EXHIBIT 10.16
WAREHOUSE LOAN AGREEMENT
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THIS WAREHOUSE LOAN AGREEMENT ("Agreement") is made and entered into as of
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the 1st day of June, 1996, between HOMEOWNERS MORTGAGE & EQUITY, INC., a
Delaware corporation ("Borrower") d/b/a HOME, INC., and GUARANTY FEDERAL BANK,
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F.S.B., a federal savings bank ("GFB" or "Bank").
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W I T N E S S E T H:
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WHEREAS, Borrower has requested that Bank make a loan (the "Loan") to
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Borrower in the amount of $2,000,000.00 to enable Borrower to originate and/or
purchase conventional home improvement and second lien mortgage loans and hold
such loans in its loan portfolio for up to sixty (60) days prior to purchase by
Investors (hereinafter defined);
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and of the loans and Commitment of Bank hereinafter referred
to, Borrower and Bank agree as follows:
ARTICLE I
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GENERAL TERMS
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Section 1.01 Certain Definitions. As used in this Agreement, the
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following terms shall have the-following meanings, unless the context otherwise
requires:
"Adjusted Tangible Net Worth" shall mean, as of any date, the amount
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equal to (i) the sum of (A) the Net Worth of Borrower as of such date plus
(B) an amount equal to ninety percent (90%) of the Capitalized Servicing of
Borrower as of such date plus (C) an amount equal to ninety percent (90%)
of the Excess Servicing Receivables of Borrower, minus (ii) the value of
all Intangible Assets, Capitalized Servicing, Excess Servicing Receivables
and receivables from Affiliates of Borrower on such date.
"Advance" means a Warehouse Advance.
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"Affiliate" shall mean (i) any Person (hereinafter defined) directly
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or indirectly (through one or more intermediaries) controlling, controlled
by or under common control, with the Person in question, which in the case
of a Person which is a partnership, shall include each of the constituent
partners, whether general or limited partners thereof, or (ii) any Person
who is a director, shareholder, officer or employee of (a) such Person or
(b) any person described in the preceding clause (i). The term "control",
as used in the immediately preceding sentence, means, with respect to a
corporation, any ownership interest which exceeds ten percent (10%) of the
issued and outstanding stock in such corporation, and, with respect to an
entity that is not a corporation, the possession, directly or indirectly,
of any ownership interest which exceeds ten percent (10%) of the ownership
interests in such entity.
"Agency" means FNMA, FHLMC or GNMA.
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"Agency Commitment" means a binding and enforceable agreement on the
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part of (a) FNMA or FHLMC to issue Mortgage Backed Securities in exchange
for Mortgage Loans or (b) GNMA to guaranty Mortgage Backed Securities to be
issued by the Borrower. Agency Commitment includes the FNMA Guide, the
FHLMC Guide or the GNMA Guide, as applicable pursuant to which such Agency
Commitment was issued.
"Agency Custodian" means GFB in its capacity as document custodian on
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behalf of an Agency.
"Agency Forms" means forms promulgated by an Agency for use in
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connection with the delivery of Mortgage Loans and the issuance or guaranty
of a Mortgage Backed Security pursuant to an Agency Commitment.
"Agreement" shall mean this Warehouse Loan Agreement, as the same may
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from time to time be amended or supplemented.
"Appraisal" means a written statement as to the market value of the
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property upon which a Lien is granted pursuant to a Mortgage to secure a
Mortgage Loan.
"Appraisal Laws and Regulations" means laws set forth in Title XI of
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the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and
the Federal Deposit Insurance Corporation Improvement Act of 1991 and
regulations promulgated by the Office of the Comptroller of the Currency
(the "OCC") or any other Governmental Authority in connection therewith
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regarding Appraisals with respect to loans made by Persons regulated by the
OCC.
"Average Advances" shall mean for any period of time, the product of
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the following calculation, (a) the sum of the daily totals of outstanding
Advances, divided by (b) the number of days in such period of time.
"Average Deposit Balances" means for any period of time, the average
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daily amount of free collected balances maintained in non-interest bearing
demand deposit accounts in the name of Borrower or its Affiliates with
Bank, including any escrow or custodial accounts held for third parties,
after deducting float and balances required by Bank under its normal
practices to compensate Bank for the maintenance of such accounts and
taking into consideration all Reserve Requirements applicable to such
accounts. Borrower represents and warrants to Bank that the only deposits
made by such Borrower with Bank shall be deposits which shall not be
subject to any legal requirement or contractual or regulatory provision (a)
requiring payment of interest by any party or depository on such deposits,
or (b) resulting in the classification of such deposits as special deposits
rather than general deposits. Borrower represents and warrants to Bank that
Borrower shall deposit with Bank only those funds for which Bank is an
authorized depository under any material agreement of Borrower and all
applicable laws and regulations.
"Bank" shall have the meaning assigned to such term in the preamble
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hereof.
"Base Rate" means the rate of interest per annum equal to the base or
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prime rate for commercial loans as publicly announced from time to time by
Bank, as the same may vary from time to time upward or downward with (and
effective as of the date of) each announcement, without notice to Borrower
or any guarantor (such rate being set by Bank as a general rate of
reference, taking into account such factors as Bank may deem appropriate,
it being understood that many of its commercial and other loans are priced
in relation to such rate, that it is not necessarily the lowest or best
rate actually charged to any of Bank's customers and that it may make
various commercial or other loans at rates of interest having no
relationship to such rate), subject, however, to the right of Bank, at any
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time and from time to time, to substitute a substantially comparable
reference rate of interest in lieu of the base rate of Bank, upon giving
notice to Borrower.
