by the
Purchaser shall be irrevocable and binding on the Purchaser and the Seller. The
Seller shall indemnify the Purchaser and hold it harmless against any Losses
incurred by the Purchaser as a result of any failure by the Seller to timely
deliver the Eligible Assets subject to such Purchase. The Purchaser shall
undertake to take all commercially reasonable steps to mitigate the Seller's
indemnity hereunder. Each Purchase shall cover the Eligible Assets identified in
a Mortgage Loan Schedule attached to the related Purchase Request. Each Purchase
Request shall specify the type of Eligible Asset, the Purchase Price Percentage
and date of such requested Purchase,
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the Initial Tranche Amount, together with the Tranche Term and Tranche Rate
requested by the Seller with respect thereto in accordance with Section 2.05
hereof, the Market Movement Allowance, the Recourse Amount and such other
matters as may be specified on the form of the Purchase Request attached hereto
as Exhibit D. On the applicable Purchase Date, the Purchaser shall either (i)
pay or (ii) cause the Custody Agent, pursuant to the terms of the Custody
Agreement, to pay to the Seller the Initial Tranche Amount for the related
Eligible Assets against receipt of the documents required to be delivered by the
Seller pursuant to either Section 2.02 or 2.03, as the case may be.
Section 1.025 Tranche Selection. The Seller shall, at least three
Business Days prior to the expiration of any Tranche Term, provide the Purchaser
with a notice requesting a new Tranche Term for application to the related
Tranche (a "Tranche Selection Notice"). The Tranche Selection Notice may be
oral, promptly confirmed by the Seller in writing, and shall be deemed to be an
irrevocable offer by the Seller to the Purchaser to apply the requested Tranche
Term to the related Tranche. Failure to provide written confirmation of an oral
Tranche Selection Notice shall not affect the irrevocability of any such Notice.
Notwithstanding the foregoing provisions of this Section, the Purchaser, in its
reasonable discretion, may select a new Tranche Term if (i) the Seller fails to
provide a Tranche Selection Notice on a timely basis or (ii) the Purchaser
determines in its reasonable discretion that any Tranche Term requested by the
Seller is unavailable or would not yield efficient execution to the Purchaser.
Section 1.026 Survival of Representations. The terms and
conditions of the purchase of each Eligible Asset shall be as set forth in this
Purchase Agreement. The Seller will be deemed on each Purchase Date to have made
to the Purchaser the representations and warranties set forth in Article V and
Exhibit H hereof and such representations and warranties of the Seller shall be
true and correct on and as of such Purchase Date and throughout the term of this
Purchase Agreement for as long as Eligible Assets are held by the Purchaser.
Each Purchase Request made by the Seller shall be deemed to be a restatement of
each of the covenants of the Seller made pursuant to Article V and Exhibit J
hereof.
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Section 1.027 Proceeds of Eligible Assets. The transfer and sale
hereby of all of the Seller's right, title and interest in and to each Eligible
Asset shall include all proceeds, products and profits derived therefrom,
including, without limitation, all scheduled payments of principal of and
interest on such Eligible Assets and other amounts due or payable or to become
due or payable in respect thereof and proceeds thereof including, without
limitation, all moneys, goods and other tangible or intangible property received
upon the liquidation or sale thereof.
Section 1.028 Purchase Mechanics. (a) The Seller shall deliver to
the Purchaser a Purchase Request no later than 5:00 p.m., New York time, one
Business Day prior to a Purchase Date of the amount of each Purchase to be paid
on such Purchase Date and the total thereof. By 12:00 noon, New York time, on
the related Purchase Date, the Purchaser will authorize its bank to make payment
of the aggregate amount of each Purchase to be funded on such Purchase Date by a
single wire transfer of immediately available funds to the account of the Seller
set forth in Schedule I attached hereto; provided, however, that with respect to
a Purchase paid in respect of Wet-Funded Mortgage Loans hereof, the Purchaser
shall authorize its bank to make such Purchase by wire transfer of immediately
available funds to the related Purchase Funding Account.
(b) On or before the date of closing of any Wet-Funded Mortgage
Loan with respect to which a Purchase has been made, the Seller shall provide to
the Custody Agent and, if requested by the Purchaser, the Purchaser the wiring
instructions for the transfer of funds from the Purchase Funding Account for the
closing of such Wet-Funded Mortgage Loan.
Section 1.029 Retention of Accrued Interest. The Seller shall
retain all rights with respect to any interest accrued and unpaid with respect
to any Eligible Assets to the related Purchase Date.
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ARTICLE III.
DISTRIBUTIONS
Section 1.031 Distributions.
(a) The Seller agrees to pay the Purchaser during the term of
this Purchase Agreement, on the last day of any Tranche Term the Net Securities
Amount and Adjusted Tranche Amount owed to the Purchaser, if any, with respect
to the applicable Tranche.
(b) The Seller shall provide the Purchaser with an irrevocable
instruction to the applicable paying agent, servicer or other appropriate party
with respect to each Eligible Asset purchased hereunder to remit to the
Purchaser, at the times required by the terms of such Eligible Asset, by wire
transfer in immediately available funds, all distributions thereon or with
respect thereto in accordance with the Purchaser's payment instructions;
provided, however, that the Purchaser agrees that so long as no event of
default, Event of Termination or Forbearance Waiver hereunder shall have
occurred and be continuing, the Purchaser shall not deliver such instruction to
the applicable paying agent, servicer, or other appropriate party, and shall
instead permit the Servicer to receive all distributions as permitted by the
Seller.
(c) Upon receipt by the Purchaser of any payment with respect to
any Eligible Asset, the Purchaser shall apply such payment so received first, to
the reduction of the Net Securities Amount and second, to reduce the Adjusted
Tranche Amount of the applicable Tranche.
(d) Upon receipt by the Purchaser of any payment of principal or
interest with respect to any Eligible Assets, the prior Tranche Period shall
terminate and a new Tranche Period shall begin, and the Purchaser shall request
that Seller cause the Servicer to compute and either remit to the Seller or, at
the Seller's option, deposit in an account maintained by the Purchaser on behalf
of the Seller the amount by which the aggregate amount of any interest payment
received by the Purchaser exceeds the Net Securities Amount with respect to the
Tranche Period then ending.
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(e) Notwithstanding the foregoing provisions of this Article III,
the Purchaser hereby grants a waiver with respect to the Seller's obligation to
remit, or to cause to remit, all payments in respect of principal and interest
of any Eligible Asset (the "Forbearance Waiver"). During the period in which a
Forbearance Waiver is in effect, the Seller will cause the Servicer to remit
payments to the Purchaser once a month on the 17th day of the month, or if not a
Business Day, then on the next succeeding Business Day. Any payment so held by
the Servicer shall be paid to the Purchaser immediately upon the termination of
the Forbearance Waiver. The Forbearance Waiver shall terminate upon the earlier
to occur of (i) the occurrence of any default by the Seller hereunder and (ii)
the Purchaser's delivery of a written notice to the Seller and Servicer
terminating such Forbearance Waiver. During the existence of any Forbearance
Waiver, any payments remitted by the Servicer to the Purchaser shall not
terminate the relevant Tranche Period.
ARTICLE IV.
TRANSFERS OF ELIGIBLE ASSETS BY THE PURCHASER
Section II.01 Purchaser Sale. The Purchaser may, at its election,
and without the consent of the Seller, at any time during this Purchase
Agreement sell, transfer, convey, pledge or assign any or all of its right,
title and interest in, to or under, or grant a security interest in, any
Eligible Assets purchased by the Purchaser hereunder. Prior to effecting any
sale or other disposition of its right, title and interest in any Eligible Asset
(other than Repurchase Transactions), the Purchaser shall offer to the Seller
between the hours of 8:00 a.m. and 6:00 p.m. (New York City time) on any
Business Day (by oral notice to such effect, promptly confirmed in writing), the
right to purchase the offered Eligible Assets in whole from it at the applicable
Adjusted Tranche Amount plus the applicable Net Securities Amount (which has not
been theretofore paid pursuant to Section 3.01) on the related Eligible Assets.
Within the time periods specified below (New York City time), the Seller shall
notify the Purchaser of its intent to so purchase the offered Eligible Assets:
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If the Purchaser makes The Seller shall notify
offer to sell to the Purchaser of intent
the Seller to Purchase
---------------------- -------------------------
Between 8:00 a.m. and Before noon on the
10:00 a.m. on any next succeeding
Business Day Business Day
Between 10:00 a.m. and Before noon on the
6:00 p.m. on any second succeeding
Business Day Business Day
If the Seller fails to notify the Purchaser of its intention to purchase the
related Eligible Assets within the time periods set forth above, then the Seller
shall be deemed to have declined the Purchaser's offer to purchase the related
Eligible Assets. If the Seller determines to effect such a purchase, the Seller
shall, on the fifth Business Day next succeeding the Business Day on which the
Seller accepted the offer to purchase the related Eligible Assets from the
Purchaser pursuant to this Section 4.01, pay to the Purchaser the applicable
Adjusted Tranche Amount and any Net Securities Amount required to be paid
pursuant to Section 3.01 hereof. If the Purchaser disposes of any Eligible
Assets which the Seller declines to purchase, and the Purchaser later reacquires
such Eligible Assets for any reason, then prior to any subsequent sale of such
Eligible Assets, the Purchaser shall afford the Seller the right to purchase
such Eligible Assets pursuant to this Section 4.01 at the greater of (i) the
Purchaser's reacquisition price plus applicable costs and expenses or (ii) the
Aggregate Adjusted Tranche Amount plus any Net Securities Amount plus applicable
costs and expenses. This right to purchase the Assets reacquired by the
Purchaser shall be extinguished upon the Seller's second refusal to purchase any
Eligible Asset(s).
Section 1.042 Market Value. On a weekly basis, the Purchaser, in
respect of each Purchase, shall determine the Market Value of each Eligible
Asset which has been purchased by the Purchaser and not disposed of, and shall
notify the Seller thereof. If the Seller shall in good faith disagree with the
Market Value of any such Eligible Asset as so determined by the Purchaser, the
Seller shall notify the Purchaser and the Purchaser and the Seller shall
endeavor in good faith to reach an agreement on the Market Value of such
Eligible Assets. If the Purchaser and the Seller cannot agree
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on the Market Value, a Required Sale Event will be deemed to have occurred. If,
in respect of any Purchase, the Market Value of the Eligible Assets at any time
has declined from the Market Value of the Eligible Assets as of the relevant
Purchase Date by an amount exceeding the applicable Market Movement Allowance, a
Required Sale Event shall be deemed to have occurred.
Section 1.043 Required Sale Event. (a) A "Required Sale Event"
shall occur pursuant to Section 4.02, Section 5.05, Section 6.02, or if any
Event of Termination occurs. Upon the occurrence of a Required Sale Event, the
Purchaser shall in a commercially reasonable manner sell the Eligible Assets,
subject to the Seller's obligation to indemnify the Purchaser against any
resulting Losses from such sale up to the then-applicable Recourse Amount. Prior
to effecting any such sale, the Purchaser shall offer to the Seller the right to
purchase such Eligible Assets from it at the Adjusted Tranche Amount, plus any
Net Securities Amount payable pursuant to Section 3.01 hereof. If the Seller
fails to exercise its right of purchase within the time set forth in Section
4.01 and the Purchaser sells the Eligible Assets (through private or public
sale) to a third party, the Purchaser shall promptly provide a notification to
the Seller of such event, setting forth the net sales proceeds inclusive of
accrued interest received (after giving effect to all selling and related
expenses, including the fees and expenses of any consultants, brokers or
attorneys) and shall notify the Seller of all Losses incurred and invoice the
Seller (with supporting detail) for the amount due to the Purchaser, up to the
amount of the Recourse Amount. Upon receipt of such invoice, the Seller shall
pay to the Purchaser such portion of the Recourse Amount to the extent necessary
to indemnify the Purchaser against the Losses sustained. If, as a result of the
sale of the Eligible Assets, the net realized sales proceeds, inclusive of
accrued interest, if any, on the related Eligible Assets exceed the applicable
Adjusted Tranche Amount plus the applicable Net Securities Amount, then the
Purchaser shall pay any such excess up to the Gain Amount to the Seller.
(b) Notwithstanding the foregoing, if a Required Sale Event
occurs due to an Event of Termination, the Purchaser will not be obligated to
offer the Seller a right to purchase the Eligible Assets. The Purchaser will be
able to sell the Eligible Assets to any other third party first. In
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the event that the Purchaser offers to sell the Eligible Assets to the Seller,
the Seller will be obligated to buy the Eligible Assets at the Adjusted Tranche
Amount, plus any Net Securities Amount payable pursuant to Section 3.01 hereof.
Section 1.044 Bankruptcy Event. With respect to the Seller's
right of purchase set forth in Section 4.01 and Section 4.03, if a bankruptcy
event occurs, as described in Section 8.04 below, involving the Seller, during
the period after which the Seller has notified the Purchaser of its intention to
purchase the offered Eligible Assets but before the expiration of the five
Business Day period in which the Seller has to effect such purchase, the
Purchaser shall be released from its obligation to sell such Eligible Assets to
the Seller and any other obligations set forth in Section 4.01 and 4.03 and may
sell such Eligible Assets (through private or public sale) to any third party.
Section 1.045 Proceeds Shortfall. If the Purchaser sells Eligible
Assets to any third party for an amount less than the applicable Adjusted
Tranche Amount plus the applicable Net Securities Amount, then the Seller shall
pay to purchaser any such shortfall (the "Proceeds Shortfall"). Until the
Proceeds Shortfall is repaid, the Purchaser shall be entitled to deduct from the
proceeds owed to the Seller as a result of any subsequent sales of Eligible
Assets (to the Seller or to any third party), the amount, up to the Proceeds
Shortfall, by which the proceeds of any such subsequent sale exceeds the
Adjusted Tranche Amount plus the Net Securities Amount, in each case applicable
to such subsequent sale.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties of the Seller. The
Seller represents and warrants to Purchaser that the representations and
warranties attached hereto as Exhibit H are true and correct as of the date of
this Purchase Agreement and as of the date of each Purchase.
Section 5.02 Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to the Seller that the representations and
warranties attached hereto
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as Exhibit I are true and correct as of the date of this Purchase Agreement.
Section 5.03 Covenants of the Seller. The Seller covenants to the
Purchaser are attached hereto as Exhibit J.
Section 5.04 Representations and Warranties Regarding the
Individual Mortgage Loans. The Seller represents and warrants to Purchaser with
respect to each individual Mortgage Loan in a pool of Eligible Assets that each
such Mortgage Loan shall have been originated in conformity with and meets, as
of the date of the Purchase, the criteria set forth in the attached Exhibit K.
Section 5.05 Remedies for Seller's Breach of Representations,
Warranties and Covenants. In the event that the Seller fails to comply with its
representation, warranties and covenants, as set forth in Sections 5.01, 5.03
and 5.04 and their accompanying Exhibits, a Required Sale Event shall occur.
ARTICLE VI.
OPERATIVE PROVISIONS
Section 6.01 Intent of Parties; Security Interest. The Purchaser
and the Seller confirm that the transactions contemplated herein are intended as
purchases and sales rather than as loan transactions. In the event, for any
reason, and solely in such event, any transaction hereunder is construed by any
court or regulatory authority as a loan or other than a purchase and sale of the
related Mortgage Loans, the Seller shall be deemed to have hereby pledged to the
Purchaser as security for the performance by the Seller of all of its
obligations from time to time arising hereunder and under any and all Purchases
effected pursuant hereto, and shall be deemed to have granted to the Purchaser a
first priority perfected security interest in, the related Mortgage and all
distributions in respect thereof, and the proceeds of any and all of the
foregoing and any other Collateral. The Seller shall, with respect to each
Purchase, execute a Receipt, Grant and Assignment substantially in the form of
Exhibit C hereto, as applicable, pursuant to which the Seller shall reconfirm
its grant to the Purchaser of a first priority security interest in, and lien
upon, the Collateral. In furtherance of the foregoing, (i) this Purchase
Agreement shall constitute a
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security agreement, (ii) the Purchaser shall have all of the rights of a secured
party with respect to the Collateral pursuant to applicable law and (iii) the
Seller shall execute all documents, including but not limited to (A) assignments
of mortgages, and (B) financing statements under the Uniform Commercial Code as
in effect in any applicable jurisdictions, as the Purchaser may reasonably
require to effectively perfect and evidence the Purchaser's first priority
security interest in the Collateral. The Seller also covenants not to pledge,
assign or grant any security interest to any other party in any Mortgage Loan
sold to the Purchaser.
Section 6.02 Term. This Purchase Agreement shall automatically
terminate on the earlier to occur of an Event of Termination or the Termination
Date. In the event this Purchase agreement expires on the Termination Date and
at that time there exists no Event of Termination, then, immediately prior to
such Termination Date, as to all Eligible Assets then owned by the Purchaser, a
Required Sale Event shall be deemed to occur unless this Purchase Agreement is
extended.
Section 6.03 Indemnification by the Seller.
(a) If, in connection with the matters that are the subject of
this Purchase Agreement, the Purchaser becomes involved in any capacity in any
action or legal proceeding involving claims by any third party, the Seller
agrees to reimburse the Purchaser, its Subsidiaries and its Affiliates and their
respective directors, officers, employees, agents and controlling persons (each,
an "Indemnified Party") promptly upon request for all reasonable expenses
(including the fees and disbursements of legal counsel, the allocated costs of
in-house counsel, and the cost of investigation and preparation) as they are
incurred, regardless of whether such actions or proceedings are brought by the
Seller, its Affiliates or third parties. The Seller also agrees to indemnify and
hold each Indemnified Party harmless against all losses, claims, damages or
liabilities of any kind, joint or several, which such Indemnified Party may
become subject to in connection with, or relating to, or arising out of this
Purchase Agreement or the Custody Agreement or any transaction contemplated
hereby; provided, however, that the Seller shall not be liable under the
foregoing indemnity agreement in respect of any loss, claim, damage or liability
to the extent that a court having jurisdiction shall have determined by a final
judgment (not subject to further appeal) that such loss,
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claim, damage or liability resulted primarily and directly from the willful
misconduct or gross negligence of such Indemnified Party.
(b) The agreements of the Seller in this Section 6.03 shall be in
addition to any liabilities that the Seller may otherwise have and shall apply
whether or not the Purchaser or any other Indemnified Party is a formal party to
any lawsuit, claim or other proceeding. Solely for purposes of enforcing such
agreements, the Seller hereby consents to personal jurisdiction, service and
venue in any court in which any claim or proceeding which relates to the
services or matters that are the subject of this Purchase Agreement is brought
against the Purchaser or other Indemnified Party.
(c) The sole indemnification with respect to Taxes is that set
forth in Article VIII hereof.
(d) All indemnities and undertakings of the Seller and the
Purchaser hereunder shall survive the termination of this Purchase Agreement.