"Borrower" shall have the meaning assigned to such term in the
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preamble hereof.
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"Borrowing" shall mean a borrowing consisting of an Advance by the
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Bank in connection with a Credit Request.
"Borrowing Base" as of any time of determination means the aggregate
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Collateral Value of all Mortgage Collateral.
"Borrowing Date" with respect to a particular Borrowing shall mean the
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Business Day, identified by Borrower in the related Credit Request, as the
date on which Borrower requests that the Bank make Advances in respect of
such Borrowing.
"Business Day" shall mean any day on which Bank is open for business.
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"Capitalized Servicing" shall mean the servicing owned by Borrower
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which is capitalized on the balance sheet of Borrower in accordance with
GAAP.
"Cash Equivalents" shall mean (i) securities issued or directly and
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fully guaranteed or insured by the United States Government or any agency
or instrumentality thereof which mature within ninety days from the date of
acquisition and (ii) time deposits and certificates of deposit, which
mature within ninety days of the date of acquisition of any domestic
commercial bank having capital and surplus in excess of $200,000,000.00,
which has, or the holding company of which has, a commercial paper rating
of at least A-1 or the equivalent thereof by Standard & Poors Corporation
or P-1 or the equivalent thereof by Xxxxx'x Investors Service, Inc.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Collateral" shall have the meaning given to such term in the Security
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Agreement.
"Collateral Schedule" shall mean a schedule delivered to Bank along
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with a Credit Request pursuant to the terms of Section 4.02 hereof.
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"Collateral Value" shall mean as of any date of determination, with
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respect to Mortgage Loans, an amount equal to ninety-seven percent (97%) of
the least of: (i) the actual out of pocket costs to Borrower of such
Mortgage Collateral (or in the case of any Mortgage Note funded by
Borrower, the original principal amount of such Mortgage Note minus any
discount points paid to Borrower upon the closing of the loan evidenced by
such Mortgage Note), or (ii) the Take-Out Value of such item of Mortgage
Collateral, or (iii) the outstanding principal balance of the Mortgage
Collateral, or (iv) at the option of Bank, the Market Value of such
Mortgage Note; provided, however, that (a) any Mortgage Note shall be
utilized in the computation of Collateral Value for a maximum period of
sixty (60) days, (b) any Mortgage Note which is in default, shall be
excluded from the computation of Collateral Value, (c) the cumulative
Collateral Value at any time attributable to Second Lien Mortgage Loans
other than (i) Conventional Home Improvement Loans, (ii) Conventional
Purchase Money Second Lien Loans and (iii) Conventional Equity Recovery
Loans, shall be limited to $1,000,000.00, and (d) the cumulative Collateral
Value at any time attributable to Mortgage Notes which evidence Wet
Advances shall be limited to $500,000.00.
"Commitment" as to Bank shall mean the obligation of Bank to make
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Advances to Borrower pursuant to Section 2.01 hereof in an aggregate amount
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not to exceed at any one time outstanding the amount of $2,000,000.00.
"Commitment Termination Date" (or maturity date of the Loan) shall
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mean January 31, 1997 or such earlier date on which the Commitment
terminates as provided in this Agreement.
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"Company Loan Number" shall mean the number assigned by the Borrower
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to a Mortgage Loan to facilitate the servicing of such Mortgage Loan by the
Borrower and the delivery, holding and transfer of Mortgage Documents
relevant to such Mortgage Loan pursuant to this Agreement.
"Compliance Certificate" shall mean the Compliance Certificate
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attached hereto as Exhibit "L" incorporated herein by this reference.
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"Conventional Equity Recovery Loan" shall mean a Conventional Loan
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which is secured by a first or second lien mortgage on a non-homestead
second or vacation home and the proceeds are not used for the purchase of
the home.
"Conventional Home Improvement Loan" shall mean a Conventional Loan
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which is secured by a second lien mortgage and the proceeds of which are
utilized solely for construction of improvements to the home encumbered by
such Mortgage.
"Conventional Loan" means a Mortgage Loan (excluding FHA Loans and VA
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Loans) reasonably satisfactory to the Bank, which conforms to the
eligibility requirements established by an Investor pursuant to the
requirements of a Take-out Commitment acceptable to Bank.
"Conventional Purchase Money Second Lien Loan" shall mean a
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Conventional Loan which is secured by a second lien mortgage and the
proceeds of which are utilized to purchase the home encumbered by such
Mortgage.
"Covered Mortgage Loan" means a Conventional Loan, a Conventional Home
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Improvement Loan, a Conventional Purchase Money Second Lien Loan, or
Conventional Equity Recovery Loan, with respect to which Borrower has a
Take-Out Commitment (excluding Take-out Commitments issued by an Affiliate
of Borrower) for the sale of that specific Mortgage Loan as evidenced by
the written approval of Investor as to that specific Mortgage Loan.
"Credit Request" shall mean a Mortgage Warehouse Credit Request for a
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Borrowing in the form of Exhibit "A" attached hereto.