Section 6.04 Securitization. (a) If the Seller awards
Securitizations on a whole-loan trade involving any Mortgage Loans (other than
those Mortgage Loans underwritten through its Conforming Mortgage Loan
Underwriting Guidelines) to any underwriter or placement agent other than CFS,
or if the Seller determines not to consummate the Securitizations, then Seller
shall owe to the Purchaser, in addition to all other amounts due, a fee for the
facility in an amount equal to the product of (i) 0.25% and (ii) the daily
average outstanding Adjusted Tranche Amount from the Purchase Date until the
date of determination on the Mortgage Loans which are not included in the
Securitizations. The fee for the facility is calculated based on such Mortgage
Loans' average daily outstanding principal balance during the time they were
Mortgage Loans. To the extent that the Adjusted Tranche Amount is outstanding,
any such fee shall be added to the then outstanding Adjusted Tranche Amount, if
the Adjusted Tranche Amount is not then outstanding, such fee shall be
immediately due and payable.
(b) At any time that a Mortgage Loan (other than those Mortgage
Loans underwritten through its Conforming Mortgage Loan Underwriting Guidelines)
is removed from the facility provided hereby (except for the purpose of curing a
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breach of any representations and warranties), an additional fee of 25 basis
points per annum (the "Release Fee") calculated on such Mortgage Loan's average
daily outstanding principal balance during the time that such Mortgage Loan was
owned by the Purchaser hereunder, shall be immediately due and payable to the
Purchaser with respect to such Mortgage Loan.
(c) At any time in which a Mortgage Loan (other than those
Mortgage Loans underwritten through its Conforming Mortgage Loan Underwriting
Guidelines) is not included in a securitization or removed for another purpose
after such Mortgage Loan has been purchased by the Purchaser, the Seller agrees
to either purchase such Mortgage Loan or cause a third-party to purchase such
Mortgage Loan.
Section 6.05 Remedies. If an Event of Termination occurs and is
continuing, the Purchaser may, to the extent provided or permitted by applicable
law and this Purchase Agreement, pursue any available legal remedy including the
sale or other disposition of some or all of the Eligible Assets and related
Collateral in accordance with the provisions of Section 4.03(b); provided,
however, the Purchaser shall not be obligated to offer the relevant Eligible
Asset to the Seller for purchase pursuant to the right of first refusal
contained in Article IV if any Event of Termination hereof has occurred and is
continuing. Following an Event of Termination, in addition to the rights granted
to the Purchaser pursuant to Section 4.03(b) hereof, no further Purchase
hereunder shall occur, unless such Event of Termination shall have been waived
by the Purchaser.
Section 6.06 Consumer Credit Law Obligations. The Seller agrees
to discharge on the Purchaser's behalf all obligations, including, without
limitation, all disclosure obligations, which the Purchaser may have under any
Consumer Credit Laws in connection with the Purchaser's purchases of Mortgage
Loans hereunder. The Purchaser agrees to provide the Seller with such
information as is reasonably necessary for the Seller to discharge such
obligations and hereby appoints the Seller as its agent in its name for the
purposes of, and only for the purposes of, performing such obligations. The
Seller hereby agrees to indemnify the Purchaser and its respective officers,
directors, agents and employees from any losses suffered by any such party in
connection with the Seller's obligations under this Section 6.06.
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Section 6.07 Grant of Security Interest. It is the intention of
the parties hereto, that the transactions described herein shall be regarded as
sales of the Eligible Assets by the Seller to the Purchaser. Nevertheless, to
secure the performance of the Seller's obligations hereunder, Seller pledges and
hypothecates to the Purchaser, and grants a continuing lien and first priority
security interest in favor of the Purchaser in, all of the Seller's right, title
and interest in and to the following (the "Collateral"):
(a) all Mortgage Loans, Mortgages, Mortgage Notes, Mortgage
Files, Servicing Files and other documents and property as shall be
deposited with, or held by or at the direction of the Purchaser pursuant
to this Purchase Agreement and the Custody Agreement;
(b) all payments and prepayments of principal, interest,
penalties and other income due or to become due on all Mortgages Loans,
Mortgages and Mortgage Notes referred to in Paragraph (a) above, and all
proceeds thereof, all the right, title and interest of every nature
whatsoever of the Seller in and to the same and all property used in
connection therewith, including, without limitation, the following: (i)
all rights, liens and security interests existing with respect to, or as
security for, all such Mortgage Loans; (ii) all hazard insurance
policies, flood insurance policies (if applicable), title insurance
policies or condemnation proceeds with respect to each such Mortgage
Loan (and amounts received by the Servicer for the purpose of payment of
real property taxes, assessments and insurance premiums pursuant to the
terms of the Mortgage Notes); (iii) the servicing rights attributable to
the Mortgage Loans; and (iv) all private mortgage insurance policies, if
any, with respect to each such Mortgage Loan;
(c) all files, surveys, certificates, correspondence, appraisals,
computer programs, tapes, discs, cards, accounting records and other
records and data of the Seller related to the Mortgage Loans referred to
in Paragraph (a) above (but not including the general accounting
materials of the Seller); and
(d) all products, profits and proceeds of any of the property
described in the foregoing Paragraphs (a) and (b) and any other property
or documents relating to
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any of the foregoing that may, from time to time hereafter, come into
the Seller's possession and/or be delivered by the Seller to the
Purchaser or its designee under this Purchase Agreement.
Section 6.08 Late Payments. Any late payments shall bear interest
at the Default Rate.
ARTICLE VII.
INDEMNITIES AND OTHER COSTS
Section 1.071 Hold Harmless. The Seller hereby agrees to pay, and
to indemnify, protect, save and hold harmless, on an After-Tax Basis (as defined
in Section 7.05 below), the Purchaser from and against any and all Taxes (as
defined in Section 7.02 below) other than (i) income taxes of the Purchaser,
(ii) Taxes that result from the misconduct or negligence of the Purchaser or
from the failure of the Purchaser to file tax returns or certificates of
exemption from withholding or other reports, properly and on a timely basis or
to claim a deduction or credit and (iii) Taxes that are based on or measured by
fees or compensation received by the Purchaser, which may at any time be imposed
or asserted by reason of, in connection with or in respect of the Eligible
Assets or any transactions contemplated hereby, whether imposed on the
Purchaser, the Seller, or the Eligible Assets or otherwise, whether collected
directly from the party upon which the tax is imposed, by withholding or
otherwise whether arising by reason of the acts to be performed by the Seller
hereunder or otherwise.
Section 1.072 Definition of Taxes. For purposes of this Article
VII, the term "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, excise, property and sale taxes
(including, in each such case, any interest, penalties or additions attributable
to or imposed on or with respect to any such assessment) imposed by the United
States, any state or political subdivision thereof, any foreign government or
any other jurisdiction or taxing authority.
Section 1.073 After-Tax Calculation. For purposes of this Article
VII, in determining the additional amount necessary so that any payment
hereunder is paid on an After-
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Tax Basis, such calculation shall be based on the Purchaser's effective tax rate
in effect from time to time under applicable law.
Section 1.074 Contest, Payment, Interest. In the event that the
Purchaser becomes aware that a taxing jurisdiction has made or is making a claim
with respect to any Tax for which the Seller may be liable under this Article
VII, the Purchaser shall promptly notify the Seller thereof; provided, however,
that if the Purchaser fails to promptly notify the Seller thereof, such failure
shall not relieve the Seller of its obligations hereunder, except and only to
the extent that the Seller is materially prejudiced by such failure. If
reasonably requested by the Seller within 30 days of receipt of such notice, the
Seller shall, at its expense, be entitled to contest the imposition of such Tax.
All payments due pursuant to this Article VII shall be paid no later than the
later of (i) five Business Days after the date of such notice or (ii) five
Business Days before the date the Tax to which such amount payable hereunder
relates is due or is to be paid accompanied by a written statement (which
written statement shall, at the request of the Seller, be verified by a
nationally recognized independent accounting firm mutually acceptable to the
Seller and the Purchaser, such verification to be at the Seller's expense unless
such accountants determine that the amount payable by the Seller is less than
ninety-five percent (95%) of the amount shown on such written statement)
describing in reasonable detail the Tax and the computation of the amount
payable; provided, however, that the Seller shall not be entitled to any payment
in respect of accountants' fees and expenses incurred in connection with the
contest of a taxing authority assessment. Without in any way limiting the
Purchaser's remedies, any such amount not paid when due, shall bear interest at
a rate equal to the Default Rate.
Section 1.075 Definition of "After-Tax Basis"; Tax Savings. For
purposes of this Article VII, the term "After-Tax Basis" shall mean an amount
which after deduction of the net increase in federal, state and foreign income
taxes required to be paid by the Purchaser with respect to the receipt of such
amount is equal to the payment required under the provision of this Article VII
which requires payment to be made on an After-Tax Basis. If the Purchaser
subsequently realizes a tax deduction or credit (including foreign tax credit
and any reduction in Taxes) not previously taken into
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account in computing such payment, the Purchaser shall promptly pay to the
Seller an amount equal to the sum of (a) the actual reduction in Taxes, if any,
realized by the Purchaser which is attributable to such deduction or credit and
(b) the actual reduction in Taxes, if any, realized by the Purchaser as a result
of any payment made by the Purchaser pursuant to this sentence.
Section 1.076 Facility Fee. In consideration of the access to
this facility, the Seller shall pay a facility fee to the Purchaser on a monthly
basis, in an amount equal to the product of (a) 0.0025 per annum, (b) 1/12, and
(c) the Maximum Available Amount.
ARTICLE VIII.
EVENTS OF TERMINATION
Each of the following events shall constitute an "Event of
Termination" hereunder except where remedies are provided for (whatever the
reason for such Event of Termination and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body).
Section 1.081 Failure to Perform. Failure of the Seller to
deliver to the Purchaser or its designee the relevant Eligible Assets on the
relevant Purchase Date; or failure of the Seller to pay when due any sums or
amount equal to or greater than $20,000 payable hereunder or under any Purchase
or to pay within one Business Day of the due date any sums or amount less than
$20,000 payable hereunder or under any Purchase.
Section 1.082 Failure of Representation or Warranty. Any of the
representations and warranties made by the Seller herein, or in any certificate
or other document delivered pursuant to or in connection with this Purchase
Agreement or any transaction contemplated hereby, shall prove to be untrue in
any material respect when made or deemed made. [If such Representation or
warranty is made in connection with individual Mortgage Loans, the Purchaser may
require the Seller to purchase such Mortgage Loans as set forth in Section 4.03.
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Section 1.083 Failure of Covenant. Failure of the Seller to
observe and perform any material covenant, condition or other agreement on its
part to be observed or performed hereunder and such default shall continue
unremedied for five Business Days.
Section 1.084 Bankruptcy Event. (a) Appointment of a receiver,
conservator, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Seller, or of any substantial part of its Property, the
ordering of the winding-up or liquidation of its affairs, or the entry of a
decree or order for relief by a court having jurisdiction in the premises in
respect of the Seller in any involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect which such order
remains undischarged or unstayed, as the case may be, for 60 days; or
(b) Commencement by the Seller of a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the consent by the Seller to the entry of an order for relief in an
involuntary case under any such law or to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other similar official) of the Seller or of any substantial part of the
Seller's property, or the making by the Seller of any general assignment for the
benefit of creditors, or the failure of the Seller generally to pay its debts as
such debts become due, or the taking of corporate action by the Seller in
furtherance of any of the foregoing.
Section 1.085 Seller Default. Default by the Seller whether as
principal, guarantor or surety, in the payment of any principal or interest on
any indebtedness or any other obligation of the Seller in the amount of $50,000
or more.
Section 1.086 Material Adverse Change. A material adverse change
in the financial condition of the Seller shall have occurred which, in the
reasonable opinion of the Purchaser, materially impairs the ability of the
Seller to perform its obligations hereunder.
Section 1.087 Cross-Default. The occurrence and continuance of an
"event of default" or of an "event of
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termination" on the part of the Seller under either (i) any Significant
Documents, (ii) any material agreement of the Seller, including, but not limited
to, any warehouse agreements, financing agreement, or any credit agreements, or
(iii) any other agreement between the Seller and the Purchaser or any of its
affiliates on the other hand, which has not been waived by the Purchaser.
Section 1.088 Non-Closure. If (i) the Merger Agreement has not
closed or (ii) all of the Significant Documents have not been executed and
closed by March 31, 1997
ARTICLE IX.
GENERAL PROVISIONS
Section 1.091 Cooperation, Confidentiality, Etc..
(a) Upon reasonable notice the Seller shall furnish, and shall
use its best efforts to cause other relevant parties to furnish, the Purchaser
with all information and data reasonably requested by the Purchaser in
connection with its activities on the Seller's behalf to carry out the terms of
this Purchase Agreement, and shall provide the Purchaser reasonable access to
the Seller's officers, directors, employees and professional advisers.
(b) The Seller recognizes and confirms that the Purchaser in
acting pursuant to this Purchase Agreement may use information in reports and
other information provided by others, including, without limitation, information
provided by the Seller, and that the Purchaser does not assume responsibility
for and may rely, without independent verification, on the accuracy and
completeness of any such reports and information. The Seller agrees that any
advice or information rendered by the Purchaser in connection with this Purchase
Agreement is for the confidential use of the Seller only and, except as
otherwise required by law, the Seller will not, and will not permit any third
party to, disclose such advice or information to others or summarize or refer to
such advice or information or to the Purchaser's engagement hereunder without,
in each case, the Purchaser's prior written consent. The Purchaser agrees to
keep confidential any information furnished to it by the Seller which is clearly
labelled as proprietary to the Seller, is not otherwise
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publicly available to the Purchaser and the disclosure of which is not required
by applicable law or judicial or administrative process.
(c) Neither the Purchaser nor the Seller may place public
announcements or advertisements describing this or any part of this Purchase
Agreement without the prior written consent of the other party.
Section 1.092 Waiver of Trial by Jury. Each party hereto waives
the right to trial by jury in any action, suit, proceeding or counterclaim of
any kind arising out of or related to this Purchase Agreement. In the event of
litigation, this Purchase Agreement may be filed as a written consent to a trial
by the court.
Section 1.093 Amendment; Waivers. This Purchase Agreement may be
amended from time to time only by written agreement of the parties. No failure
on the part of the Purchaser to exercise, and no delay in exercising, any right,
power, or remedy under this Purchase Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right under this
Purchase Agreement preclude any other or further exercise thereof or the
exercise of any other right. No term or provision of this Purchase Agreement may
be waived or modified unless such waiver or modification is in writing and
signed by the party against whom such waiver or modification is sought to be
enforced.
Section 1.094 Taxes. All payments made by the Seller to the
Purchaser on account of any Mortgage Loan which are due hereunder shall be made
free and clear of, and without reduction by reason of, any taxes, levies,
imposts, deductions, charges or withholdings of any nature, including, without
limitation, any withholding taxes (but excluding any taxes imposed on the
overall net income of the Purchaser) and all liabilities with respect thereto
(all such taxes, levies, imposts, deductions, charges, withholding and
liabilities being hereinafter referred to as "Taxes"). If the Seller shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Secured Note, the sum payable shall be increased as may
be necessary so that after making all required deductions (applicable to
additional sums payable under this subsection) the Purchaser receives an amount
equal to the sum it would have received had no such deductions been made.
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Section 1.095 Limited Liability. No recourse under any
Significant Documents shall be had against, and no personal liability shall
attach to, any officer, employee, director, affiliate or shareholder of any
party hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Significant Documents, it being expressly agreed and understood that each
Significant Document is solely a corporate obligation of each party hereto, and
that any and all personal liability, either at common law or in equity, or by
statute or constitution, of every such officer, employee, director, affiliate or
shareholder for breaches by any party hereto of any obligations under any
Significant Document is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Purchase Agreement.
Section 1.096 Other Transactions. The Seller acknowledges that
the Purchaser and its Affiliates compete, directly and indirectly in the
business in which the Seller engages and proposes to engage; provided, however,
that the Purchaser shall not compete with respect to any transaction, the terms
of which are revealed to the Purchaser by the Seller in connection with seeking
the services of the Purchaser and assuming that neither the Purchaser nor any of
its Affiliates has prior knowledge of such transaction. The Seller acknowledges
that the Purchaser and its Affiliates have and will in the future have business
dealings with parties other than the Seller, which parties compete, directly or
indirectly with the Seller. Although the Purchaser and its Affiliates may, in
their normal course of business, acquire information about the securitization
market, particular transactions or such other parties, the Purchaser shall have
no obligation to disclose such information to the Seller. The Seller
acknowledges that the Purchaser and its Affiliates may engage in their
businesses and otherwise compete with the Seller without regard to their
relationship to the Seller hereunder.
Section 1.097 Opinion of Counsel to the Seller. Upon the
execution of this Purchase Agreement, the Seller shall deliver to the Purchaser
a legal opinion from their special counsel in the form attached hereto as
Exhibit E, together with such other certificates and documents as the Purchaser
shall require.
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Section 1.098 Costs and Expenses. (a) The Purchaser and the
Seller will each be solely responsible for and bear all of their own respective
expenses (other than the expenses of legal counsel), including, without
limitation, accountants and other advisers, incurred at any time in connection
with pursuing or consummating the Significant Documents and the transactions
contemplated thereby. In addition, the Seller shall be solely responsible for
(i) all accountant's fees incurred in connection with the review of the Seller's
June 30, 1996 financial statements and (ii) fees incurred by an independent
contract underwriter.
(b) The Seller will be responsible for and bear 50% of all the
fees and expenses of legal counsel for the Purchaser in connection with the
preparation, negotiation, and execution of the Significant Documents and the
transactions contemplated thereby; however, the Seller shall not bear more than
$75,000 under this clause (b). The Purchaser will be responsible for and bear
all remaining fees and expenses of legal counsel for the Purchaser in connection
with the preparation, negotiation, and execution of the Significant Documents
and the transactions contemplated thereby.
(c) The Purchaser will be responsible for the bear 50% of all the
fees and expenses of legal counsel for the Seller in connection with the
preparation, negotiation, and execution of the Significant Documents and the
transactions contemplated thereby; however, the Purchaser shall not bear more
than $35,000 under this clause (c). The Seller will be responsible for and bear
all the remaining fees and expenses of legal counsel for the Seller in
connection with the preparation, negotiation, and execution of the Significant
Documents and the transactions contemplated thereby.
(d) All other costs and expenses incurred in connection with the
transactions contemplated herein, including recording fees for the Assignments
of Mortgages, if the Purchaser elects to have them recorded, fees for title
policy endorsements and continuations, fees due to the Custody Agent under the
Custody Agreement and the Seller's attorneys' fees, shall be paid by the Seller.
Section 1.099 Wiring Instructions. Any payment required to be
made by either party hereto, or any Affiliate thereof, pursuant to this Purchase
Agreement shall be made by
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wire transfer of immediately available funds to the account of the other party
set forth in the wiring instructions attached hereto as Schedule I.