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"Custodian Fees" are defined in Section 11.03 hereof.
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"Debtor Laws" shall mean all applicable liquidation, conservatorship,
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bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar laws from time to time in effect affecting the
rights of creditors generally.
"Default" shall mean any of the events specified in Section 8.01
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hereof, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
"Delivery Commitment Certificate" means an agreement in the form
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attached hereto as Exhibit "B" which Borrower may from time to time deliver
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to the Bank pursuant to the terms hereof.
"Dividends" in respect of any corporation, shall mean:
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(i) Cash distributions or any other distributions on, or in
respect of, any class of capital stock of such
corporation, except for distributions made solely in
shares of stock of the same class; and
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(ii) Any and all funds, cash or other payments made in respect
of the redemption, repurchase or acquisition of such
stock, unless such stock shall be redeemed or acquired
through the exchange of such stock with stock of the same
class.
"Dry Advance" shall mean an Advance which is not a Wet Advance.
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"ERISA" shall mean the Employee Retirement Income Security Act of
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1974, as amended.
"ERISA Affiliate" of Borrower or any Subsidiary of Borrower shall mean
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any trade or business (whether or not incorporated) which, together with
Borrower or such Subsidiary, as the case may be, would be treated as a
single employer under Section 4001 of ERISA.
"Event of Default" shall mean any of the events specified in Section
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8.01 hereof, provided that there has been satisfied any requirement in
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connection with such event for the giving of notice or the lapse of time.
"Excess Servicing Receivables" shall mean the difference in the note
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rate of a Mortgage Loan which has been sold to an Agency or Investor by
Borrower on a servicing retained basis and the rate given with respect to
such Mortgage Loan by Borrower to such Agency or Investor to the extent
such receivable is capitalized on the balance sheet of Borrower in
accordance with GAAP.
"FDIC Percentage" shall mean, on any day, the net assessment rate
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(assessed as a percentage rounded to the next highest .01 of one percent)
which is in effect on such day (under the regulations of the Federal
Deposit Insurance Corporation or any successor) for determining the
assessments paid by Bank to the Federal Deposit Insurance Corporation (or
any successor) for insuring time deposits made in dollars at Bank's
principal offices in Dallas, Texas. Each determination of said percentage
made by Bank shall, in the absence of manifest error, be binding and
conclusive.
"Federal Funds Rate" means, for any period, a fluctuating interest
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rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Bank from three Federal funds brokers of recognized standing selected by
it.
"FHA" shall mean the Federal Housing Administration.
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"FHA Loan" shall mean a Mortgage Loan, payment of which is completely
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insured by the FHA under the National Housing Act or Title V of the Housing
Act of 1949 or with respect to which there is a current, binding and
enforceable commitment for such insurance issued by the FHA.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation, a
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wholly-owned corporate instrumentality of the United States of America
created pursuant to the Emergency House Finance Act of 1970, or its
successor.
"FHLMC Guide" means the FHLMC Sellers' & Servicers' Guide, as amended,
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modified or supplemented from time to time.
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"FHLMC Securities" shall mean participation certificates representing
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undivided interests in mortgage loans purchased by FHLMC pursuant to the
Emergency Home Finance Act of 1970, as amended.
"Fixed Rate" shall mean a fixed rate of interest equal to three and
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three quarters percent (3.75%) per annum.
"FNMA" shall mean the Federal National Mortgage Association, or its
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successor.
"FNMA Guide" means the FNMA Selling Guide and the FNMA Servicing
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Guide, as amended, modified or supplemented from time to time.
"FNMA Securities" shall mean modified pass-through mortgage backed
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certificates guaranteed by FNMA pursuant to the National Housing Act, as
amended.
"FRB" shall mean any Federal Reserve Bank chartered under the laws of
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the United States of America.
"FRB Member" shall mean any national banking association or other
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Person which is authorized to hold and trade Uncertificated Mortgage Backed
Securities in its name for the account of others through an FRB and which
is acceptable to the Bank in its sole discretion.
"Funding Account" shall mean the non-interest bearing demand checking
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account (Account Number 3940000965) established by Borrower with the Bank
to be used for (i) the deposit of proceeds of Advances; and (ii) the
funding of Mortgage Notes by Borrower.
"Generally Accepted Accounting Principles" or "GAAP" shall mean those
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generally accepted accounting principles and practices which are recognized
as such by the American Institute of Certified Public Accountants acting
through its Accounting Principles Board or by the Financial Accounting
Standards Board or through other appropriate boards or committees thereof
and which are consistently applied for all periods after the date hereof,
except that any accounting principle or practice required to be changed by
the said Accounting Principles Board or Financial Accounting Standards
Board (or other appropriate board or committee of the said Boards) in order
to continue as a generally accepted accounting principle or practice may so
be changed.
"GNMA" shall mean the Government National Mortgage Association, a
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wholly-owned corporate instrumentality of the United States of America
within the Department of Housing and Urban Development, or its successor.
"GNMA Guide" means the GNMA I and GNMA II Mortgage Backed Securities
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Guides, GNMA Handbooks 5500.1 and 5500.2, as amended, modified or
supplemented from time to time.
"GNMA Securities" shall mean modified pass-through type mortgage
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backed certificates guaranteed by GNMA pursuant to Section 306(g) of the
National Housing Act, as amended.
"Governmental Authority" means any nation or government, any agency,
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department, state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Governmental Requirement" shall mean any law, statute, code,
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ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other direction
or
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requirement (including, without limitation, any of the foregoing which
relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any (domestic or
foreign) federal, state, county, municipal or other government, quasi-
governmental agency, department, commission, board, court, agency or any
other instrumentality of any of them (including without limitation, FHLMC,
GNMA, FNMA, HUD, VA and FHA), which exercises jurisdiction over Borrower or
any of its Property.
"Guaranty" of any Person shall mean any contract, agreement or
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understanding of such Person pursuant to which such Person guarantees, or
in effect guarantees, any Indebtedness of any other Person (the "Primary
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Obligor") in any manner, whether directly or indirectly, including without
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limitation agreements: (i) to purchase such Indebtedness or any property
constituting security therefor; (ii) to advance or supply funds (A) for the
purchase or payment of such Indebtedness, or (B) to maintain working
capital or other balance sheet conditions, or otherwise to advance or make
available funds for the purchase or payment of such Indebtedness; (iii) to
purchase property, securities or service primarily for the purpose of
assuring the holder of such Indebtedness of the ability of the Primary
Obligor to make payment of the Indebtedness; or (iv) otherwise to assure
the holder of the Indebtedness of the Primary Obligor against loss in
respect thereof; except that "Guaranty" shall not include the endorsement
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in the ordinary course of business of negotiable instruments or documents
for deposit or collection.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
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Person, whether or not represented by bonds, debentures, notes or other
securities, for the repayment of money borrowed, (ii) all deferred
indebtedness of such Person for the payment of the purchase price of
property or assets purchased, (iii) all obligations of such Person under
any lease which are required to be capitalized for balance sheet purposes,
(iv) all Guaranties of such Person, (v) all indebtedness secured by any
Lien existing on property owned by such Person, whether or not the
indebtedness secured thereby shall have been assumed by such Person, (vi)
all unfunded benefit liabilities (within the meaning of 4001(a)(18) of
ERISA) under each Plan maintained by such Person or its Related Persons,
(vii) any obligation of such Person (a) created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person, or (b) under letters of credit,
acceptances or similar obligations issued or created for the account of
such Person.
"Intangible Assets" of any Person shall mean those assets of such
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Person which are (i) deferred assets, (ii) contract rights to service
mortgage loans, patents, copyrights, trademarks, trade names, franchises,
goodwill, experimental expenses, and other similar assets which would be
classified as intangible on a balance sheet of such Person prepared in
accordance with GAAP, (iii) unamortized debt discount and expense and (iv)
assets located, and notes and receivables due from obligors domiciled
outside the United States of America.
"Interest Payment Date" means (i) the tenth day of each month,
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beginning July 10, 1996, and (ii) any day on which past due interest or
principal is owed hereunder and is unpaid.
"Interest Rate Election Notice" shall mean a notice given by Borrower
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in the form attached hereto as Exhibit "M" pursuant to Section 2.04(a).
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"Investor" shall mean any Person (other than an Affiliate of
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Borrower), which may include GFB, approved by Bank in its sole discretion
who agrees to purchase Mortgage Notes pursuant to a Take-Out Commitment.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
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deposit arrangement, encumbrance, lien (whether statutory or otherwise), or
preference, priority or other security agreement or
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preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement
under the uniform commercial code or comparable law of any jurisdiction in
respect of any of the foregoing).
"Loan" shall mean at any time the aggregate unpaid principal amount of
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all Advances.
"Loan Documents" shall mean this Agreement, the Note, the Security
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Agreement and any and all other agreements or instruments now or hereafter
executed and delivered by Borrower or any other Person in connection with,
or as security for the payment or performance of, the Note or this
Agreement, as such agreements may be amended or supplemented from time to
time.
"Market Value" of any Mortgage Note shall mean at any time the market
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value of such Mortgage Note based upon the then most recent posted net
yield furnished by FNMA and published and distributed by Telerate Mortgage
Services; provided, that if such posted net yield is not available from
Telerate Mortgage Services, Bank shall obtain such posted net yield from
FNMA. If the Bank is unable to obtain any yield, bid price or factor from
the source or alternative source called for under this definition, such
yield, price or factor shall be that established by the Bank in good faith.
"Material Adverse Effect" shall mean any event or set of circumstances
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that (i) would have a material adverse effect on the validity or
enforceability of this Agreement, the Note or any Loan Document, (ii) is,
or upon the passage of time or happening of an event will be, material and
adverse to the financial condition or business operations of Borrower, or
(iii) would materially impair the ability of Borrower to fulfill its
obligations under this Agreement, the Note or any Loan Document to which it
is a party.
"Maximum Loan Amount" means, at any time, the sum of $2,000,000.00.
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"Maximum Rate" means at the particular time in question the maximum
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rate of interest which, under applicable law, may then be charged on each
Note. If such maximum rate of interest changes after the date hereof, the
Maximum Rate shall be automatically increased or decreased, as the case may
be, without notice to Borrower from time to time as of the effective time
of each change in such maximum rate. If applicable law ceases to provide
for such a maximum rate of interest, the Maximum Rate shall be a per annum
rate of interest equal to six percent (6.0%) plus the Base Rate from time
to time in effect.