Section 9.10 Power of Attorney. The Seller hereby authorizes the
Purchaser, at the Seller's expense, to file such financing statement or
statements relating to the Collateral without the Seller's signature thereon as
the Purchaser at its option may deem appropriate, and appoints the Purchaser as
the Seller's attorney-in-fact (without requiring the Purchaser) to execute any
such financing statement or statements in the Seller's name and to perform all
other acts which the Purchaser deems appropriate to perfect and continue the
security interest granted hereby and to protect, preserve and realize upon the
Collateral, including, but not limited to, the right to endorse notes, complete
blanks in documents and sign assignments on behalf of the Seller as its
attorney-in-fact. This Power of Attorney is coupled with an interest and is
irrevocable without the Purchaser's written consent. Notwithstanding the
foregoing, the power of attorney hereby granted shall only be effective during
the occurrence and continuance of any Event of Default hereunder.
Section 9.11 Right of Set-Off. Upon the occurrence of any event
or circumstance which requires the Seller to make a payment hereunder, the
Purchaser is hereby authorized then or at any time or times thereafter, without
notice to the Seller (any such notice being expressly waived by the Seller), to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Purchaser to or for the credit or the account of the Seller against any
and all of the obligations of the Seller now or hereafter existing hereunder,
irrespective of whether or not the Purchaser shall have made any demand
hereunder. The Purchaser agrees promptly to notify the Seller after any such
set-off and application made by the Purchaser; provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Purchaser under this Section 9.11 are in addition to other rights
and remedies which the Purchaser may have.
Section 9.12 Servicing. All of the Mortgage Loans shall be
serviced by the Servicer pursuant to the terms of the Servicing Agreement. Under
the Servicing Agreement, the Servicer will be entitled to receive a Servicing
Fee of 0.50%
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per annum based upon the outstanding principal balance of Mortgage Loans
serviced.
ARTICLE X.
CONSTRUCTION
Section 1.101 Entire Agreement. This Purchase Agreement, together
with the Significant Documents, including the Exhibits and the Schedules
thereto, contains the entire agreement of the parties with respect to the
subject matters hereto, and supersedes all prior agreements between them,
whether oral or written, of any nature whatsoever with respect to the subject
matter hereof.
Section 1.102 Severability Clause. Any part or provision of this
Purchase Agreement that is prohibited or that is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part
or provision of this Purchase Agreement that is prohibited or unenforceable or
is held to be void or unenforceable in any jurisdiction shall be ineffective, as
to such jurisdiction, to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable Law, the parties hereto waive any provision of Law that prohibits
or renders void or unenforceable any provision hereof. If the invalidity of any
part or provision of this Purchase Agreement shall deprive any party of the
economic benefit intended to be conferred by this Purchase Agreement, the
parties shall negotiate, in good-faith, to develop a structure, the economic
effect of which is as close as possible to the economic effect of this Purchase
Agreement, without regard to such invalidity.
Section 1.103 Counterparts. This Purchase Agreement may be
executed simultaneously in any number of counterparts. Each counterpart shall be
deemed to be an original, and all such counterparts shall constitute one and the
same instrument.
Section 1.104 Governing Law; Purchase Agreement Constitutes
Security Agreement; Consent To Forum; Immunities. This Purchase Agreement has
been negotiated, executed and
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delivered at and shall be deemed to have been made in New York, New York. This
Purchase Agreement shall be governed by and construed in accordance with the
Laws of the State of New York, without giving effect to the conflict of laws
rules therein, and shall constitute a security agreement within the meaning of
the New York UCC. The parties hereto hereby consent and agree that the Supreme
Court of New York County, New York or, at the Purchaser's option, the United
States District Court for the Southern District of New York, shall have
exclusive jurisdiction to hear and determine any claims or disputes between the
parties hereto pertaining to this Purchase Agreement or to any matter arising
out of or related to this Purchase Agreement. The parties hereto expressly
submit and consent in advance to such jurisdiction in any action or suit
commenced in any such court, and hereby waive any objection which it may have
based upon lack of personal jurisdiction, improper venue or forum non conveniens
and hereby consent to the granting for such legal or equitable relief as is
deemed appropriate by such court. Each party hereto irrevocably consents to the
service of process by registered or certified mail, postage prepaid, to it at
its address given pursuant to Section 11.01 hereof. Nothing in this Purchase
Agreement shall be deemed or operate to affect the right of the Purchaser to
serve legal process in any other manner permitted by Law, or to preclude the
enforcement by the Purchaser of any judgement or order obtained in such forum or
the taking of any action under this Purchase Agreement to enforce same in any
other appropriate forum or jurisdiction.
To the extent that the Seller has or may hereafter acquire any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgement, attachment in aid of
execution, execution or otherwise) with respect to the Seller or the Seller's
property, the Seller hereby irrevocably waives such immunity in respect of its
obligations under this Purchase Agreement.
Section 1.105 No Agency; No Partnership; No Joint Venture.
Neither the Purchaser nor the Seller is the agent or representative of the
other, and nothing in this Purchase Agreement shall be construed to make either
the Purchaser or the Seller liable to any third party for services performed by
such third party or for debts or claims accruing to such third party against
either the Purchaser or the Seller. Nothing contained herein nor the acts of the
parties hereto shall be
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construed to create a partnership, agency or joint venture between the Purchaser
and the Seller.
Section 1.106 Judicial Interpretation. Should any provision of
this Purchase Agreement or any of the other Significant Documents require
judicial interpretation, it is agreed that a court interpreting or construing
the same shall not apply a presumption that the terms hereof shall be more
strictly construed against any Person by reason of the rule of construction that
a document is to be construed more strictly against the Person who itself or
through its agent prepared the same, it being agreed that all the parties hereto
have participated in the preparation of this Purchase Agreement.
Section 1.107 Recitals. The recitals of this Purchase Agreement
are not intended to constitute substantive provisions hereof.
Section 1.108 Rules of Interpretation. Except as otherwise
expressly provided in this Purchase Agreement, the following rules shall apply
hereto:
(a) the singular includes the plural and the plural includes the
singular;
(b) "or" is not exclusive and "include" and "including" are not
limiting;
(c) a reference to any agreement or other contract includes
permitted supplements, amendments and other modifications;
(d) a reference to a law (or Law) includes any amendment or
modification of such law (or Law) and the rules or regulations issued
thereunder;
(e) a reference to a Person includes its permitted successors and
assigns in the applicable capacity;
(f) a reference in this Purchase Agreement to an Article,
Section, clause, recital or Exhibit is to the Article, Section, clause,
recital or Exhibit of this Purchase Agreement unless otherwise expressly
provided;
(g) words such as "hereunder", "hereto", "hereof", and "herein"
and other words of like import shall, unless
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the context clearly indicates to the contrary, refer to the whole of
this Purchase Agreement and not to any particular Article, Section or
clause hereof;
(h) all obligations under this Purchase Agreement are continuing
obligations throughout the term of this Purchase Agreement;
(i) any right in this Purchase Agreement may be exercised at any
time and from time to time;
(j) the headings of the Articles and Sections are for convenience
and shall not affect the meaning of this Purchase Agreement; and
(k) time is of the essence in performing all obligations.
Section 1.109 Good Faith. The Seller and the Purchaser shall
implement the terms and provisions of this Purchase Agreement in good faith in
accordance with applicable Law.
ARTICLE XI.
MISCELLANEOUS
Section 1.111 Notices. All demands, notices, requests for consent
and other communications hereunder shall be in writing and personally delivered,
mailed by certified mail, return receipt requested, and telecopied, and shall be
deemed to have been duly given upon receipt;
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if to the Seller:
CMG Funding Corp.
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx Xxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
Continental Mortgage Group, L.C.
0000 Xxxxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxx Xxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
if to the Purchaser:
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Counsel
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
with a copy to:
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
or, as to either party, at such other address or telecopy number as shall be
designated by such party in a written notice to the other party.
Section 1.112 Further Agreements. The Seller and the Purchaser
each agree to execute and deliver to the other such additional documents,
instruments or agreements as may be necessary or appropriate to effectuate the
purposes of this Purchase Agreement.
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Section 1.113 Third-Party Rights; Assignment. This Purchase
Agreement is for the exclusive benefit of the parties hereto and their
respective successors and assigns and shall not be deemed to give any legal or
equitable right to any other Person. The Seller may neither assign its rights
nor delegate its obligations under this Purchase Agreement without the prior
written consent of the Purchaser. The Purchaser may assign (a) its rights and/or
delegate its obligations under this Purchase Agreement to an Affiliate without
the consent of the Seller, and (b) its rights under this Purchase Agreement, or
any portion thereof (including, without limitation, the security interest of the
Purchaser in the Collateral, and its right to receive payments and exercise
remedies under a Secured Note), in connection with any financing, borrowing,
repo sale and/or pledge by the Purchaser concerning a Secured Note.
Section 1.114 Advice from Independent Counsel. The parties hereto
understand that this Purchase Agreement and each of the other Significant
Documents to which either of them is a party are legally binding agreements that
may affect such party's rights. Each party represents to the other that it has
received legal advice from counsel of its choice regarding the meaning and legal
significance of this Purchase Agreement and each of the other Significant
Documents to which it is a party and that it is satisfied with its legal counsel
and the advice received from it.
Section 1.115 Summary Judgment. The Seller hereby acknowledges
and agrees that any enforcement action relating to this Purchase Agreement or
any Secured Note may be brought by motion for summary judgment in lieu of a
complaint pursuant to Section 3213 of the New York Civil Practice Law and Rules.
Section 1.116 Reproduction of Documents. This Purchase Agreement
and all documents relating thereto, including, without limitation, (a) consents,
waivers and modifications which may hereafter be executed, (b) documents
received by any party at the closing, and (c) financial statements, certificates
and other information previously or hereafter furnished, may be reproduced by
any photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
48
49
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
[Remainder of Page Intentionally Left Blank]
49
50
IN WITNESS WHEREOF, each of the parties hereto have caused their
duly appointed representative(s) to set their hands as of the date and year
first above written.
CMG FUNDING CORP.
By
----------------------------------
Name:
Title: President
CONTINENTAL MORTGAGE GROUP, L.C.
By
----------------------------------
Name:
Title: President
CONTITRADE SERVICES L.L.C.
By
----------------------------------
Name:
Title:
By
----------------------------------
Name:
Title:
51
EXHIBIT A
Securitization Program
Mortgage Loan Underwriting Guidelines
[Attached]
A-1
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EXHIBIT B
Conforming Mortgage Loan
Underwriting Guidelines
The Conforming Mortgage Loan Underwriting Guidelines include the
standards acceptable under either the FNMA Mortgage Loan Underwriting Guidelines
and the FHMLC Mortgage Loan Underwriting Guidelines as may exist from time to
time.
B-1
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EXHIBIT C
RECEIPT, GRANT AND ASSIGNMENT
Reference is made to the Purchase and Sale Agreement (the
"Purchase Agreement") dated as of December 17, 1996 among CMG Funding Corp. and
Continental Mortgage Group, L.C. (the "Seller") and ContiTrade Services L.L.C.
("the Purchaser") and the Purchase Request dated , 19 (a copy of which is
annexed hereto). Capitalized terms used herein but not defined herein have the
meanings assigned such terms in the Purchase Agreement.
The Seller hereby acknowledges receipt of $ in immediately
available funds representing the Initial Tranche Amount for Eligible Assets
which are the subject matter of the annexed Purchase Request. The Seller hereby
confirms and restates with respect to each such Eligible Asset the
representations and warranties contained in Section 5.01 and Exhibit H of the
Purchase Agreement.
The Seller hereby assigns to the Purchaser as security for the
Seller's obligations under the Purchase Agreement all of the Seller's right,
title and interest in, to and under (a) the Eligible Assets set forth on the
Mortgage Loan Schedule, (b) all distributions of principal and interest with
respect thereto and (c) all proceeds of the foregoing. The foregoing grant of a
security interest is given in furtherance of Section 6.07 of the Purchase
Agreement.
CMG FUNDING CORP.
By:
----------------------------------
Name:
Title:
X-0
00
XXXXXXX X
XXXXXXXX REQUEST
[Date]
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
Pursuant to Section 2.04 of the Purchase Agreement (the "Purchase
Agreement") dated as of December 17, 1996 between you ("the Purchaser") and us
(the "Seller"), the Seller hereby irrevocably requests that the Purchaser
purchase the following Eligible Assets: [describe Eligible Assets]
TYPE OF ELIGIBLE ASSETS:
---------
PURCHASE DATE:
---------
MARKET VALUE OF PRINCIPAL: $
(multiplied by) ---------
PURCHASE PRICE
PERCENTAGE: ____%
(equals)
INITIAL TRANCHE AMOUNT: $
(less) ==========
NET WIRE AMOUNT $
==========
Tranche Term:
-----------
Tranche Rate: LIBOR plus 225
basis points
Market Movement Allowance: %
----------
D-1
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Other terms:
CMG FUNDING CORP.
By:
---------------------------------
Name:
Title:
Date:
CONTINENTAL MORTGAGE GROUP, L.C.
By:
---------------------------------
Name:
Title:
Date:
SELECT ONE ONLY:
/ / the Purchaser hereby acknowledges receipt of the foregoing
Purchase Request and by its signature below agrees to purchase
and for this Tranche, the Market Movement Allowance is the
above-described Eligible Assets subject to the terms and
provisions hereof and of the Purchase Agreement. This document
shall operate as a confirmation of the purchase transaction which
is the subject of such request.
/ / the Purchaser hereby acknowledges receipt of the foregoing
Purchase Request and declines to purchase the above-described
Eligible Assets.
CONTITRADE SERVICES L.L.C.
By:
-----------------------------------------
Name:
Title:
D-2
56
Date:
By:
-----------------------------------------
Name:
Title:
Date:
D-3
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EXHIBIT E
[FORM OF OPINION OF COUNSEL TO THE SELLER]
[Attached]
E-1
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EXHIBIT F-1
MORTGAGE LOAN SCHEDULE
(a) name of the Obligor
(b) address of the Mortgaged Property
(c) account number
(d) original principal amount of the Mortgage Loan
(e) current principal balance
(f) current interest rate on the Mortgage Loan
(g) stated maturity of the Mortgage Loan
(h) LTV
(i) CLTV
(j) lien priority
(k) next due date on the Mortgage Loan
(l) amount of the original principal and interest payment
(m) Loan Type
(n) Index, if applicable
(o) Gross Margin, if applicable
(p) Start Rate, if applicable
(q) any periodic caps, if applicable,
(r) lifetime cap, if applicable
(s) appraised value of the Mortgage Loan
(t) credit category of the Obligor (as set forth in the related
Securitization Program Mortgage Loan Underwriting Guidelines or
Conforming Mortgage Loan Underwriting Guidelines, as the case may be)
(u) occupancy status (i.e., owner occupied or non-owner occupied)
(v) documentation status of the
Mortgage Loan
(w) with respect to any Conforming Mortgage Loan, the anticipated, date of
sale of such Wholesale Mortgage Loan.
F-1-1
59
EXHIBIT F-2
DETAILED MORTGAGE LOAN SCHEDULE
For each Mortgage Loan, the Seller shall provide the following
information:
(a) the account number:
(b) a mortgagor's name:
(c) the mortgaged property's xxxxxx xxxxxxx, xxxx, xxxxx and ZIP code;
(d) the original balance;
(e) the current principal balance;
(f) the mortgage interest rate;
(g) original P&I payment;
(h) the index;
(i) the gross margin;
(j) the floor rate;
(k) the lifetime cap;
(l) the frequency of rate adjustment;
(m) the rate adjustment caps:
(n) the original term:
(o) the amortization term;
(p) the remaining term;
(q) the lien position;
(r) the combined loan-to-value ratio;
(s) loan-to-value ratio with respect to the Mortgage Loan;
(t) the funding date;
(u) the first payment date;
(v) the first adjustment date;
(w) the interest pay through date;
(x) the maturity date;
(y) the appraised value and type;
(z) the owner occupancy status;
(aa) the property type;
(bb) the property's use;
(cc) the borrower credit quality;
(dd) risk upgrade (Y/N); (ee) the debt to income ratio;
(ff) the documentation classification;
(gg) prepayment penalty terms/type;
(hh) broker number;
(ii) broker points;
(jj) premium/discount paid to or received from broker;
F-2-1
60
(kk) the wiring instructions for funds to be disbursed by the
Purchaser to the Seller or a specified title company or escrow
agent in respect of the Mortgage Loan (including, but not
limited to, any federal wire reference number, if available);
(ll) the date of the Mortgage Note and the related Mortgage; and
(mm) the beginning date and ending date of each rescission period
under applicable federal, state and local law relating to such
Mortgage Loan.
(nn) next payment date
(oo) lien-status
(pp) loan purpose
(qq) balloon/non-balloon
F-2-2
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EXHIBIT G
[FORM OF OFFICER'S CERTIFICATE]
[ATTACHED]
G-1
62
EXHIBIT H
REPRESENTATIONS AND WARRANTIES OF THE SELLER
(a) The Seller hereby makes the following representations and
warranties to the Purchaser as of each Purchase Date, as follows:
(i) the Seller is a corporation, in the case of CMGFC, and a
limited liability company in the case of CMLC, in good standing and has
been duly organized and is validly existing as a corporation under the
Laws of the State of its organization;
(ii) the Seller is duly licensed where required as a
"Licensee" or is otherwise qualified in each state in which it transacts
business and is not in default of such state's applicable laws, rules
and regulations;
(iii) the Seller has the requisite power and authority and
legal right to own and xxxxx x xxxx on all of its right, title and
interest in and to the Mortgage Loans and the Seller has the requisite
power and authority and legal right to execute and deliver, engage in
the transactions contemplated by, and perform and observe the terms and
conditions of, the Significant Documents;
(iv) the Seller is able to meet its obligations when they
become due and is not in default (beyond any applicable cure period)
under any mortgage, borrowing agreement or other instrument or agreement
pertaining to indebtedness for borrowed money, and the execution and
delivery by the Seller of the Significant Documents will not result in
any violation of any such mortgage, instrument or agreement to which the
Seller is a party or by which its property is bound;
(v) (A) all audited and unaudited financial statements,
budgets and certificates of the Seller or any of its officers furnished
to the Purchaser are true and complete and do not omit to disclose any
material liabilities, contingent or otherwise, or other facts relevant
to the condition of the Seller; and (B) all such
H-1
63
audited financial statements have been prepared in accordance with GAAP;
(vi) no consent, approval, authorization or order of,
registration or filing with, or notice to any Governmental Authority or
court is required under applicable Law in connection with the execution,
delivery and performance by the Seller of the Significant Documents;
(vii) there is no action, proceeding or investigation pending
or, to the best knowledge of the Seller, threatened against it before
any court, administrative agency or other tribunal (A) asserting the
invalidity of any of the Significant Documents, (B) seeking to prevent
the consummation of any of the transactions contemplated by any of the
Significant Documents, or (C) which might materially and adversely
affect the performance by the Seller of its obligations under, or the
validity or enforceability of, any of the Significant Documents;
(viii) since the date of this Purchase Agreement, there has
been no material adverse change in the business, operations, financial
condition, properties or business plan of the Seller, taken as a whole;
(ix) the person or persons signatory to this Purchase
Agreement and any document executed pursuant to it on behalf of the
Seller have full power and authority to bind the Seller;
(x) each of the Significant Documents has been duly
authorized and executed by the Seller and is a legal, valid and binding
agreement and is enforceable against the Seller in accordance with its
terms;
(xi) the execution, delivery and performance of any of the
Significant Documents, and the exhibits attached thereto, if any, and
the other documents contemplated herein, and the performance by it of
all transactions contemplated herein and therein, (A) have been duly
authorized by all necessary and appropriate corporate action on the part
of the Seller, (B) will not violate any provision of the Certificate of
Incorporation or Bylaws of the Seller, (C) does not conflict with any
H-2
64
term or provision of any other agreement to which the Seller is a party,
and (D) will not cause a breach of any applicable federal, state or
municipal governmental law or regulations, or any order, judgment, writ,
award, injunction or decree of any court or governmental instrumentality
which is binding upon the Seller;
(xii) there has been no (A) filing against the Seller of a
petition for liquidation, reorganization, arrangement or adjudication as
a bankrupt or similar relief under the bankruptcy, insolvency or similar
Laws of the United States or any state or territory thereof or of any
foreign jurisdiction as to which the Seller fails to secure dismissal
within 60 days of such filing, or (B) commencement by the Seller of a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Seller to
the entry of an order for relief in an involuntary case under any such
law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Seller or of any substantial part of its property, or
the making by the Seller of any general assignment for the benefit of
creditors, or the failure of the Seller generally to pay its debts as
such debts become due, or the taking of corporate action by the Seller
in furtherance of any of the foregoing;
(xiii) all representations and warranties made pursuant to this
Purchase Agreement and any Significant Documents are and will be true
and correct at the time when made and at all times thereafter under this
Purchase Agreement and any Significant Documents or, if limited to a
specific date, as of the date to which they refer;
(xiv) to the knowledge of the Seller, all written information
and documents or copies of documents furnished to the Purchaser pursuant
to or in connection with this Purchase Agreement and any Significant
Documents are and will be true and correct in all material respects at
the time when made and at all times thereafter under this Purchase
Agreement and any Significant Documents or, if limited to a specific
date, as of the date to which they refer;
H-3
65
(xv) Immediately after the sale, assignment and transfer to the
Purchaser as herein contemplated, all necessary action will have been
taken to grant a valid and enforceable first priority perfected security
interest in the related Eligible Assets (including the filing or
amendment of financing statements under the Uniform Commercial Code in
all applicable jurisdictions, if necessary) free and clear of all liens
and encumbrances, except for those subsequent liens which, by operation
of law take priority over a previously perfected security interest; and
(xvi) The Seller has not originated title I home improvement
loans during any immediately preceding three consecutive calendar month
period such that such loans represents more than 49% of all loans which
the Seller originated during such three calendar month period,
determined on the basis of the initial principal balances of the loans.
(xvii) all actions necessary to transfer to the Purchaser the
interests in the Mortgage Loans subject to Purchase hereunder have been
or are currently being taken and the Seller has not offered or sold, and
will not offer or sell, any Mortgage Loans in any manner that would
render the issuance and sale of the Mortgage Loans a violation of
Section 5 of the Securities Act of 1933, as amended, or any state
securities or "Blue Sky" laws or require registration pursuant thereto,
nor has it authorized, nor will it authorize, any person to act in such
manner.
(b) The Seller agrees and acknowledges that each of the
representations and warranties set forth in subsection (a) hereof (i) is
material and being relied upon by the Purchaser, (ii) is true in all respects as
of the date of this Purchase Agreement and (iii) shall survive the execution,
termination and expiration of this Purchase Agreement.
H-4
66
EXHIBIT I
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
(a) The Purchaser hereby makes the following representations and
warranties as of the date of this Purchase Agreement:
(i) the Purchaser has been duly organized and is validly
existing as a limited liability company under the Laws of the State of
Delaware;
(ii) the Purchaser has the requisite power and authority and
legal right to execute and deliver, engage in the transactions
contemplated by, and perform and observe the terms and conditions of,
this Purchase Agreement to be performed by it;
(iii) no consent, approval, authorization or order of,
registration or filing with, or notice to any governmental authority or
court is required under applicable law in connection with the execution
and delivery by the Purchaser of this Purchase Agreement;
(iv) the person or persons signatory to this Purchase
Agreement and any document executed pursuant to it on behalf of the
Purchaser have full power and authority to bind the Purchaser;
(v) this Purchase Agreement is valid, binding and
enforceable against the Purchaser in accordance with its terms; and
(vi) the execution, delivery and performance of this Purchase
Agreement, and the exhibits attached hereto and the other documents
contemplated herein to which the Purchaser is a party, and the
performance by the Purchaser of all transactions contemplated herein and
therein (A) have been duly authorized by all necessary and appropriate
corporate action on the part of the Purchaser, (B) will not violate any
provision of the Articles of Organization of the Purchaser, (C) does not
conflict with any term or provision of any other agreement to which the
Purchaser is a party, and (D) will not cause a breach of any applicable
federal, state or
I-1
67
municipal governmental law or regulations, or any order, judgment, writ,
award, injunction or decree of any court or governmental instrumentality
which is binding upon the Purchaser.
(b) The Purchaser agrees and acknowledges that each of the
representations and warranties set forth in subsection (a) hereof (i) is
material and being relied upon by the Seller, (ii) is true in all respects as of
the date of this Purchase Agreement and (iii) shall survive the execution and
termination of this Purchase Agreement.
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EXHIBIT J
COVENANTS OF THE SELLER
Affirmative Covenants. The Seller covenants and agrees with the
Purchaser as follows:
(a) the Seller shall timely make any payment of interest or
principal or any other sum, which has become due whether by acceleration or
otherwise, under the terms of this Purchase Agreement and under any document
evidencing or securing indebtedness of the Seller to the Purchaser or any of its
Affiliates;
(b) the Seller will notify the Purchaser in writing of any of
the following within three Business Days after a responsible officer of the
Seller learns of the occurrence thereof, but in no event later than ten Business
Days following the occurrence thereof, describing the same and, if applicable,
further notifying the Purchaser, within four Business Days after learning of the
occurrence thereof, of any remedial steps being taken with respect thereto:
(i) the occurrence or likelihood of occurrence of an Event of
Termination hereunder;
(ii) the institution of any litigation, arbitration
proceeding or governmental proceeding with the amount in contest being
greater than $200,000 in the aggregate;
(iii) the entry of any judgment or decree against the Seller
if the aggregate amount of all judgments and decrees then outstanding
against the Seller exceeds $50,000 after deducting (i) the amount with
respect to which the Seller is insured and with respect to which the
insurer has assumed responsibility in writing, and (ii) the amount for
which the Seller is otherwise indemnified if the terms of such
indemnification are reasonably satisfactory to the Purchaser;
(iv) an event of default under any material agreement of the
Seller if such event of default would materially and adversely affect
the condition (financial
J-1
69
or otherwise) or the operation of the Seller or its assets or would
materially and adversely affect the performance of its obligations and
duties hereunder; or
(v) any breach of any representation, warranty, covenant or
material obligation under this Purchase and Sale Agreement.
(c) in the event of a filing against the Seller of a petition for
liquidation, reorganization, arrangement or adjudication as a bankrupt or
similar relief under the bankruptcy, insolvency or similar Laws of the United
States or any state or territory thereof or of any foreign jurisdiction or there
shall be appointed a receiver, conservator, liquidator, assignee, custodian,
trustee, sequestrator or other similar official of the Seller or any substantial
part of the property of either or the ordering of the winding-up or liquidation
of either party's affairs, dismissal of such filing, appointment or order shall
be secured within 30 days of such filing;
(d) the Seller shall maintain Consolidated Tangible Equity at an
amount greater than (i) $1,000,000 from the date of execution of this Purchase
Agreement through the calendar year ending on December 31, 1997, (ii) $1,500,000
during the calendar year ending on December 31, 1998, and (iii) $2,000,000 at
all times thereafter;
(e) less than 10% of (i) the aggregate outstanding principal
balance of all loans originated by the Seller or (ii) the aggregate outstanding
principal balance of any pool of mortgage loans purchased by the Seller and
subsequently securitized is contractually delinquent for 91 or more days;
(f) (1) the Seller shall, promptly upon preparation, but in no
event later than 60 days following the end of its first three fiscal quarters,
deliver to the Purchaser its unaudited company-prepared consolidated and
consolidating financial statements as of the end of such fiscal quarter,
prepared in accordance with GAAP consistently applied and certified by the chief
financial officer of the Seller; (2) the Seller shall, promptly upon
preparation, but in no event later than 90 days following the end of its fourth
fiscal quarter, deliver to the Purchaser (A) its audited and certified
consolidated and consolidating financial statements, including the consolidated
and consolidating balance sheets of the Seller and the related statements of
income and cash flows
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and stating in comparative form the figures for the corresponding date and
period in the previous fiscal year, all in reasonable detail and prepared in
accordance with GAAP consistently applied, as of the end of the most recently
ended fiscal year, (B) the annual report, furnished by a firm of independent
public accountants, of the examination, which has been conducted in compliance
with the Uniform Single Audit Program for Mortgage Bankers, of the Seller's
servicing performance and (C) a certificate from the accountants preparing the
Seller's audited financial statements stating that in the course of preparing
the audited financial statements nothing came to their attention indicating that
the Seller was not in compliance with the terms of this Purchase Agreement; (3)
beginning with the audit and certification for the fiscal year ended September
30, 1997, audits and certifications shall each be prepared by a nationally
recognized independent accounting firm and reasonably acceptable to the
Purchaser; (4) in all cases, consolidated and consolidating financial statements
shall include, without limitation, balance sheets, profit and loss statements
and statements of cash flows; and (5) notwithstanding anything in this Purchase
Agreement to the contrary, if (A) the audited and certified financial statements
described in the immediately preceding sentence are not delivered within 90
days, as the case may be, (B) such financial statement delivery delay is through
no fault of the Seller, and (C) the Seller provides the Purchaser with a notice
specifying the reason for the delay and a date, within a reasonable time period
(as determined by the Purchaser), on which such financial statements will be
delivered and they are so delivered; then failure to deliver such financial
statements within 90 days, as the case may be, shall not be deemed to be an
Event of Termination for purposes of this Purchase Agreement;
(g) the Seller shall in writing, promptly upon a responsible
officer of the Seller learning of any breach of any representation, warranty,
covenant or material obligation under this Purchase Agreement, notify the
Purchaser thereof;
(h) as requested by the Purchaser by written notice from time to
time, the Seller shall, promptly upon filing, deliver to the Purchaser such
requested copies of all public filings made by the Seller with any Governmental
Authority or quasi-governmental body;
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(i) the Seller shall comply with all Laws, ordinances,
governmental rules and regulations to which the Seller is subject, and obtain
and keep in force any and all licenses, permits, franchises, or other
governmental authorizations from, give all such notices promptly to, register,
enroll or file promptly all such agreements, instruments or documents required
by applicable Laws with, and promptly take all such other legally required
action with respect to, any Governmental Authority or regulatory authority,
agency or official, as is required under any provision of any applicable Law and
that it is necessary (i) for the continued operation of any of the Seller's
activities or business or the performance by the Seller of any of its agreements
or obligations under this Purchase Agreement or (ii) to ensure the continuing
legality, validity, binding effect or enforceability of this Purchase Agreement
or any of the obligations hereunder of the Seller necessary to the ownership of
its properties or to the conduct of its businesses;
(j) the Seller shall do all things necessary to remain duly
incorporated, validly existing and in good standing as a domestic corporation in
its jurisdiction of incorporation and maintain all requisite authority to
conduct its business in each jurisdiction in which its business is conducted,
except where the failure to maintain such authority would not have a material
adverse effect on the ability of the Seller to conduct its business or to
perform its obligations under the Significant Documents in the reasonable
judgment of the Purchaser;
(k) at all times during which this Purchase Agreement is in
effect, the Seller shall possess sufficient net capital and liquid assets to
satisfy its obligations as they become due in the normal course of business;
(l) upon five days prior written notice, the Seller shall permit
the Purchaser or its accountants, attorneys or other agents access to all of its
books and records for inspection and copying, at the Purchaser's expense, during
normal business hours at all places where the Seller conducts business. During
the term of this Purchase Agreement, the Seller shall furnish the Purchaser such
periodic, special or other reports or information, whether or not provided for
herein, as shall be necessary, reasonable and appropriate in respect of the
purposes of this Purchase Agreement;
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(m) the Seller shall pay and discharge all taxes, assessments
and governmental charges upon it, its income and properties as and when such
taxes, assessments and charges are due and payable, except and to the extent
only that such taxes, assessments and charges are being actively contested in
good faith and by appropriate proceedings, the Seller shall maintain adequate
reserves on its books therefor;
(n) the Seller shall file all federal, state and local tax
returns and other reports that the Seller is required by Law to file and
maintain adequate reserves for the payment of all taxes, assessments,
governmental charges, and levies imposed upon it, its income, or its profits, or
upon any property belonging to it;
(o) the Seller shall maintain thereafter, at its own expense, an
errors and omissions policy of insurance and a blanket fidelity bond with broad
coverage on all officers, directors, employees and agents of the Seller or its
Affiliates with (A) its current insurer, Fidelity Deposit of Maryland (Policy
Number MPP000245700), or (B) responsible companies with a rating of "A" or
better by Best. Any such fidelity bond shall protect the Seller and the
Purchaser against losses, including forgery, theft, embezzlement and fraud of
such persons. The insurance policy and the bond shall each show the Purchaser as
an additional insured and shall provide that the insurers or bonding company
shall give the Purchaser thirty (30) days' written notice prior to any
cancellation. This provision shall not diminish or relieve the Seller from its
duties and obligations as set forth in this Purchase Agreement. The minimum
coverage under (i) any such errors and omissions policy of insurance shall be
three hundred fifty thousand dollars ($350,000), or such greater coverage amount
as FNMA or FHMLC may require for the Seller and (ii) any such fidelity bond
shall be at least equal to three hundred fifty thousand dollars ($350,000), or
such greater coverage amount as FNMA or FHMLC may require for the Seller. The
deductible amount on such errors and omissions policy of insurance and such
fidelity bond shall not exceed $25,000, without the written consent of the
Purchaser;
(p) the Seller shall furnish to the Purchaser, periodically upon
request, good standing certificates and officer's certificates to assure the
Purchaser of the Seller's continued authority to perform the Seller's
obligations under this Purchase Agreement;
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(q) the Seller shall at all times maintain the ratio of its
current assets to its current liabilities at 1.05 or greater (each as determined
by GAAP);
(r) with respect to:
(i) Mortgage Loans other than Wet-Funded Mortgage
Loans and Quick-Funded Mortgage Loans, the Seller shall deliver
to the Custody Agent, no later than 12:00 p.m., Eastern time, on
the Business Day prior to any Purchase Date, the Mortgage Files
relating to the Mortgage Loans to be purchased on such Purchase
Date;
(ii) each Wet-Funded Mortgage Loan, the Seller shall
use its best efforts to deliver the related Mortgage File to the
Custody Agent within one Business Day after the Purchase Date
for such Wet-Funded Mortgage Loan, and such documents shall in
any event be delivered to the Custody Agent on behalf of the
Purchaser within three Business Days after the related Purchase
Date;
(iii) each Quick-Funded Mortgage Loan, the Seller shall
deliver the related original executed Mortgage Note and
Assignment of Mortgage to the Custody Agent on or prior to the
Purchase Date for such Quick-Funded Mortgage Loan; and
(iv) any Quick-Funded Mortgage Loan, the Seller shall
use its best efforts to deliver to the Custody Agent the
documents in the Mortgage File, other than those already
delivered pursuant to clause (iii) hereof, within two Business
Days after the related Purchase Date but in any event not later
than the third Business Day after such Purchase Date.
(s) the Seller shall replace a Mortgage Loan not conforming in
any material respect with the representations and warranties made in Exhibit K
of this Purchase Agreement with a conforming Mortgage Loan of substantially the
same size and type as the non-conforming Mortgage Loan, or repurchase same at
the related Adjusted Tranche Amount plus the related Net Securities Amount;
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(t) with respect to each Eligible Asset, the Seller shall comply
with all document delivery requirements set forth in this Purchase Agreement and
in the Custody Agreement;
(u) the Seller shall permit the Purchaser or its accountants,
attorneys or other agents access to all of its books and records relating to
Eligible Assets purchased and retained by the Purchaser for inspection and
copying during normal business hours at all places where the Seller conducts
business;
(v) the Seller hereby warrants that no Obligor of a Mortgaged
Property underlying any Eligible Asset sold to the Purchaser hereunder is, or
shall become, contractually delinquent with respect to the first payment due on
the mortgage note or other instrument evidencing such Obligor's indebtedness, as
the case may be, pertaining to such Mortgaged Property; and
(w) The Seller hereby warrants that no Obligor of a Mortgaged
Property underlying any Eligible Asset sold to the Purchaser hereunder is, or
shall become, contractually delinquent with respect to any three consecutive
payments due on the mortgage note or other instrument evidencing such Obligor's
indebtedness, as the case may be, pertaining to such Mortgaged Property.
(x) for the six-month period following the date of transition to
this Purchase Agreement as described in (s) above, the Seller shall cause all of
its Mortgage Loans sold under this Purchase Agreement to be reunderwritten by an
independent contract underwriter selected by the Purchaser; thereafter, based on
the experience obtained from such reunderwriting, the Purchaser may reasonably
direct that the Seller continue to have its Mortgage Loans, or some portion
thereof, reunderwritten by an independent contract underwriter for such further
period as the Purchaser may reasonably direct; the Seller shall bear all of the
costs and expenses at such reunderwriting;
(y) the Seller shall prepare annual operating and capital
budgets for its operations, acceptable to the Purchaser, acceptable to the
Purchaser, on at least yearly intervals, or at such other times as the Purchaser
may reasonably request, and the Seller shall promptly furnish copies of such
budgets to the Purchaser;
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(z) the Seller shall take all actions reasonably requested by
the Purchaser, from time to time, as the Purchaser may request in order to
perfect, maintain or release any security interest of the Purchaser;
(aa) the Seller shall take all actions necessary as is requested
by the Purchaser, from time to time to assure that (i) no Wet-Funded Mortgage
Loan remains a Wet-Funded Mortgage Loan under this Purchase Agreement for more
than three days following the related Purchase Date, (ii) no Conforming Mortgage
Loan shall remain a Mortgage Loan under this Purchase Agreement for more than
sixty (60) days from the related Purchase Date, and (iii) no Mortgage Loan shall
remain a Mortgage Loan under this Purchase Agreement for more than (90) days
from the related Purchase Date; and
(bb) the Purchase shall take all actions necessary to merge
Continental Mortgage Group, L.C. into the Purchaser on or before January 31,
1997.