"Mortgage" shall mean a mortgage or deed of trust, on standard forms
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approved by VA, FHA, FNMA or FHLMC or otherwise in form and substance
satisfactory to Bank, granting a perfected first-priority (or second-
priority in the case of a Second Lien Mortgage Loan) lien on residential
real property consisting of land and a single family (1-4 family) dwelling
thereon which is completed and ready for occupancy.
"Mortgage Backed Securities" shall mean FHLMC Securities, FNMA
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Securities and GNMA Securities, whether such securities are issued in
certificated form or book entry form.
"Mortgage Collateral" shall mean all Mortgage Notes and those items
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described in Delivery Commitment Certificates, which Bank has accepted as
Mortgage Collateral hereunder supported by the documentation specified
herein, which meets continuously the following additional conditions: (i)
which at all times constitute a Covered Mortgage Loan, (ii) which are made
payable to the order of Borrower or have been endorsed (without restriction
or limitation) payable to the order of Borrower, (iii) in which the Bank
has been granted and continues to hold a perfected first-priority security
interest, (iv) which are in
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form and substance acceptable to the Bank in its reasonable discretion, (v)
which are secured by Mortgages, (vi) which, together with such Mortgages,
conform in all respects with all the requirements for purchase of such
Mortgage Notes under the Take-Out Commitments and are valid and enforceable
in accordance with their respective terms, (vii) under which there shall be
no default as to the payment of any installment of principal or interest,
or other default, and foreclosure or other similar proceedings shall not
have been commenced with respect thereto, (viii) there shall be no pending
claim for any credits, allowance or adjustment with respect thereto, (ix)
each Mortgage Loan is delivered to Bank not more than five (5) Business
Days after the date of funding of such Mortgage Loan, (x) if required by
applicable Appraisal Laws and Regulations, is covered by an Appraisal which
complies with all applicable Appraisal Laws and Regulations and (xi) which
are one of the following, a Conventional Equity Recovery Loan, a
Conventional Home Improvement Loan, a Conventional Purchase Money Second
Lien Loan or a Second Lien Mortgage Loan.
"Mortgage Documents" means, for any Mortgage Loan, the Principle
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Documents and the Other Mortgage Documents relevant thereto.
"Mortgage File" means the Mortgage File Summary and the Principle
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Mortgage Documents relevant to a Mortgage Loan.
"Mortgage File Summary" means a summary setting forth the pertinent
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information for the Principle Mortgage Documents relevant to a Mortgage
Loan.
"Mortgage Loan" means a loan represented by a Mortgage Note which
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bears interest at either a fixed rate or an adjustable rate and which is
collateralized or secured by a Mortgage; provided, that in no event shall
Mortgage Note mean a promissory note evidencing a commercial loan.
"Mortgage Note" shall mean a promissory note evidencing a Conventional
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Loan, Second Lien Mortgage Loan, Conventional Equity Recovery Loan,
Conventional Home Improvement Loan, or Conventional Purchase Money Second
Lien Loan.
"Net Collateral Deficit" means, at any time, the amount, if any, by
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which the aggregate Collateral Value of all Mortgage Collateral is exceeded
by the outstanding principal balance of the Loan.
"Net Collateral Surplus" means, at any time, the amount, if any, by
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which the aggregate Collateral Value of all Mortgage Collateral exceeds the
outstanding principal balance of the Loan.
"Net Income" means, for any period of time, the net income appearing
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on an income statement of such Person prepared as of the end of such
calendar quarter in accordance with GAAP.
"Net Worth" of any Person shall mean, as of any date, the total
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shareholder's equity (including capital stock, additional paid-in capital
and retained earnings after deducting treasury stock) which would appear on
a balance sheet of such Person prepared as of such date in accordance with
GAAP.
"Note" means the Warehouse Promissory Note delivered by the Borrower
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to the Bank pursuant to Section 2.02 in the form attached hereto as Exhibit
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"C" (together with all renewals, extensions and other modifications
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thereof), evidencing the obligation of Borrower to repay Advances made
hereunder and all other Obligations.
"Obligations" shall mean all present and future indebtedness,
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obligations, and liabilities of Borrower to the Bank, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this
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Agreement or any other Loan Document, and all interest accruing thereon,
and reasonable attorneys' fees incurred in the drafting, negotiation,
enforcement or collection thereof, regardless of whether such indebtedness,
obligations, and liabilities are direct, indirect, fixed, contingent,
joint, several or joint and several.
"OCC" means the Office of the Comptroller of the Comptroller of the
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Currency of the United States of America and any Governmental Authority
succeeding to the functions of such office.
"Operating Account" means the non-interest bearing demand deposit
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account (Account Number 3206017075) established by the Borrower with the
Bank which account, subject to the provisions of Section 3.06, is subject
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to the sole dominion and control of the Borrower.
"Other Mortgage Documents" shall mean the Mortgage Loan documents
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(other than the Principle Mortgage Documents) including but not limited to
those documents listed in Section 3.02 (other than the Principle Mortgage
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Documents).
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
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successor to any or all of the Pension Benefit Guaranty Corporation's
functions under ERISA.