Negative Covenants of the Seller. The Seller covenants and agrees
with the Purchaser as follows:
(a) the Seller shall not (1) assign or attempt to assign this
Purchase Agreement or any rights hereunder, without first obtaining the specific
written consent of the Purchaser, or (2) grant any security interest, lien or
other encumbrance on any Collateral other than (A) to the Purchaser or any of
its Affiliates or (B) with respect to taxes and assessments related thereto
which are not yet due and payable, or which are being contested in good faith;
(b) the Seller shall not commence a voluntary case under any
applicable bankruptcy, insolvency or other similar Law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such Law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Seller, or of any substantial part of its property, and the
Seller shall not make any general assignment for the benefit of creditors, or
fail generally to pay debts as such debts become due, and shall not take
corporate action in furtherance of any of the foregoing;
(c) the Seller shall not amend its Articles of Incorporation or
Bylaws, or sell, transfer, or issue any
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capital stock other than pursuant to the exceptions listed in clauses (i)
through (vi) of paragraph (a) of the definition of "Change of Control", without
the prior written consent of the Purchaser;
(d) the Seller shall not suffer any materially adverse change in
its financial condition, operations, business, properties or business plan, or
the existence of any other condition which, in the Purchaser's sole judgement,
constitutes an impairment of such the Seller's ability to perform its
obligations under any of the Significant Documents and which condition is not
remedied within ten days after written notice to the Seller thereof or, if the
condition cannot be fully remedied within said ten days, substantial progress
(which shall be in the Purchaser's sole judgement) has not been made within said
ten days, or such other period as may be mutually agreed upon, toward remedy of
the condition;
(e) the Seller shall not default under any term or provision of
any other agreement between (1) the Seller and (2) the Purchaser or any of its
Affiliates or any third parties, which default shall not have been cured within
an applicable cure period, if any, and which default has, or with the passage of
time will have, a material adverse effect on the Seller or its business. For the
purposes of this subsection, both (x) a final judgement for the payment of money
in excess of $50,000 in the aggregate rendered against the Seller and remaining
in force unpaid, unbonded, undismissed, undischarged and unstayed after the
expiration of the period which is the longer of ten days or the payment plan for
such judgement and (y) the failure to make any payment in excess of $50,000 to a
third party pursuant to the terms of any other agreement, and such failure is
not cured within any applicable cure period, shall be deemed material;
(f) the Seller shall not declare any dividends or redeem any
capital stock without the prior written consent of the Purchaser;
(g) there shall be no Change of Control, and the Seller shall
not merge or consolidate with or into any other entity, without the prior
written consent of the Purchaser;
(h) except for mortgage loans acquired with the intent of sale
(either on a whole-loan or securitization
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basis) and securities issued pursuant to securitizations of the Seller-owned
loans, the Seller shall not purchase, lease or otherwise acquire all or
substantially all of the assets or properties of, or acquire any capital stock,
equity interest, debt or other securities of any other entity without the prior
written consent of the Purchaser, which consent shall not be unreasonably
withheld;
(i) the Seller shall not (1) dissolve or terminate its
existence, (2) enter into any joint venture or become a partner in any
partnership, (3) transfer any assets to any Affiliate except as otherwise
expressly permitted or contemplated hereby, (4) operate any portion of the
business of the Seller under an assumed name or dba, (5) modify or amend the
Stock Option Plan without the consent of the Purchaser, or (6) create any
subsidiary without the prior written consent of the Purchaser;
(j) except for making and purchasing of mortgage loans in the
ordinary course of business, the Seller shall not (i) make or permit to exist
investments in or loans or advances to any other person, entity or Affiliate,
including without limitation, any shareholders of the Seller, or (ii) sell or
transfer 5% or more of the assets of the Seller, except with the prior written
consent of the Purchaser;
(k) the Seller shall not guarantee, endorse or otherwise in any
way become or be responsible for any obligations of any other person, entity or
Affiliate, including without limitation, whether directly or indirectly by
agreement to purchase the indebtedness of any other person or through the
purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purposes of paying or discharging
any indebtedness or obligation of such other person or otherwise; provided,
however, that nothing contained herein shall prevent the Seller from
indemnifying its officers, directors and agents pursuant to its bylaws and its
Certificate of Incorporation;
(l) the Seller shall not, in the aggregate, make or commit to
make capital expenditures in excess of $50,000, with respect to individual
expenditures, or in excess of $200,000 during any fiscal year without the prior
written consent of the Purchaser;
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(m) the Seller will not commit any act in violation of
applicable Laws, or regulations promulgated pursuant thereto that relate to the
Seller or that materially and adversely affect the operations or financial
condition of the Seller;
(n) commencing with January 1, 1997, with respect to any fiscal
year, the aggregate amount of Bonus Compensation (other than any reasonable
production bonus tied to direct production performance) paid to the Seller's
employees, including officers of the Seller, during such year shall not exceed
12?% for the Seller's fiscal years ending September 30, 1997 and September 30,
1998 and 10% thereafter of the net income before taxes after accounting for the
expense related to base salary compensation, excluding Fringe Benefits, for such
year;
(o) in any year the aggregate base salary compensation,
excluding Fringe Benefits, for the Senior Officers shall not exceed the amount
paid to such Senior Officers in the previous year by more than 5%;
(p) during the term of this Purchase Agreement, the Seller shall
not engage in any business other than as a mortgage or consumer loan originator
or as a provider of ancillary services or products;
(q) the Seller shall not enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the rendering
of any service, with any Affiliate, except as the Purchaser may otherwise
approve through prior written notice;
(r) the Seller shall not enter into any financing arrangement
with any entity other than the Purchaser or incur any debt to any Person other
than the Purchaser (other than debt which is fully subordinated to any Loan or
payment obligation hereunder), except as the Purchaser may otherwise approve
through prior written notice;
(s) the Seller shall not, without the prior written consent of
the Purchaser, issue, distribute, sell or transfer, or allow the issuance,
distribution, sale or transfer by the Seller or by any Affiliate of the Seller,
including, without limitation, the Controlling Shareholders of the Seller's
capital stock or securities other than (A) the sale of the
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Seller's capital stock to the Purchaser occurring upon the exercise of the
Conversion Privilege, (B) the sale of the Seller's capital stock pursuant to a
firm commitment public offering, (C) the transfer of the Seller's capital stock
for estate planning purposes or pursuant to a domestic relations settlement or
order, (D) the transfer of the Seller's Common Stock pursuant to the Stock
Option Plan for a price greater than or equal to the Share Fair Market Value,
(E) pursuant to a buy/sell agreement solely among the Seller's existing
shareholders, or (F) the sale, transfer or issuance of no more than five (5%)
percent of the Seller's Common Stock which percentage shall be determined on a
cumulative basis together with all other sales, transfers or issuances of the
Seller's Common Stock under this clause (F) from the date of this Agreement) at
a price at least equal to Share Fair Market Value with the prior written consent
of the Purchaser;
(t) with respect to;
(i) Mortgage Loans other than Wet-Funded Mortgage
Loans, the Seller deliver to the Custody Agent on behalf of
Purchaser, no later than 12:00 p.m., Eastern time, on the
Business Day prior to any Purchase Date, the Mortgage Files
relating to the Mortgage Loans to be pledged on such Purchase
Date;
(ii) each Wet-Funded Mortgage Loan, the Seller shall
use its best efforts to deliver the related Mortgage File to the
Custody Agent within one Business Day after the Purchase Date
for such Wet-Funded Mortgage Loan, and such documents shall in
any event be delivered to the Custody Agent on behalf of the
Purchaser within three Business Days after the related Purchase
Date;
(u) the Seller shall deliver Purchase Requests identifying
Mortgage Loans pertaining to the related Purchases sorted and aggregated for
Wet-Funded Mortgage Loans and all other Mortgage Loans; and
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(v) the Seller shall not originate title I home improvement
loans during any immediately preceding three consecutive calendar month period
such that such loans represent more than 49% of all loans which the Seller
originated during such three calendar month period determined on the basis of
the initial principal balances of the loans.
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EXHIBIT K
REPRESENTATIONS AND WARRANTIES REGARDING
INDIVIDUAL MORTGAGE LOANS.
As to each Mortgage Loan, the Seller hereby represents and warrants to the
Purchaser that as of the related Purchase Date with respect to such Mortgage
Loan:
I. (a) The information set forth on the Mortgage Loan Schedule is
complete, true and correct as of the related Cut-off Date.
(b) The Mortgage Note and the Mortgage have not been assigned or pledged
by the Seller to a person other than the Purchaser, and the Seller has good and
marketable title thereto, and the Seller is the sole owner and holder of the
Mortgage Loan free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests of any
nature (collectively, a "Lien"), other than any such Lien released
simultaneously with the sale contemplated herein, and has full right and
authority, subject to no interest or participation of, or agreement with, any
other party, to sell and assign the same, and immediately upon the transfer and
assignment of each Mortgage Loan as herein contemplated, the Purchaser shall
have good title to, and will be the sole legal owner of, each Mortgage Loan free
and clear of any Lien.
(c) The Mortgage is a valid and existing lien on the property therein
described, and the Mortgaged Property is free and clear of all encumbrances and
liens having priority over the lien of the Mortgage, except liens for real
estate taxes and special assessments not yet due and payable, in the case of a
Mortgaged Property that is a condominium or an individual unit in a planned unit
development, liens for common charges permitted by statute, and in the case of a
second Mortgage Loan, the lien securing the related first lien. Any security
agreement, chattel mortgage or equivalent document related to the Mortgage and
delivered to Purchaser establishes in Seller a valid and subsisting lien on the
property described therein, and Seller has full right to sell and assign the
same to Purchaser.
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(d) The terms of the Mortgage Note and the Mortgage have not been
impaired, altered or modified in any respect, except by a written instrument
which has been recorded, if necessary to protect the interests of the Purchaser,
and which has been delivered to the Purchaser. The substance of any such
alteration or modification is reflected on the Mortgage Loan Schedule.
(e) No instrument of release or waiver has been executed in connection
with the Mortgage Loan, and no Obligor has been released, in whole or in part,
except in connection with an assumption agreement which has been approved by the
primary mortgage guaranty insurer, if any, and which has been delivered to the
Purchaser.
(f) Except with respect to delinquencies described in clause (m) hereof,
no Obligor is in default in complying with the terms of the Mortgage Note or the
Mortgage, and the Seller has not waived any default, breach, violation or event
of acceleration except that the Seller may have accepted late payments, and all
taxes, governmental assessments, insurance premiums, or water, sewer and
municipal charges 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. The Seller has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the Obligor,
directly or indirectly, for the payment of any amount required by the Mortgage,
except for interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage proceeds, whichever is more recent, to the day
which precedes by one month the due date of the first installment of principal
and interest.
(g) There is no proceeding pending or, to the best of Seller's
knowledge, threatened for the total or partial condemnation of the Mortgaged
Property, nor is such a proceeding currently occurring, and such property is
undamaged by waste, fire, water, 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.
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(h) 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 law
could give rise to such lien) affecting the Mortgaged Property which are, or may
be, liens prior or equal to, or coordinate with, the lien of the Mortgage except
those that are stated in the title insurance policy and for which related losses
are affirmatively insured against by such policy.
(i) All of the improvements that were included for the purpose of
determining the value of the Mortgaged Property lie wholly within the boundaries
and building restriction lines of such property, and no improvements on
adjoining properties encroach upon the Mortgaged Property except those that are
stated in the title insurance policy and for which related losses are
affirmatively insured against by such policy.
(j) There do not exist any circumstances or conditions with respect to
the Mortgage Loan, the Mortgaged Property, the appraisal, the Obligor or the
Obligor's credit standing that can be reasonably expected to cause private
institutional investors who are familiar with and invest in first and second
mortgage loans similar to the Mortgage Loans to regard the Mortgage Loan as an
unacceptable investment, cause the Mortgage Loan to become Delinquent or
adversely affect the value or marketability of the Mortgage Loan.
(k) No improvement located on or being part of the Mortgaged Property is
in violation of any applicable zoning law or regulation unless the appraisal for
such Mortgaged Property notes such violation and assigns such improvement no
value. 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 and the Mortgaged Property is lawfully
occupied under applicable law.
(l) All parties that 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 licensing requirements of the United States and of the laws of the state
wherein the Mortgaged Property is located that are applicable to such parties,
subject to exceptions
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which, either individually or in the aggregate, do not adversely affect the
value of the Mortgage Loans, and (ii)(A) organized under the laws of such state,
or (B) qualified to do business in such state or exempt from such qualification
in a manner so as not to affect adversely the enforceability of such Mortgage
Loan, or (C) federal savings and loan associations or national banks having
principal offices in such state, or (D) not doing business in such state.
(m) As of the Cut-off Date, (i) all payments required to be made on each
Mortgage Loan under the terms of the related Mortgage Note have been made except
for 1% of the Mortgage Loans (calculated as a percentage of the aggregate unpaid
principal balance of all the Mortgage Loans) which are 30-59 days Delinquent and
(ii) no payment required to be made on any Mortgage Loan has been more than 30
days Delinquent more than once during the twelve month period immediately
preceding the Cut-off Date.
(n) The Mortgage File contains each of the documents and instruments
specified to be included therein duly executed and in due and proper form and
each such document or instrument is in a form generally acceptable to prudent
institutional mortgage lenders that regularly originate or purchase mortgage
loans comparable to the Mortgage Loans for sale to prudent investors in the
secondary market that invest in mortgage loans such as the Mortgage Loans. Each
appraisal is on forms approved by FNMA and FHLMC (subject to the exclusion of
certain addenda), as the case may be.
(o) The Mortgage Note and the related Mortgage are genuine, and each is
the legal, valid and binding obligation of the maker thereof, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or other
similar laws relating to or affecting the rights of creditors generally, and by
general equity principles (regardless of whether such enforcement is considered
in a proceeding in equity or at law). All parties to the Mortgage Note and the
Mortgage had legal capacity to execute the Mortgage Note and the Mortgage, and
each Mortgage Note and Mortgage have been duly and properly executed by such
parties. The Obligor is a natural person who is a party to the Mortgage Note and
the Mortgage in an individual capacity, and not in the capacity of a trustee or
otherwise.
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(p) Any and all 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, and Seller has
and shall maintain in its possession, available for Purchaser's inspection, and
shall deliver to Purchaser upon demand, evidence of compliance with all such
requirements.
(q) The proceeds of the Mortgage Loan have been fully disbursed, there
is no requirement for future advances thereunder and any and all requirements as
to completion of any on-site or off-site improvements and as to disbursements of
any escrow funds therefor have been complied with. All costs, fees and expenses
incurred in making, closing or recording the Mortgage Loan were paid.
(r) Any future advances made prior to the related Cut-off 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 reflected on the Mortgage Loan Schedule. The lien of the
mortgage securing the consolidated principal amount is expressly insured as
having first lien priority, except in the case of a Mortgage Loan where such
lien is expressly insured as having second lien priority subject only to the
lien of the related first lien, by a title insurance policy or an endorsement to
the policy insuring the mortgagee's consolidated interest. The consolidated
principal amount does not exceed the original principal amount of the Mortgage
Loan. Seller shall not be obligated to make future advances after the related
Cut-off Date.
(s) Each Mortgage Loan is covered by an American Land Title Association
mortgage title insurance policy, a CLTA mortgage title insurance or equivalent
policy for the jurisdiction in which the related Mortgaged Property is located,
or such other form of policy acceptable to FNMA or FHLMC, issued by and the
valid and binding obligation of TICOR Title, Xxxxxxx Title, American Title, Penn
Title, Continental Title, Monroe Title, Security Guarantee Title, First American
Title, Transamerica Title, Commonwealth Title, TRW Title, Chicago Title, Lawyers
Title or Old Republic Title or such other title insurer which is approved in
advance by the Purchaser, such approval not to be unreasonably withheld
(collectively, the "title insurers") and such title insurers
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are qualified to do business in the jurisdiction where the Mortgaged Property is
located, insuring the Seller, its successors and assigns, as to the first
priority lien of the Mortgage in the case of a first Mortgage Loan and the
second priority lien of the Mortgage in the case of a second Mortgage Loan, in
the original principal amount of the Mortgage Loan. Seller is the sole named
insured of such mortgage title insurance policy, the assignment to Purchaser of
Seller's interest in such mortgage title insurance policy does not require the
consent of or notification to the insurer or the same has been obtained, and
such mortgage title insurance policy is in full force and effect and will be in
full force and effect and inure to the benefit of Purchaser upon the
consummation of the transactions contemplated by this Agreement. No claims have
been made under such mortgage title insurance policy and no prior holder of the
related Mortgage, including Seller, has done, by act or omission, anything that
would impair the coverage of such mortgage title insurance policy.
(t) All improvements upon the Mortgaged Property are insured by a
generally acceptable insurer against loss by fire, hazards of extended coverage
and such other hazards as are customary in the area where the Mortgaged Property
is located. If the mortgaged property was, at the time of origination of the
related Mortgage Loan, in an area identified on a Flood Hazard Boundary Map or
Flood Hazard Rate Map issued by the Federal Emergency Management Agency as
having special flood hazards (and if the flood insurance policy referenced
herein has been made available), a flood insurance policy is in effect with
respect to such Mortgaged Property with a generally acceptable carrier and in an
acceptable amount. All individual insurance policies (collectively, the "Hazard
Insurance Policy") are the valid and binding obligation of the insurer and
contain a standard mortgagee clause naming Seller, its successors and assigns,
as mortgagee. All premiums thereon have been paid. The Mortgage obligates the
mortgagor thereunder to maintain all such insurance at the Obligor's cost and
expense, and upon the Obligor's failure to do so, authorizes the holder of the
Mortgage to obtain and maintain such insurance at the Obligor's cost and expense
and to seek reimbursement therefor from the Obligor.
(u) The Mortgage Loan is not subject to any right of rescission,
set-off, counterclaim or defense, including the
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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, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense, including the defense
of usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto.
(v) The Mortgage Loan was originated or purchased and re-underwritten by
the Seller pursuant to, and in compliance with, the Seller's Guidelines.
(w) The Mortgage Loan is a closed-end, residential first Mortgage Loan
or closed-end, residential second Mortgage Loan having an original term of not
more than 30 years to maturity. Except with respect to any balloon Mortgage
Loan, each Mortgage Loan is payable in equal monthly installments of principal
and interest which would be sufficient, in the absence of late payments, to
fully amortize such loan within the term thereof, beginning no later than two
months after disbursement of the proceeds of the Mortgage Loan and bears a fixed
interest rate for the term of the Mortgage Loan.
(x) The Mortgage contains a customary provision for the acceleration of
the payment of the unpaid principal balance of the Mortgage Loan in the event
the related Mortgaged Property is sold without the prior consent of the holder
thereof.
(y) No Mortgage Loan is a construction Loan. Each Mortgaged Property is
lawfully occupied under applicable law.
(z) The Mortgage Note is not and has not been secured by any collateral,
pledged account or other security except the lien of the corresponding Mortgage
and the security interest of any applicable security agreement or chattel
mortgage.
(aa) The Mortgage contains customary and enforceable provisions which
render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security,
including, (i) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (ii) otherwise by judicial or non-judicial foreclosure.
Other than in the state of Texas there is no homestead or other exemption
available to the Obligor that
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would interfere with the right to sell the Mortgaged Property at a trustee's
sale or the right to foreclose the Mortgage.
(bb) With respect to each Mortgage constituting a deed of trust, a
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in such Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
Obligor which fees and advances shall be reimbursed to the Seller as servicer of
the Mortgage Loans.
(cc) The Mortgaged Property is located in the state identified in the
Mortgage Loan Schedule and consists of a single parcel of real property with a
one family residence erected thereon, or a two- to four-family dwelling, or an
individual condominium unit; provided, however, that, no residence or dwelling
is a co-operative unit or a mobile home.
(dd) No Mortgaged Properties are held under a ground lease unless: (A)
the lease term does not expire until after 5 years beyond term of the related
Mortgage Loan; (B) the sub-lease payments are at least equal to the lease
payments; (C) the lease and sub-lease do not permit increases in the lease
payments that are not specific; (D) the lease must provide for written notice
for lessee to cure default; (E) the lease must permit mortgage encumbrance; (F)
the lease must permit assignment of leasehold estate; and (G) the lease must
grant the leasehold mortgagee (lender) the right to acquire property in its own
name.
(ee) The Loan-to-Value Ratio as of the date of origination of the
Mortgage for each Standard A Loan was not more than ___%; provided that a
Standard A Loan which is a High Loan-to-Value Loan may have a Loan-to-Value
Ratio of up to ___%, the Loan-to-Value Ratio as of the date of origination of
the Mortgage for each Special Program Loan was not more than ___%; provided that
a Special Program Loan which is a High Loan-to-Value Loan may have a
Loan-to-Value Ratio of up to ___% and the Loan-to-Value Ratio as of the date of
origination of the Mortgage for each B/C Loan was not more than ___%; provided
that a B/C Loan which is a High Loan-to-Value Loan may have a Loan-to-Value
Ratio of up to ___%.
(ff) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which
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customary arrangements for repayment thereof have not been made, and no escrow
deposits or payments of other charges or payments due the Seller have been
capitalized under the Mortgage or the related Mortgage Note.
(gg) Other than the Standard A Loans no Mortgage Loan was originated
under a buydown plan.
(hh) Other than as provided by this Agreement, there is no obligation on
the part of the Seller or any other party to make payments in addition to those
made by the Obligor.
(ii) The Mortgage Note, the Mortgage, the assignment of mortgage and any
other documents required to be delivered have been delivered to the Purchaser or
to one or more Custody agents as the agent or agents of Purchaser. The Seller is
in possession of a complete Mortgage File, except those documents delivered to
Purchaser or to one or more Custody Agents as the agent or agents of Purchaser
and there are no custodial agreements in effect adversely affecting the right or
ability of Seller to make the document deliveries required hereby. Each original
Mortgage was recorded, and all subsequent assignments of the original Mortgage
prior to the assignment to the Purchaser have been recorded in the appropriate
jurisdictions wherein such recordation is necessary to perfect the lien thereof
as against creditors of the Seller.
(jj) No Mortgage Loan has a shared appreciation or other contingent
interest feature.
(kk) With respect to each second Mortgage Loan:
(i) if the Loan-to-Value Ratio is higher than 55%, either the
related first lien does not provide for a balloon payment or the
maturity date of each second Mortgage Loan with a first lien providing
for a balloon payment occurs at least twelve months prior to the
maturity date of such first lien;
(ii) the related first lien does not provide for negative
amortization;
(iii) at the time of origination of the Mortgage Loan, the
related first lien was at least 6 months old if such first lien was
originated by the Seller;
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(iv) either no consent for the Mortgage Loan is required by
the holder of the related first lien or such consent has been obtained
and is contained in the Mortgage File; and
(v) the combined loan to value does not exceed 80%.
(ll) The Seller has caused or will cause to be performed any and all
acts required to be performed to preserve the rights and remedies of the
Purchaser in any insurance policies applicable to the Mortgage Loans, including,
without limitation, any necessary notifications of insurers, assignments of
policies or interests therein, and establishments of co-insured, joint loss
payee and mortgagee rights in favor of the Purchaser.
(mm) All amounts received on and after the related Cut-off Date with
respect to the Mortgage Loans to which the Seller is not entitled have been
remitted to the Purchaser.
(nn) Each Mortgage Loan has been originated in accordance with the
Seller's underwriting guidelines, including appraisal standards.
(oo) As of the related Cut-off Date, the Seller has no actual knowledge
that there exists on any Mortgaged Property any hazardous substances, hazard
wastes or solid wastes, as such terms are defined in the Comprehensive
Environmental Response Compensation and Liability Act, the Resource Conservation
and Recovery Act of 1976, or other federal, state or local environmental
legislation. For purposes of this clause (ao), actual knowledge of the Seller
means actual knowledge of an officer of the Seller involved in the origination
or servicing of the relevant Mortgage Loan. Actual knowledge of the Seller does
not include knowledge imputable by virtue of the availability of or
accessibility to information relating to environmental or hazardous waste sites
or the locations thereof.
(pp) None of the Mortgage Loans are subject to a bankruptcy plan.
(qq) To the best of the Seller's knowledge, no statement, report or
other document constituting a part of the Mortgage File contains any untrue
statement of fact or omits
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to state a fact necessary to make the statements therein not misleading.
(rr) No duplicate original Mortgage Note was executed by any Obligor.
(ss) As to each Mortgage Loan, and when taken together, all Mortgage
Loans, as the case may be, purchased after the initial Closing Date:
(i) No Mortgage Loan shall be secured by a third lien;
(ii) No Mortgage Loan shall have a maturity in excess of 30
years at origination; and
(iii) No Mortgage Loan shall be contractually Delinquent for
two payments.
(tt) With respect to each Conforming Mortgage Loan, subject to
the rights of the Purchaser, the Seller has contractual rights to sell loans
such as the Mortgage Loan to a third party purchaser, acceptable to the
Purchaser, as evidenced in writing.
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EXHIBIT L
REPRESENTATIONS AND WARRANTIES REGARDING
INDIVIDUAL MORTGAGE LOANS FOR FUTURE SECURITIZATIONS
From time to time the Seller agrees to provide representations and warranties to
the Purchaser as provided in this Exhibit L with respect to a pool of certain
Mortgage Loans previously sold to the Purchaser:
I. In general:
(a) When included with the Mortgage Loans previously purchased by the
Purchaser, no more than ___% of the Mortgage Loans, measured by outstanding
principal balances as of their respective Cut-off Dates, were originated by
independent originators and acquired by the Seller.
(b) Except for Mortgage Loans originated as second homes and non-owner
occupied homes, which will constitute no more than ___% of the aggregate Loan
Balance as of the Cut-off Date, at the time that each Mortgage Loan was
originated the Obligor represented that the Obligor would occupy the related
Mortgaged Property as Obligor's primary residence, and the Seller has no reason
to believe that such representation of the Obligor is no longer true.
(c) When included with the Mortgage Loans previously purchased
hereunder, as of their respective Cut-off Dates, of the aggregate principal
balance of all Mortgage Loans, (i) no more than 25% is secured by real property
improved by two- to four-family dwellings, (ii) no more than ___% is secured by
real property improved by individual condominium or townhouse units, (iii) no
more than ___% of the Mortgage Loans are secured by real property improved by an
individual unit in a planned unit development, (iv) at least ___% is secured by
real property with a detached one family residence erected thereon, (v) no more
than ___% is secured by real property improved by mixed-use units, and (vi) no
more than ___% are occupied by a person other than the owner of the Mortgaged
Property.
(d) The principal balance of such High Loan-to-Value Loan is combined
with the principal balances of all other High Loan-to-Value Loans purchased, the
aggregate principal balance
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of the High Loan-to-Value Loans does not represent more than ___% of the
aggregate principal balance of all the Mortgage Loans
(e) No more than ___% of the original aggregate principal balance of all
the Mortgage Loans, including those previously purchased hereunder, is secured
by Mortgaged Properties located within any single zip code area.
(f) The information stated on the Mortgage Loan Schedule and related
Purchase Request is correct as of the related Cut-off Date. No Mortgage Interest
Rate was less than ___%.
(g) As to each Mortgage Loan, and when taken together, all Mortgage
Loans, as the case may be, purchased after the initial Closing Date:
(i) No Mortgage Loan shall be secured by a third lien;
(ii) No more than ___% of the aggregate principal balance of
the Mortgage Loans shall be represented by balloon loans and any balloon
loan shall provide for scheduled monthly payments based on a 30-year
amortization schedule with a balloon payment of the balance due under
such loan at the end of the 15th year from the date of its origination;
(iii) No Mortgage Loan shall have a maturity in excess of 30
years at origination;
(iv) No Mortgage Loan shall be contractually Delinquent for
two payments;
(v) No more than ___% of the aggregate principal balance of
the Mortgage Loans shall be secured by condominiums;
(vi) No more than ___% of the aggregate principal balance of
the Mortgage Loans shall be secured by investor owned property;
(vii) The weighted average Loan-to-Value of the Mortgage Loans
shall not be greater than ___%, and with respect to the second lien
Mortgage Loans, the weighted
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average Combined Loan-to-Value Ratio of the Mortgage Loans shall not be
greater than ___%;
(viii) No second lien Mortgage Loan shall have a Combined
Loan-to-Value Ratio greater than ___%;
(ix) No more than ___% of the aggregate principal balance of
the Mortgage Loans shall have been originated pursuant to the Seller's
stated income program as described in the Seller's Guidelines; and
(x) No more than ___% of the aggregate principal balance of
the Mortgage Loans shall have been originated pursuant to the Seller's
limited documentation program as described in the Seller's Guidelines.
II. With respect to the Securitization Program Mortgage Loans purchased
hereunder which are ARM Loans the Seller shall represent and warrant to the
Purchaser that:
(a) no more than [__%] of the aggregate outstanding
principal balance of such ARM Loans is represented by balloon loans, and
each balloon loan provides for scheduled monthly payments based on a
30-year amortization schedule with a balloon payment of the balance due
under such loan at the end of the 15th or 20th year from the date of its
origination;
(b) no more than [__%] of the aggregate outstanding
principal balance of such ARM Loans has interest accruing at a fixed
rate for the first two or three years after origination and at a
variable rate after the end of such three year period; provided that
such percentage may be reduced by the Purchaser at any time that the
securitization market for such ARM Loans become less viable than the
market for such ARM Loans on the date of this Purchase Agreement;
(c) no more than [__%] of the aggregate outstanding
principal balance of such ARM Loans is secured by Mortgaged Properties
that are condominiums;
(d) no more than [__%] of the aggregate outstanding
principal balance of such ARM Loans is secured by Mortgaged Properties
that are investor owned;
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(e) the weighted average CLTV of such ARM Loans is not
greater than [__%];
(f) no more than [__%] of the aggregate outstanding
principal balance of such ARM Loans is represented by loans made on a no
income verification basis; and
(g) no more than [__%] of the aggregate outstanding
principal balance of such ARM Loan has LTVs above [__%] but less than or
equal to [__%].
III. With respect to the Securitization Program Mortgage Loans purchased
hereunder which are Fixed Rate Mortgage Loans, the Seller hereby represents and
warrants to the Purchaser that:
(a) no more than [__%] of the aggregate outstanding
principal balance of such Fixed Rate Mortgage Loans is represented by
balloon loans, and each balloon loan provides for scheduled monthly
payments based on a 30-year amortization schedule with a balloon payment
of the balance due under such loan at the end of the 15th or 20th year
from the date of its origination;
(b) no more than [__%] of the aggregate outstanding
principal balance of such Fixed Rate Mortgage Loans is secured by
Mortgaged Properties that are condominiums;
(c) no more than [__%] of the aggregate outstanding
principal balance of such Fixed Rate Mortgage Loans is secured by
Mortgaged Properties that are investor owned;
(d) the weighted average CLTV of such Fixed Rate Mortgage
Loans is not greater than [__%];
(e) no more than [__%] of the aggregate outstanding
principal balance of such Fixed Rate Mortgage Loans is represented by
loans made on a no income verification basis; and
(f) no more than [__%] of the aggregate outstanding
principal balance of such Fixed Rate Mortgage Loans secured by a first
lien, has a LTV of greater than [80%] and less than or equal to [__%].
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XXXXXXX M
FORM OF CUSTODY AGENT'S QUICK OR WET CERTIFICATION
[Quick]/[Wet] Certification
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxx Xxxx
Re: Custody Agreement (the "Custody Agreement") dated as of
December 17, 1996, among CMG Funding Corp., Continental
Mortgage Group, L.C., ContiTrade Services L.L.C. and First
Security Bank, N.A.
Gentlemen/Ladies:
In accordance with the provisions of Section 3 of the Custody
Agreement, the undersigned, as Custody Agent, hereby certifies that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan listed on the attachment hereto), it has
reviewed the documents delivered to it pursuant to Section 3(b)(1) and (3) of
the Custody Agreement and has determined that (i) all such documents are in its
possession, (ii) such documents have been reviewed by it and have not been
mutilated, damaged, torn or otherwise physically altered and relate to such
Mortgage Loan, (iii) based on its examination, and only as to the foregoing
documents, the information set forth in the Mortgage Loan Schedule (other than
items (i) and (iv)) respecting such Mortgage Loan accurately reflects the
information set forth in the Custody Agent's Mortgage File and (iv) each
Mortgage Note has been endorsed as provided in Section 3 of the Custody
Agreement. The Custody Agent has made no independent examination of such
documents beyond the review specifically required in the above-referenced
Custody Agreement. The Custody Agent makes no representations as to: (i) the
validity, legality, enforceability or genuineness of any such documents
contained in each or any of the Mortgage Loans identified on the Mortgage Loan
Schedule, or (ii) the
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collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
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Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custody Agreement.
FIRST SECURITY BANK, N.A.
as Custody Agent
By:___________________________
Name:_________________________
Title:________________________
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EXHIBIT N
FORM OF WET-FUNDING ESCROW AGREEMENT
[Letterhead of CMG Funding Corp.]
VIA FEDEX
[Name/Address of Closing Agent]
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Dear
In consideration of the fees as may be charged from time to time
by agreement of the parties hereto and the mutual promises exchanged, this
letter agreement shall set forth the responsibilities of [Name of Closing
Agent], as agent (the "Closing Agent") for CMG Funding Corp. ("CMG") in
connection with certain wet fundings of Loans (each a "Loan"), from time to
time, identified on funding instructions relating to particular Loan closings,
substantially in a form similar to Annex B hereto (each a "Funding
Instruction"). CMG shall indicate its intention to utilize the Closing Agent
with respect to a particular wet funding through the transmission of the related
Funding Instruction to the Closing Agent prior to the wiring of funds related
thereto. Until such time as the Closing Agent shall have given CMG five Business
Days prior written notice of its intention not to serve as closing agent with
respect to future funding instructions, each new Funding Instruction transmitted
to the Closing Agent by CMG shall form part of this Escrow Agreement.
Prior to a Loan closing, CMG will wire to the Closing Agent the
Loan proceeds specified in the related Funding Instruction. The Closing Agent
will oversee disbursement of the related Loan proceeds and will take control of
the documentation executed at the related Loan's closing, ensuring that only one
set of original loan documents is signed by the mortgagor and that any
duplicates are clearly labelled "Copy." The Closing Agent will forward the
related original loan documents as described in Annex A hereto via
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overnight mail to CMG within twenty-four (24) hours of the related Loan's
closing. Simultaneous with the related closing, the Closing Agent will transmit
via facsimile to CMG, a copy of the related original fully executed note and
mortgage and the related title commitment.
If a Loan does not fund, close or otherwise record for ANY reason
within 48 hours of the Closing Agent receiving the related Loan proceeds, the
Closing Agent shall notify, by phone, CMG's Funding Supervisor and return such
Loan proceeds to the sender and return the documents to CMG, unless instructed
in writing to do otherwise by CMG.
Any costs associated with the failure of the Closing Agent to
follow the above instructions will be billed to the Closing Agent and shall be
the Closing Agent's responsibility. These costs include interest on the related
Loan proceeds for every day beyond the 48 hours, wire fees, courier fees or any
costs or damages associated with the failure to both notify CMG before 48 hours
and to return the documents.
CMG will look to the Closing Agent for the timely and proper
handling of the related Loan proceeds and the related original loan documents
which come into your possession pursuant to the terms of this Escrow Agreement.
Please sign this notification and return to CMG.
Very truly yours,
CMG FUNDING CORP.
------------------------------------
By:
Title:
AGREED THIS ______ DAY OF
____________, 1997.
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[Name of Closing Agent]
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----------------------------
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ANNEX A
The following documents are required in connection with the closing of each
Loan:
1. Mortgage or Deed of Trust ("Mortgage") given by the Mortgagor to the
Originator securing the principal amount of such Loan set forth in the
related Funding Instruction;
2. Mortgage or Deed of Trust Note ("Mortgage Note") given by the Mortgagor
to the Originator in the principal amount of such Loan set forth in the
related Funding Instruction;
3. Assignment of Mortgage from the Originator, with assignee in blank but
otherwise in recordable form, but not recorded;
4. Primary Mortgage Guaranty Insurance Contract, if applicable;
5. List any other documents being forwarded to or prepared by the Closing
Agent in connection with the closing of such Loan.
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ANNEX B
FUNDING INSTRUCTION
This is a Funding Instruction pursuant to the Wet Funding Escrow Agreement dated
__________, ___, 199_, between CMG Funding Corp. and [Closing Agent] (the
"Escrow Agreement"), which relates to the Loan closing described herein and
which forms part of the Escrow Agreement:
1. Loan: [Identification];
2. Borrower: [Name and Address];
3. Loan Proceeds Wired: [$____________];
4. Closing: [Date, Time and Place];
5. Special Instructions: [ ].
Very truly yours,
CMG Funding Corp.
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EXHIBIT O
WET-FUNDING PROCEDURES
PRIOR TO THE PURCHASE DATE:
CMG Funding Corp. (the "Company") procedures:
The Company prepares a Mortgage Loan Schedule sub-listing the loans defined as
Wet-Funded Mortgage Loans. Additionally, the Company prepares the Purchase
Request and the Custody Agent's wiring instructions. The Company must also have
the Escrow Agreements properly executed for each Mortgage Loan listed on the
Mortgage Loan Schedule.
The Company will be required to consolidate all of the funding needs of its
local and out of state branches through a single corporate funding department.
The Custody Agent and the Purchaser will process and fund against only one
Purchase Request each Business Day.