"Permitted Liens" shall mean: (i) Liens granted to the Bank to secure
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the Obligations, or (ii) Liens for taxes, assessments or other governmental
charges either not yet due or being diligently contested in good faith (and
for the payment of which adequate reserves have been established) by
appropriate proceedings so long as such proceedings do not involve any
material danger of the sale, forfeiture, loss or loss of use of the
affected Property.
"Person" shall mean any individual, corporation, partnership, joint
------
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any employee benefit plan or other plan which is
----
subject to the provisions of Title IV of ERISA or to the minimum funding
standards under Section 412 of the Code and which is maintained for
employees of Borrower or any Subsidiary of Borrower or any of their
respective ERISA Affiliates.
"Principle Mortgage Documents" shall mean those documents listed in
----------------------------
Section 3.02(a), (b) and (c).
----------------------------
"Prohibited Transaction" shall mean any transaction described in
----------------------
Section 406 of ERISA which is not exempt under Section 408 of ERISA, and
any transaction described in Section 4975(c) of the Code which is not
exempt under Section 4975(c)(2) or 4975(d) of the Code, or by the
transitional rules of Sections 414(c) of ERISA.
"Property" shall mean any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"PTC" shall mean the Participants Trust Company.
---
"PTC Member" shall mean any Person which is authorized to hold and
----------
trade Uncertificated GNMA Securities in its name for the account of others
through the PTC and which is acceptable to the Bank in its sole discretion.
-10-
"Regulation U" shall mean Regulation U promulgated by the Board of
------------
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other
regulation hereafter promulgated by said Board to replace the prior
Regulation U and having substantially the same function.
"Regulation X" shall mean Regulation X promulgated by the Board of
------------
Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any other
regulation hereafter promulgated by said Board to replace the prior
Regulation X and having substantially the same function.
"Related Person" means the Borrower and any of Borrower's Affiliates.
--------------
"Reportable Event" shall mean a reportable event described in Section
----------------
4043 of ERISA or the regulations thereunder for which the 30-day notice is
not waived by such regulations, a withdrawal from a Plan described in
Section 4063 or 4064 of ERISA, or a cessation of operations described in
Section 4062(e) of ERISA.
"Requirement of Law" as to any Person shall mean the articles of
------------------
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, statute, code, ordinance, order, rule,
regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other determination, direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational,
safety and health standards or controls) of any arbitrator, court or other
governmental authority, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its
Property is subject.
"Reserve Requirements" means (a) the maximum aggregate reserve
--------------------
requirement imposed on the Bank (including all basic, supplemental,
marginal and other reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements) that is
imposed on non-personal time deposits of $100,000 or more, and (b) the net
assessment rate per annum payable to the Federal Deposit Insurance
Corporation (or any successor) for the insurance of domestic deposits of
Bank during the calendar year in which such assessment rate is determined,
as reasonably estimated by Bank.
"Second Lien Mortgage Loan" shall mean a Mortgage Loan which qualifies
-------------------------
qunder the definition of Mortgage Collateral except for the fact that it is
qsecured by a Mortgage which grants a perfected second-priority lien on
------
residential real property consisting of land and a single family (1-4
family) dwelling thereon which is completed and ready for occupancy. Such
Mortgage Loan shall be a Covered Mortgage Loan.
"Securities Credit Transaction Regulation" shall mean Regulations G,
----------------------------------------
U and X issued by the Board of Governors of the Federal Reserve System as
in effect from time to time.
"Security Agreement" shall mean that certain Security Agreement (and
------------------
Assignment of Rights) dated of even date herewith executed by Borrower for
the benefit of the Bank and all renewals, modifications, replacements or
supplements to such agreement.
"Servicing Agreements" shall mean all agreements relating to Servicing
--------------------
Rights owned by Borrower, between Borrower and Persons other than Borrower
pursuant to which Borrower undertakes to service loans evidenced by
Mortgage Notes and pools of loans evidenced by Mortgage Notes owned,
insured or guaranteed by such Persons.
"Servicing Records" shall mean all contracts and other documents,
-----------------
books, records and other information (including without limitation,
computer programs, tapes, discs, punch cards, data processing software and
related property and rights) maintained with respect to the Servicing
Rights.
-11-
"Servicing Rights" shall mean all of Borrower's right, title and
----------------
interest in and under the Servicing Agreements, including, without
limitation, the rights of Borrower to income and reimbursement thereunder.
"Settlement Account" shall mean the non-interest bearing demand
------------------
checking account (Account No. 3940000973) established by Borrower with the
Bank to be used for (i) the deposit of proceeds from the sale of Mortgage
Collateral and (ii) the payment of the Obligations.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association, partnership, joint venture, or other business or corporate
entity, enterprise or organization which is directly or indirectly (through
one or more intermediaries) controlled by or owned in any percentage by
such Person.
"Take-Out Commitment" shall mean a current, valid, binding and
-------------------
enforceable commitment to purchase that specific Mortgage Note which
constitutes Mortgage Collateral (evidenced by the written approval of that
Mortgage Loan from the Investor) within a period of not more than sixty
(60) days from the date of such Mortgage Note related thereto in an amount,
form and substance satisfactory to Bank in its reasonable discretion,
issued by an Investor and with respect to which there shall be no condition
which cannot be reasonably anticipated to be satisfied or complied with
prior to its expiration.