THE BUSINESS DAY PRIOR TO THE PURCHASE DATE:
The Company procedures:
(A) The Company sends the Purchase Request and Mortgage Loan Schedule via fax to
the Purchaser for receipt no later than 2:00 p.m. Mountain Time on the Business
Day prior to the Purchase Date of the related Purchase. At the same time, the
Company will transmit to the Custody Agent a data file containing the
information on the Mortgage Loan Schedule. Additionally, on such Business Day
prior to the Purchase Date, the Company will send by overnight delivery to the
Custody Agent a copy of the Purchase Request and Mortgage Loan Schedule and the
Escrow Agreement for each Mortgage Loan listed on the Mortgage Loan Schedule.
(B) The Company must also have all the Custody Agent's wiring instructions at
least one Business Day prior to the Purchase Date of the related Purchase. The
wiring instructions will direct the Custody Agent to send funds to the
appropriate title/escrow companies for the related Mortgage Loans. If requested
by the Purchaser or the Custody Agent, the Company will send a copy of the
Custody Agent's wiring instructions to the Purchaser or the Custody Agent. The
Company will not
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request a Mortgage Loan to be purchased until the applicable recision period
has expired.
The Company and the Purchaser must approve all the title/escrow companies used
for purchasing Wet-Funded Mortgage Loans. Such companies must meet certain
fidelity bond requirements and be familiar with their requirements under the
procedures for purchasing Wet-Funded Mortgage Loans.
ON THE FUNDING DATE:
The Custody Agent's procedures:
(C) The Custody Agent, upon receipt and review of the Wet-Funded Mortgage Loan
Documents (i.e., the executed Escrow Agreements, Mortgage Loan Schedule and
Purchase Request) will fax to the Purchaser and the Company a Wet-Funded Report
and attached exception report, no later than 1:00 p.m. Mountain time on the
Purchase Date of the related Purchase Request. The Custody Agent shall verify
there are no discrepancies between certain information listed on the Mortgage
Loan Schedule and the information on the related Escrow Agreements and Purchase
Request. Additionally, the Custody Agent will verify the wiring instructions
provided by the Company with the information in the Escrow Agreements. The
Custody Agent will fax to the Purchaser the Wet-Funding Report and attached
exception report prior to the Purchaser authorizing the Custody Agent to
transfer funds to the related title companies for the funding of the individual
Mortgage Loans.
(D) Subject to the funding conditions in paragraphs (C) and (E) herein, the
Custody Agent, within one hour of receipt from the Purchaser of the executed
Wet-Funding Report and related exception report authorizing the Custody Agent to
fund the related Mortgage Loans, will wire the funds in the Purchase Funding
Account per the wiring instructions provided by the Company, to the related
Escrow Agent; the Escrow Agent will pay off the existing lien(s) on the
Mortgaged Property and forward the balance of the loan purchase proceeds, if
any, in accordance with the instructions provided by the Company.
(E) The Custody Agent will fund an individual Wet-Funded Mortgage Loan when the
following conditions are met: (i) the Custody Agent has received and confirmed
that the Escrow Agreement sent by the Company (or the Escrow Agent if
applicable) has been executed and completed and has sent to
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the Purchaser a Wet-Funded Report, (ii) the Custody Agent has received from the
Purchaser authorization, in the form of the related executed Wet-Funded Report
and related exception report, to transfer funds for the Mortgage Loans to the
related title companies and (iii) the Custody Agent has received confirmation
from the Company that the Escrow Agents are ready to receive funds.
Additionally, the Purchaser reserves the right to require that the Escrow Agent
fax to the Custody Agent the executed Mortgage Note on the Purchase Date prior
to the Purchaser authorizing the Custody Agent to wire funds for the related
Mortgage Loan. If such a requirement is adopted, the Custody Agent will
incorporate into these Wet-Funding Procedures the Custody Agent's procedures for
certifying files containing Mortgage Notes.
(F) The Custody Agent, unless otherwise instructed by the Purchaser, will return
to the Purchaser, on the same day as forwarded, funds that have been forwarded
by the Purchaser to the Custody Agent but for whatever reason the loan for which
such advance was made did not fund by 4:00 p.m. Eastern time (i.e., the loan did
not meet the final purchase conditions or the mortgagor rescinded, etc.). Note:
it is likely that over time, the Purchaser will issue standing instructions to
the Custody Agent to retain such funds overnight and utilize such funds for the
next day's funding requirements.
The Purchaser's procedures:
(G) After receiving the information in paragraph (A) on the prior Business Day,
the Purchaser will authorize its bank to wire to the Purchase Funding Account
the amount on the related Purchase Request by 12:00 noon Eastern time (Note: the
Purchaser reserves the right to require receipt of the Wet-Funding Report prior
to authorizing its bank to transfer funds to the Purchase Funding Account). The
Purchaser will receive from the Custody Agent the Wet-Funding Report with the
attached exception report. The Purchaser will cross-out or otherwise identify
loans on the exception report that do not meet the funding requirements. The
Purchaser will authorize the Custody Agent to wire funds for the individual
Mortgage Loans not crossed-out or otherwise identified on such exception report
by executing the related Wet-Funding Report and sending it via fax along with
the related exception report to the Custody Agent and the Company.
The Company's procedures:
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The Company will send via overnight delivery to the Custody Agent, the original
Assignments of Mortgage for all the Wet-Funded Mortgage Loans on the Mortgage
Loan Schedule. To the extent that the Company has not manually endorsed the
Mortgage Note for a Wet-Funded Mortgage Loan contemporaneously with its
origination, the Company shall on the origination day of such Wet-Funded
Mortgage Loan prepare and execute an allonge with respect to the related
Mortgage Note, which properly endorses such Mortgage Note in blank, and shall
deliver such allonge to the Custody Agent via overnight delivery to the Custody
Agent.
(H) If any of the Mortgage Loans listed on a Mortgage Loan Schedule do not fund
on their related Purchase Date, the Company will send via fax or other
acceptable electronic means to the Custody Agent and the Purchaser on the same
day as the related Purchase Date a corrected Mortgage Loan Schedule deleting the
Mortgage Loans that did not fund. The Company will receive information on which
Mortgage Loans did not fund from the related exception report that the Purchaser
will send via fax on the related Purchase Date. Mortgage Loans that did not fund
will have to be added to the next appropriate Mortgage Loan Schedule when they
are ready to fund.
Escrow Agent procedures:
On the Purchase Date, the Escrow Agent shall send via overnight delivery to the
Custody Agent the original executed Mortgage Note and shall fax a copy of such
Mortgage Note to the Company. Additionally the Escrow Agent shall send via
overnight delivery to the Company the remaining loan documents (or certified
copies of such documents, if applicable).
Additionally, on the Purchase Date, the Escrow Agent may be required to fax to
the Custody Agent the executed Mortgage Note prior to the Custody Agent
releasing funds for the related Mortgage Loan to the Escrow Agent or title
company.
THE BUSINESS DAY FOLLOWING THE PURCHASE DATE:
The Custody Agent's procedures:
After receipt and review of the original Mortgage Notes received from the Escrow
Agents and the related Assignments of Mortgage received from the Company, the
Custody Agent shall issue a Wet Certification, and deliver such certification to
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the Purchaser. Additionally, Custody Agent shall notify both the Purchaser and
the Company of any Wet-Funded Mortgage Loan for which it did not receive the
related Mortgage Note or Assignment of Mortgage. Such notification will be in
the form of a daily document status report that the Custody Agent shall fax to
the Purchaser and the Company. Additionally, with regard to original Mortgage
Notes for Wet-Funded Mortgage Loans, to the extent that the Company has endorsed
such Mortgage Note by means of an allonge, the Custody Agent shall match up such
allonge with the related Mortgage Note.
AFTER THE FUNDING DATE:
The Company procedures:
(I) With respect to Wet-Funded Mortgage Loans, the Company will use its best
efforts to deliver to the Custody Agent the balance of the Mortgage Loan File
within one Business Day after the Closing Date of the related Mortgage Loan and
in no case later than three Business Days.
(J) In accordance with paragraph (M) below, if the Company is unable to deliver
to the Custody Agent the required documentation for a Mortgage Loan, such
Mortgage Loan will become a Defaulted Mortgage Loan. The Company will use its
best efforts to deliver to the Custody Agent, at the same time and in a single
group, the balance of the Mortgage Loan Files for Mortgage Loans funded under a
single Purchase. Additionally, the Company will use its best efforts to deliver
complete Mortgage Loan Files which contain all the necessary documentation as
designated herein.
(K) When requested by the Purchaser or the Custody Agent, the Company will send
via fax to the Purchaser, and Custody Agent's trustee department, the daily
account activity of the Purchase Funding Account. Such report will include all
the daily funding activity for Wet-Funded Mortgage Loans and Mortgage Loans with
complete documentation. Such reports shall be generated by the Company.
Custody Agent's procedures:
(L) Upon receipt of the balance the Mortgage Loan Files from the Company, the
Custody Agent will use its best efforts to review such files no later than the
next Business Day. The Company will work to clear up any exceptions regarding
such
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Mortgage Loan Files within five Business Days from the related Purchase Date
(certain minor exceptions may take longer). On the day the Custody Agent reviews
any Mortgage Loan Files it will update the document status report with the
results of such review. The Custody Agent shall fax on a daily basis to the
Purchaser and the Company the daily document status report.
(M) The Custody Agent will issue Trust Receipts, as frequently as daily at the
request of the Purchaser.
Other items:
Covenant: The Company will provide to the Purchaser upon its reasonable request
a report projecting the number and aggregate principal balance of Mortgage Loans
to be funded that will enable the Purchaser to plan for the funding needs of the
Company.
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EXHIBIT P
QUICK-FUNDING PROCEDURES
PRIOR TO THE PURCHASE DATE:
CMG Funding Corp. (the "Company") procedures:
The Company prepares a Mortgage Loan Schedule sub-listing the loans defined as
Quick-Funded Mortgage Loans (together with any other types of loans sub-listed
according to the requirements in the Purchase Request). Additionally, the
Company prepares the Purchase Request and the Custody Agent's wiring
instructions.
The Company under the Purchase Agreement will be required to consolidate all of
the sales of Mortgage Loans of its local and out of state branches through a
single corporate sales department. The Custody Agent and the Purchaser will
process and fund against only one Purchase Request each Business Day.
THE BUSINESS DAY PRIOR TO THE PURCHASE DATE:
The Company procedures:
(A) The Company sends the Purchase Request and Mortgage Loan Schedule via fax to
the Purchaser for receipt no later than 2:00 p.m. Mountain Time on the Business
Day prior to the Purchase Date of the related Purchase. At the same time, the
Company will transmit to the Custody Agent a data file containing the
information on the Mortgage Loan Schedule. Additionally, on such Business Day
prior to the Purchase Date, the Company will send by overnight delivery to the
Custody Agent a copy of the Purchase Request and the Mortgage Loan Schedule, the
original executed Mortgage Note endorsed in blank and the original executed
Assignment of Mortgage endorsed in blank, for each Mortgage Loan listed on the
Mortgage Loan Schedule.
(B) The Company must also have all the Custody Agent's wiring instructions at
least one Business Day prior to the Purchase Date of the related Purchase. The
wiring instructions will direct the Custody Agent to send funds to the
appropriate Escrow Agents for the related Mortgage Loans. If requested by the
Purchaser or the Custody Agent, the Company will send a
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copy of the Custody Agent's wiring instructions to the Purchaser or the Custody
Agent. The Company will not request a Mortgage Loan to be purchased until the
applicable recision period has expired.
ON THE PURCHASE DATE:
The Custody Agent's procedures:
(C) The Custody Agent, upon receipt and review of the executed Mortgage Notes
and Assignments of Mortgage, will issue a "Quick Certification", a form of which
is attached as Exhibit E to the Custody Agreement, no later than 1:00 p.m.
Mountain Time on the Date of the related Purchase Request. The Custody Agent, in
accordance with Section 3 of the Custody Agreement, shall verify there are no
discrepancies between certain information listed on the Mortgage Loan Schedule
and the information on the related Mortgage Notes and Assignments of Mortgage.
Additionally, the Custody Agent will verify the wiring instructions provided by
the Company with the information in the related Mortgage Notes. The Custody
Agent will fax to the Purchaser the Quick Certification prior to the Purchaser
authorizing the Custody Agent to transfer funds to the related Escrow Agent for
the funding of the individual Mortgage Loans.
(D) Subject to the funding conditions in paragraphs (C) and (E) herein, the
Custody Agent, within one hour of receipt from the Purchaser of the executed
Quick Certification and related file exception report authorizing the Custody
Agent to fund the related Mortgage Loan, provided that the Purchaser provides
such executed Quick Certification by 1:00 p.m. Mountain Time, will wire the
funds in the Purchase Funding Account in accordance with the wiring instructions
provided by the Company, to the related Escrow Agent; such Escrow Agent will pay
off the existing lien(s) on the Mortgaged Property and forward the balance of
the Purchase proceeds, if any, in accordance with the instructions provided by
the Company.
(E) The Custody Agent purchase an individual Mortgage Loan when the following
conditions are met: (i) the Custody Agent has received and verified the original
executed Mortgage Note and Assignment of Mortgage sent by the Company (or the
Escrow Agent if applicable) and has sent to the Purchaser a Quick Certification,
(ii) the Custody Agent has received from the Purchaser authorization, in the
form of the executed Quick
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112
Certification and related file exception report, to transfer funds for the
Mortgage Loans to the related title companies, (iii) the Custody Agent has
received confirmation from the Escrow Agent that it is ready to receive funds
and (iv) the Custody Agent has verified the wiring instructions provided by the
Company with the information in the Mortgage Notes.
(F) The Custody Agent, unless otherwise instructed by the Purchaser, will return
to the Purchaser, on the same day as advanced, funds that have been advanced by
the Purchaser to the Custody Agent but for whatever reason the loan for which
such advance was made did not fund by 4:00 p.m. Eastern Time (i.e. the loan did
not meet the final purchase conditions or the mortgagor rescinded etc.).
The Purchaser's procedures:
(G) After receiving the information in paragraph (A) on the prior Business Day,
the Purchaser will authorize its bank to wire to the Purchase Funding Account
the amount on the related Purchase Request by 12:00 noon Eastern time (Note: the
Purchaser reserves the right to require receipt of the Quick Certification prior
to authorizing its bank to transfer funds to the Purchase Funding Account). The
Purchaser will receive from the Custody Agent the Quick Certification with the
attached file exception report. The Purchaser will cross-out or otherwise
identify loans on the file exception report that do not meet the funding
requirements. The Purchaser will authorize the Custody Agent to wire funds for
the individual Mortgage Loans not crossed-out or otherwise identified on such
file exception report by completing and executing the related Quick
Certification and sending it via fax along with the related file exception
report to the Custody Agent and the Company.
The Company's procedures:
(H) If any of the Mortgage Loans listed on a Mortgage Loan Schedule do not fund
on their related Purchase Date, the Company will send via fax or other
acceptable electronic means to the Custody Agent and the Purchaser on the same
day as the related Purchase Date a corrected Mortgage Loan Schedule deleting the
Mortgage Loans that did not fund. The Company will receive information
concerning the Mortgage Loans which the Custody Agent did not fund from the file
exception report that the Purchaser will fax to the Company on each Purchase
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113
Date. Mortgage Loans that did not fund will have to be added to the next
appropriate Mortgage Loan Schedule when they are ready to fund.
AFTER THE PURCHASE DATE:
The Company procedures:
(I) With respect to Quick-Funded Mortgage Loans, the Company will use its best
efforts to deliver to the Custody Agent the Mortgage File documents that have
not been previously received by the Custody Agent (the "Quick-Funded Mortgage
File") within two Business Days after the Purchase Date of the related Mortgage
Loan and in no case later than four Business Days. The Company fill use its best
efforts to deliver to the Custody Agent, at the same time and in a single group,
the Quick-Funded Mortgage Files for Mortgage Loans funded under a single
Purchase. Additionally, the Company will use its best efforts to deliver
complete Quick-Funded Mortgage Files which contain all the necessary
documentation.
(J) In accordance with paragraph (M) below, if the Company is unable to deliver
to the Custody Agent the required documentation for a Mortgage Loan, such
Mortgage Loan will become a Defaulted Mortgage Loan.
(K) The Company will send via fax on a daily basis to the Purchaser, and the
Custody Agent, if requested, the daily account activity of the Purchase Funding
Account. Such report will include all the daily funding activity for Wet-Funded
Mortgage Loans, Quick-Funded Mortgage Loans, and Mortgage Loans with complete
documentation. Such reports shall be generated by the Company.
Custody Agent's procedures:
(L) Upon receipt of the Quick-Funded Mortgage Files from the Company, the
Custody Agent will use its best efforts to review such files no later than next
Business Day. The Company will work to clear up any exceptions regarding such
Quick-Funded Mortgage Files within five Business Days from the related Funding
Date (certain minor exceptions may take longer). On the day the Custody Agent
reviews any Quick-Funded Mortgage File it will update the document status report
with the results of such review. The Custody Agent shall fax on a
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114
daily basis to the Purchaser and the Company the daily document status report.
(M) The Custody Agent will issue trust receipts, in a form acceptable to the
Purchaser, as frequently as daily at the request of the Purchaser. In most
instances and as directed by the Purchaser, a trust receipt will aggregate
Mortgage Loans relating to several Purchase Requests by loan type.
Other Items:
Covenant: The Company will provide to the Purchaser upon its reasonable request
reports projecting the number and aggregate principal balance of Mortgage Loans
to be funded that will enable the Purchaser to plan for the funding needs of the
Company.
If loans are funded in certain states that have additional documentation
requirements for establishing good collateral (i.e. in addition to the Mortgage
Note and Assignment of Mortgage such as a certified copy of the Mortgage) then
the prior to funding requirements for the Company and the Custody Agent will be
adjusted to require such additional documentation.
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115
EXHIBIT Q
FORM OF CUSTODY AGENT'S CERTIFICATION
Certification
ContiTrade Services L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxx Xxxx
Re: Custody Agreement (the "Custody Agreement") dated as of December 17,
1996, among CMG Funding Corp., Continental Mortgage Group, L.C.,
ContiTrade Services L.L.C. and First Security Bank, N.A.
Gentlemen/Ladies:
In accordance with the provisions of Section 3 of the Custody
Agreement, the undersigned, as Custody Agent, hereby certifies that, as to each
Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan
paid in full or any Mortgage Loan listed on the attachment hereto), it has
reviewed the documents delivered to it pursuant to Section 3(b) the Custody
Agreement and has determined that (i) all such documents are in its possession,
(ii) such documents have been reviewed by it and have not been mutilated,
damaged, torn or otherwise physically altered and relate to such Mortgage Loan,
(iii) based on its examination, and only as to the foregoing documents, the
information set forth in the Mortgage Loan Schedule (other than items (i) and
(iv)) respecting such Mortgage Loan accurately reflects the information set
forth in the Custody Agent's Mortgage File and (iv) each Mortgage Note has been
endorsed as provided in Section 3 of the Custody Agreement. The Custody Agent
has made no independent examination of such documents beyond the review
specifically required in the above-referenced Custody Agreement. The Custody
Agent makes no representations as to: (i) the validity, legality, enforceability
or genuineness of any such documents contained in each or any of the Mortgage
Loans identified on the Mortgage Loan Schedule, or (ii) the
Q-1
116
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.
Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Custody Agreement.
Q-2
117
FIRST SECURITY BANK, N.A.
as Custody Agent
By:
---------------------------
Name:
-------------------------
Title:
------------------------
Q-3
118
SCHEDULE I
Wiring Instructions
[Attached]
119
SCHEDULE II
WIRING INSTRUCTIONS - PURCHASE FUNDING ACCOUNT
First Security Bank, N.A.
ABA: 000000000
Corporate Trust Services
Acct: 0510922115
RE: ContiFinancial mortgage purchase
date:
120
EXECUTION COPY
PURCHASE AND SALE AGREEMENT
Among
CMG FUNDING CORP., CONTINENTAL MORTGAGE GROUP, L.C.,
and
CONTITRADE SERVICES L.L.C.
Dated as of December 17, 1996
121
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS...................................................... 1
"Adjusted Tranche Amount"................................................... 1
"Affiliate"................................................................. 1
"Aggregate Adjusted Tranche Amount"......................................... 1
"Appraised Value"........................................................... 1
"ARM Loan".................................................................. 2
"Assignment of Mortgage".................................................... 2
"Available Amount".......................................................... 2
"B/C Loan".................................................................. 2
"Bonus Compensation"........................................................ 2
"Business Day".............................................................. 2
"CFS"....................................................................... 2
"Change of Control"......................................................... 2
"Closing Date".............................................................. 3
"CLTV"...................................................................... 3
"CMGFC"..................................................................... 3
"Collateral"................................................................ 3
"Conforming Mortgage Loan".................................................. 4
"Conforming Mortgage Loan Underwriting Guidelines".......................... 4
"Consumer Credit Laws"...................................................... 4
"Controlling Shareholders".................................................. 4
"Conversion Privileges"..................................................... 4
"Custody Agent"............................................................. 4
"Custody Agreement"......................................................... 4
"Default Rate".............................................................. 4
"Detailed Mortgage Loan Schedule"........................................... 4
"Eligible Assets"........................................................... 4
"Event of Termination"...................................................... 5
"FHA"....................................................................... 5
"FHLMC"..................................................................... 5
"Fixed Rate Mortgage Loan".................................................. 5
"FNMA"...................................................................... 5
"Forbearance Waiver"........................................................ 5
"Fringe Benefits"........................................................... 5
"GAAP"...................................................................... 5
"Gain Amount"............................................................... 5
"GNMA"...................................................................... 5
"Governmental Approvals".................................................... 5
"Governmental Authority".................................................... 5
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Page
----
"Initial Tranche Amount".................................................... 6
"Investment Banking Services Agreement"..................................... 6
"Law"....................................................................... 6
"Letter Agreement".......................................................... 6
"LIBOR"..................................................................... 6
"LIBOR Reset Date".......................................................... 6
"London Business Day":...................................................... 7
"Losses".................................................................... 7
"LTV" or "Loan-To-Value".................................................... 7
"Market Movement Allowance"................................................. 7
"Market Value".............................................................. 7
"Material Change"........................................................... 7
"Maximum Available Amount".................................................. 7
"Monoline Insurance Company"................................................ 8
"Mortgage".................................................................. 8
"Mortgage File"............................................................. 8
"Mortgage Interest Rate".................................................... 9
"Mortgage Loan"............................................................. 9
"Mortgage Loan Schedule".................................................... 10
"Mortgage Note"............................................................. 10
"Mortgaged Property"........................................................ 10
"Net Securities Amount"..................................................... 10
"Obligor"................................................................... 10
"Person".................................................................... 11
"Preferred Stock"........................................................... 11
"Principal"................................................................. 11
"Proceeds Shortfall"........................................................ 11
"Purchase".................................................................. 11
"Purchase Agreement"........................................................ 11
"Purchase Date"............................................................. 11
"Purchase Price Percentage"................................................. 11
"Purchase Request".......................................................... 11
"Purchaser"................................................................. 12
"Quick Certification"....................................................... 12
"Quick-Funded Mortgage Loan"................................................ 12
"Recourse Amount"........................................................... 12
"Registration Rights Agreement"............................................. 12
"Release Fee"............................................................... 12
"Repurchase Transaction".................................................... 12
"Required Sale Event"....................................................... 12
"Residualholder"............................................................ 12
"SEC"....................................................................... 12
"Securitization"............................................................ 12
"Securitization Program Mortgage Loan"...................................... 13
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123
Page
----
"Securitization Program Mortgage Loan Underwriting Guidelines".............. 13
"Seller".................................................................... 13
"Senior Officers"........................................................... 13
"Servicer".................................................................. 13
"Servicing Agreement"....................................................... 13
"Share Fair Market Value"................................................... 13
"Shareholders' Equity"...................................................... 13
"Significant Documents"..................................................... 14
"Special Program Loan"...................................................... 14
"Standard A Loans".......................................................... 14
"Standby Agreement"......................................................... 14
"Stock Option Plan"......................................................... 14
"Subordinated Debt Agreement"............................................... 14
"Taxes"..................................................................... 14
"Termination Date".......................................................... 14
"Tranche"................................................................... 14
"Tranche Period"............................................................ 14
"Tranche Rate".............................................................. 15
"Tranche Selection Notice".................................................. 15
"Tranche Term".............................................................. 15
"Trust Receipt":............................................................ 15
"VA"........................................................................ 15
"Wet Certification"......................................................... 15
"Wet-Funded Mortgage Loan".................................................. 15
"Wet-Funding"............................................................... 15
"Wet-Funding Escrow Agent".................................................. 15
"Wet-Funding Escrow Agreement".............................................. 15
"Wet-Funding Limit"......................................................... 16
ARTICLE II. PROCEDURES FOR PURCHASES OF ELIGIBLE ASSETS; CONDITIONS
PRECEDENT; SETTLEMENTS........................................... 16
Section 2.01 Obligation to Purchase........................................ 16
Section 2.02 Delivery of Documents; Initial Purchase of
Eligible Assets............................................... 16
Section 2.03 Delivery of Documents; Subsequent Purchases of
Eligible Assets............................................... 18
Section 2.04 Purchase Requests............................................. 18
Section 2.05 Tranche Selection............................................. 19
Section 2.06 Survival of Representations................................... 19
Section 2.07 Proceeds of Eligible Assets................................... 20
Section 2.08 Purchase Mechanics............................................ 20
Section 2.09 Retention of Accrued Interest................................. 20
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Page
----
ARTICLE III. DISTRIBUTIONS.................................................... 21
Section 3.01 Distributions................................................. 21
ARTICLE IV. TRANSFERS OF ELIGIBLE ASSETS BY THE PURCHASER.......................... 22
Section 4.01 Purchaser Sale................................................ 22
Section 4.02 Market Value.................................................. 23
Section 4.03 Required Sale Event. ......................................... 23
Section 4.04 Bankruptcy Event.............................................. 24
Section 4.05 Proceeds Shortfall............................................ 24
ARTICLE V. REPRESENTATIONS AND WARRANTIES.......................................... 25
ARTICLE VI. OPERATIVE PROVISIONS.................................................... 25
Section 6.01 Intent of Parties; Security Interest.......................... 25
Section 6.02 Term.......................................................... 26
Section 6.03 Indemnification by the Seller................................. 26
Section 6.04 Securitization................................................ 27
Section 6.05 Remedies...................................................... 28
Section 6.06 Consumer Credit Law Obligations............................... 28
Section 6.07 Grant of Security Interest.................................... 28
Section 6.08 Late Payments................................................. 29
ARTICLE VII. INDEMNITIES AND OTHER COSTS............................................ 29
Section 7.01 Hold Harmless................................................. 29
Section 7.02 Definition of Taxes........................................... 30
Section 7.03 After-Tax Calculation......................................... 30
Section 7.04 Contest, Payment, Interest.................................... 30
Section 7.05 Definition of "After-Tax Basis"; Tax Savings.................. 31
Section 7.06 Facility Fee.................................................. 31
ARTICLE VIII. EVENTS OF TERMINATION......................................... 31
Section 8.01 Failure to Perform............................................ 31
Section 8.02 Failure of Representation or Warranty......................... 32
Section 8.03 Failure of Covenant........................................... 32
Section 8.04 Bankruptcy Event.............................................. 32
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125
Page
----
Section 8.05 Seller Default................................................ 32
Section 8.06 Material Adverse Change....................................... 32
Section 8.07 Cross-Default................................................. 33
Section 8.08 Non-Closure................................................... 33
ARTICLE IX. GENERAL PROVISIONS..................................................... 33
Section 9.01 Cooperation, Confidentiality, Etc............................. 33
Section 9.02 Waiver of Trial by Jury....................................... 34
Section 9.03 Amendment; Waivers............................................ 34
Section 9.04 Taxes......................................................... 34
Section 9.05 Limited Liability............................................. 34
Section 9.06 Other Transactions............................................ 35
Section 9.07 Opinion of Counsel to the Seller.............................. 35
Section 9.08 Costs and Expenses............................................ 35
Section 9.09 Wiring Instructions........................................... 36
Section 9.10 Power of Attorney............................................. 36
Section 9.11 Right of Set-Off.............................................. 36
Section 9.12 Servicing..................................................... 37
ARTICLE X. CONSTRUCTION........................................................... 37
Section 10.01 Entire Agreement............................................. 37
Section 10.02 Severability Clause.......................................... 37
Section 10.03 Counterparts................................................. 38
Section 10.04 Governing Law; Purchase Agreement Constitutes
Security Agreement; Consent To Forum; Immunities............. 38
Section 10.05 No Agency; No Partnership; No Joint Venture.................. 39
Section 10.06 Judicial Interpretation...................................... 39
Section 10.07 Recitals..................................................... 39
Section 10.08 Rules of Interpretation...................................... 39
Section 10.09 Good Faith................................................... 40
ARTICLE XI. MISCELLANEOUS.......................................................... 40
Section 11.01 Notices...................................................... 40
Section 11.02 Further Agreements........................................... 41
Section 11.03 Third-Party Rights; Assignment............................... 41
Section 11.04 Advice from Independent Counsel.............................. 42
Section 11.05 Summary Judgment............................................. 42
Section 11.06 Reproduction of Documents.................................... 42
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126
EXHIBITS
Exhibit A Securitization Program Mortgage Loan Underwriting Guidelines
Exhibit B Conforming Mortgage Loan Underwriting Guidelines
Exhibit C Form of Receipt, Grant and Assignment
Exhibit D Form of Purchase Request
Exhibit E Form of Opinion of Counsel to the Seller
Exhibit F-1 List of Information to be Provided on a Mortgage Loan
Schedule
Exhibit F-2 List of Information to be Provided on a Detailed Mortgage
Loan Schedule
Exhibit G Form of Officers' Certificate
Exhibit H Representations and Warranties of the Seller
Exhibit I Representations and Warranties of the Purchaser
Exhibit J Covenants of the Seller
Exhibit K Representations and Warranties regarding Individual Mortgage
Loans
Exhibit L Representations and Warranties regarding Individual Mortgage
Loans for Future Securitizations
Exhibit M Form of Quick or Wet Certification
Exhibit N Form of Wet-Funding Escrow Agreement
Exhibit O Wet-Funding Procedures
Exhibit P Quick-Funding Procedures
Exhibit Q Form of Certification
vi
127
SCHEDULES
Schedule I Wiring Instructions
Schedule II Wiring Instructions - Purchase Funding Account
vii
128
Execution Copy
AMENDMENT 1 TO
PURCHASE AND SALE AGREEMENT
This Amendment 1, dated October 24, 1997 (the "Amendment"), to
the Purchase and Sale Agreement (the "Purchase Agreement"), dated December 17,
1996, among CMG Funding Corp., and Continental Mortgage Group, L.C. (now
succeeded by CMG Funding Corp.), as Sellers, and ContiTrade Services L.L.C. as
Purchaser.
WHEREAS, the parties hereto have entered into the Purchase
Agreement, as well as a series of other agreements designated as Significant
Documents in the Purchase Agreement; and
WHEREAS, the parties hereto now wish to amend certain provisions
in the Purchase Agreement.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 11.02 of the
Purchase Agreement, to amend the Purchase Agreement and restate certain
provisions thereof as follows:
1. Defined Terms Capitalized terms used herein without definition
have the meanings ascribed to them in the Purchase Agreement.
2. Maximum Available Amount. The definition of "Maximum Available
Amount" as set forth in Article 1 of the Purchase Agreement is amended through
the replacement of the value "$ 30,000,000" with "$ 50,000,000".
3. Wet Funding Limit. The definition of "Wet Funding Limit" as
set forth in Article 1 of the Purchase Agreement is amended through the
replacement of the value "$3,000,000" with "$ 5,000,000".
4. Effectiveness. This Amendment, even after due execution by the
parties hereto, will not become effective until each of Amendment 1 to the
Standby and Working Capital Financing Agreement dated October 24, 1997 (the
"Standby Amendment"), the New Letter Agreement, dated October 24, 1997, between
Xxxx Xxx and ContiFinancial Corporation, Amendment 1 to the Registration Rights
Agreement, dated October 24, 1997, (the "Registration Rights Amendment")and the
amended Secured Note pursuant to Paragraph 8 of the Standby Amendment have also
been duly executed and delivered by the parties thereto.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to its rules regarding conflict of laws.
129
IN WITNESS WHEREOF, the parties have executed this Amendment 1 to the Purchase
and Sale Agreement as of the day and year first above written.
CMG FUNDING CORP.
as the Seller
By
------------------------------------------
Name:
Title:
CONTITRADE SERVICES, L.L.C
as Purchaser
By
------------------------------------------
Name:
Title:
By
------------------------------------------
Name:
Title:
2
130
AMENDMENT 2 TO
PURCHASE AND SALE AGREEMENT
This Amendment 2, dated December 31, 1997 (the "Amendment"), to
the Purchase and Sale Agreement (the "Purchase Agreement"), dated December 17,
1996, among CMG Funding Corp. ("CMG"), and Continental Mortgage Group, L.C. (now
succeeded by CMG Funding Corp.), as Sellers, and ContiTrade Services L.L.C.
("CTS") as Purchaser.
WHEREAS, the parties hereto have entered into the Purchase
Agreement, as well as a series of other agreements designated as Significant
Documents in the Purchase Agreement;
WHEREAS, the parties hereto have entered into Amendment 1 to the
Purchase Agreement dated as of October 24, 1997 ("Amendment"); and
WHEREAS, the parties hereto now wish to amend certain provisions
in the Purchase Agreement.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 11.02 of the
Purchase Agreement, to amend the Purchase Agreement and restate certain
provisions thereof as follows:
1. Defined Terms. Capitalized terms used herein without
definition have the meanings ascribed to them in the Purchase Agreement.
2. Amended Definition of "Termination Date". The definition of
"Termination Date" in the Payment Agreement is hereby replaced in its entirety
with the following:
"Termination Date" means January 1, 1999.
3. Effectiveness. This Agreement, even after due execution by the
parties hereto, will not become effective until (i) each of the Conversion
Letter Agreement No. 2 dated as of December 31, 1997 by and between CTS and CMG
(the "Conversion Letter Agreement No. 2"), Amendment 3 to the Registration
Rights Agreement dated as of December 31, 1997, by and between CMG and CTS,
Amendment 2 to the Investment Banking Services Agreement dated December 31, 1997
by and among CTS, CMG and ContiFinancial Services Corporation, Amendment 3 to
the Standby Agreement dated as of December 31, 1997, among CMG and CTS, Warrant
No. 2 issued by CMG to CTS and dated as of December 31, 1997 has been exchanged
for Warrant No. 1 held by CTS, and Warrant No. 3 issued by CMG to CTS and dated
as of December 31, 1997, have each also been duly executed and delivered by the
parties thereto, and (ii) the 410,581 shares of Class A Preferred Stock have
been conveyed to CTS pursuant to Paragraph 2 of the Conversion Letter Agreement
No. 2.
131
4. Governing Law. This Amendment shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to its rules regarding conflict of laws.
IN WITNESS WHEREOF, the parties have executed this Amendment 2 to
the Purchase and Sale Agreement as of the day and year first above written.
CMG FUNDING CORP.
as the Seller
By
------------------------------------------
Name:
Title:
CONTITRADE SERVICES, L.L.C
as Purchaser
By
------------------------------------------
Name:
Title:
By
------------------------------------------
Name:
Title:
2
132
AMENDMENT 3 TO
PURCHASE AND SALE AGREEMENT
This Amendment 3, dated March 6, 1998 (the "Amendment"), to the
Purchase and Sale Agreement (the "Purchase Agreement"), dated December 17, 1996,
among CMG Funding Corp.,and Continental Mortgage Group, L.C. (now succeeded by
CMG Funding Corp.), as Sellers, and ContiTrade Services L.L.C., as Purchaser.
WHEREAS, the parties hereto have entered into the Purchase
Agreement, as well as a series of other agreements designated as Significant
Documents in the Purchase Agreement; and
WHEREAS, the parties hereto have entered into Amendment No. 1 to
the Purchase Agreement dated as of October 24, 1997; and
WHEREAS, the parties hereto have entered into Amendment No. 2 to
the Purchase Agreement dated as of December 31, 1997; and
WHEREAS, the parties hereto now wish to amend certain provisions
in the Purchase Agreement.
NOW, THEREFORE, in consideration of the promises and agreements
contained herein, the parties hereto agree, pursuant to section 11.02 of the
Purchase Agreement, to amend the Purchase Agreement and restate certain
provisions thereof as follows:
1. Defined Terms. Capitalized terms used herein without
definition have the meanings ascribed to them in the Purchase Agreement.
2. Maximum Available Amount. The definition of "Maximum Available
Amount" as set forth in Article 1 of the Purchase Agreement is amended through
the replacement of the value "$50,000,000" with "$53,000,000."
3. Effectiveness. This Amendment shall be effective after due
execution by the parties hereto, and it will continue to be effective until
April 30, 1998. As of May 1, 1998, the definition of "Maximum Available Amount"
as set forth in Article 1 of the Purchase Agreement shall be "$50,000,000."
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the Laws of the State of New York, without regard
to its rules regarding conflict of laws.
IN WITNESS WHEREOF, the parties have executed this Amendment 1 to the Purchase
and Sale Agreement as of the day and year first above written.
133
CMG FUNDING CORP.
as the Seller
By
--------------------------------------
Name: Xxxx X. Xxx
Title: President
CONTITRADE SERVICES, L.L.C.
as Purchaser
By
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Authorized Signatory
By
--------------------------------------
Name: Xxx X. Xxxxx
Title: Authorized Signatory
2