"Take-Out Price" means, with respect to each Mortgage Loan, the
--------------
Take-Out Commitment price, expressed as a percentage. In the event that the
price set forth in a Take-Out Commitment is stated as a yield and not as a
percentage of par, a yield so stated shall be converted to a percentage
price by the use of the "Net Yield Tables for GNMA Mortgage Backed
Securities" published by Financial Publishing Company or the "Mortgage
Yield Conversion Tables" published by FNMA, as applicable and as agreed
upon by the Bank.
"Take-Out Value" of a Mortgage Loan means the lesser of (a) the amount
--------------
at which an Investor has committed to purchase such Mortgage Loan pursuant
to a Take-Out Commitment or, if such Take-Out Commitment relates to a
security to be backed by a pool of Mortgage Loans which includes such
Mortgage Loan, the amount equal to (i) the commitment price for such
security times (ii) the fraction of the aggregate outstanding principal
balance of such pool of Mortgage Loans which is attributable to such
Mortgage Loan and (b) the Take-Out Price of such Mortgage Loan.
"Tangible Net Worth" of Borrower shall mean at any time, as determined
------------------
by GAAP, an amount equal to the sum of (i) Borrower's Net Worth, minus (ii)
the value of all assets of Borrower that would be characterized as
Intangible Assets.
"Total Liabilities" of Borrower shall mean, as of any date, all
-----------------
amounts which would be included as liabilities on a balance sheet of
Borrower as of such date prepared in accordance with GAAP.
"UCC" shall mean the Uniform Commercial Code as adopted in the State
---
of Texas, TEX. BUS. & COM. CODE XXX. (S)1.101 ET SEQ. (Xxxxxx 1968 and
Supp. 1991), as the same may hereafter be amended.
"Uncertificated Mortgage Backed Security" shall mean a Mortgage Backed
---------------------------------------
Security which is in uncertificated form, as such term is used in the UCC.
"VA Loan" shall mean a Mortgage Loan covering real estate improved by
-------
single family dwellings, payment of which is partially or completely
guaranteed by the Veteran's Administration (the "VA") under the
--
Serviceman's Readjustment Act of 1944 or Chapter 37 of Title 38 of the
United States Code or with
-12-
respect to which there is a current binding and enforceable commitment for
such a guaranty issued by the VA.
"Voting Shares" of any corporation shall mean shares of any class or
-------------
classes (however designated) having ordinary voting power for the election
of at least a majority of the board of directors (or other governing
bodies) of such corporation, other than shares having such power only by
reason of the happening of a contingency.
"Warehouse Advance" means an Advance by the Bank to the Borrower
-----------------
pursuant to Section 2.01(b).
---------------
"Warehouse Promissory Note" means the promissory note delivered by the
-------------------------
Borrower to the Bank pursuant to the first sentence of Section 2.02 in the
------------
form attached hereto as Exhibit "C" and all renewals, extensions,
-----------
modifications and rearrangements thereof."
"Wet Advance" shall mean an Advance under the provisions of Section
----------- -------
2.03(b) hereof.
-------
Section 1.02 Other Definitional Provisions.
-----------------------------
(i) All meanings defined in this Agreement shall have the above-
defined meanings when used in the Note or any Loan Document, certificate,
report or other document made or delivered pursuant to this Agreement,
unless the context therein shall otherwise require. Defined terms not
specifically defined in the preceding provisions shall have the meaning
specified in the Security Agreement.
(ii) Defined terms used herein in the singular shall import the
plural and vice versa.
---- -----
(iii) The words "hereof," "herein," "hereunder" and similar terms
when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
(iv) Section, schedule and exhibit references herein are references
to sections, schedules and exhibits to this Agreement unless otherwise
specified.
(v) As used herein, in the Note, or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in
this Agreement or otherwise shall have the respective meanings given to
them under GAAP.
(vi) Unless otherwise specified herein, all times set forth herein
are Dallas, Texas time.
ARTICLE II
----------
AMOUNT AND TERMS OF CREDITS
---------------------------
Section 2.01. Commitment.
----------
(a) Advances in General. Subject to the terms and conditions
-------------------
contained in this Agreement and applicable laws and regulations and so long
as no Default or Event of Default has occurred and is continuing, the Bank
agrees to make Warehouse Advances according to the Commitment, to or for
the
-13-
account of the Borrower on a revolving credit basis from time to time on
any Business Day from the date of this Agreement through the earlier to
occur of the Commitment Termination Date in an amount not to exceed at any
one time outstanding the Commitment of the Bank.
(b) Warehouse Advances. Each Borrowing under this Section 2.01(b)
------------------ ---------------
shall be in an aggregate amount of not less than $2,500.00 and shall
consist of Warehouse Advances made on the Borrowing Date by the Bank
according to its Commitment; provided, however, that: (i) the aggregate
amount of Warehouse Advances at any time outstanding shall not exceed the
Commitment; and (ii) the aggregate amount of Warehouse Advances outstanding
shall not at any time exceed the Borrowing Base. Within the limits of the
Bank's Commitment and subject to the other terms and conditions hereof, the
Borrower may borrow, repay pursuant to Section 2.06 and reborrow under this
------------
Section 2.01(b).
---------------
Section 2.02. Note. The Warehouse Advances made by Bank pursuant to
----
Section 2.01(b) shall be evidenced by a Warehouse Promissory Note payable to
---------------
Bank in the principal amount of the Commitment of Bank. The Note shall be
payable and bear interest as set forth therein.
Section 2.03. Notice and Manner of Obtaining Borrowings; Wet Advances.
-------------------------------------------------------
(a) Borrowings. Borrower shall give the Bank (i) prior to
----------
9:00 p.m. (Dallas, Texas time) on the Business Day prior to a Borrowing
Date, telephonic or telecopy notice of the amount of such requested
Borrowing and (ii) written notice by means of a Credit Request sent to Bank
by telecopy or Federal Express and received by Bank prior to 10:30 a.m.
(Dallas, Texas time) on the Borrowing Date in accordance with the
provisions of Section 4.02 hereof. The Bank will make such funds available
------------
to the Borrower in accordance with Section 3.06.
------------
(b) Wet Advances. Borrower may from time to time request that
------------
certain Advances be funded prior to the delivery to the Bank of the items
of Mortgage Collateral described in Sections 3.02(a), (b) and (c) (such
-----------------------------
Advances being hereinafter referred to individually as a "Wet Advance" and
-----------
collectively as "Wet Advances"). The Bank hereby agrees to make Warehouse
------------
Advances to fund such Wet Advances in accordance with Section 2.03(a)
---------------
subject to the terms and conditions of this Agreement, including, without
limitation, the following terms and conditions:
(i) (A) Simultaneously with the delivery to Bank of a Credit
Request requesting a Wet Advance, Borrower shall deliver to Bank each of
the following:
(1) a true and correct copy of a Collateral Schedule
(attached as Schedule I to the Credit Request) identifying the
----------
Mortgage Notes offered as collateral pursuant to such Credit
Request.
(B) No later than 10:30 a.m. (Dallas, Texas time) on the
Borrowing Date, Borrower shall cause to be delivered directly to Bank
via Federal Express by the title company (which shall not be an
Affiliate of Borrower) closing each Mortgage Note funded by such Wet
Advance each of the following:
(1) a true and complete photocopy of each such proposed
Mortgage Note, although the same has not yet been signed by the
maker thereof;
(2) a true and complete photocopy of the proposed
Mortgage related to each such Mortgage Note, although the same
has not yet been signed by the grantor thereof;
-14-
(3) a true and complete photocopy (or if requested by Bank,
an original) of the executed Take-Out Commitment relating to each
such Mortgage Note;
(4) an original assignment (leaving the name of the
assignee blank) executed by Borrower for each such Mortgage Note
and the Mortgage securing such Mortgage Note, in recordable form,
and otherwise in form satisfactory to Bank;
(5) (a) a true and complete photocopy of the closing
instructions executed by Borrower and the title company closing
the transaction (which shall not be an Affiliate of Borrower)
evidenced by each such Mortgage Note and (b) copies of the
Federal Truth in Lending Act and Real Estate Settlement
Procedures Act disclosure statements required to be provided to
the maker of such Mortgage Note; and
(6) a Delivery Commitment Certificate in the form attached
hereto as Exhibit "B".
-----------
(ii) No Wet Advance shall be made if, after the making of
such Wet Advance, the aggregate principal amount of all Wet Advances
outstanding would exceed $500,000.00;
(iii) Borrower shall, and does hereby, grant to Bank pursuant
to the Security Agreement, a perfected, first priority security
interest in the Mortgage Notes identified in the Credit Request
delivered to Bank in connection with such Wet Advance; and
(iv) Borrower shall cause the title company closing the
transaction evidenced by each such Mortgage Note to deliver to the
Bank, not later than five (5) Business Days after the date of each Wet
Advance, the original each of such Mortgage Notes, endorsed in blank
and the original filed copy, or a true and correct copy of the
original filed copy acceptable to the Bank, of the Mortgage relating
to each such Mortgage Note, certified by the title company as being
true, correct and complete, as described in Sections 3.02(a) and (b),
------------------------
with respect to such Wet Advance.
Section 2.04. Interest. (a) On or before 5:00 p.m. (Dallas, Texas time)
--------
on that date which is four (4) Business Days prior to the first day of each
calendar month (the "Applicable Month") during the term of this Loan, Borrower
----------------
shall transmit to Bank by telecopy received by Bank prior to 5:00 p.m. (Dallas,
Texas time) ("Minimum Notice Period") on the next Business Day ("Interest
--------------------- --------
Election Date"), an Interest Rate Election Notice in the form attached hereto as
-------------
Exhibit "M". By such notice Borrower shall inform Bank of its election that the
-----------
Applicable Month be considered a Base Rate Month (herein so called) or a Federal
Funds Rate Month (herein so called). In the event that Borrower elects a Base
Rate Month, then commencing with the first day of the Applicable Month the Base
Rate shall apply during such calendar month. In the event that Borrower chooses
a Federal Funds Rate Month, then the Federal Funds Rate shall apply during such
calendar month. To the extent that Borrower has not made an effective election
under and in accordance with this subparagraph, the Base Rate shall apply
pursuant to the provisions contained herein.
(b) The Bank shall calculate the interest owed by Borrower under its Note
and submit to Borrower on the fifth day of each calendar month, Bank's invoice
to Borrower with respect to interest, principal and any fees and expenses owed
by Borrower to Bank for the preceding calendar month.
(c) Prior to a Default, interest shall accrue on the outstanding principal
balance of the Note as follows:
-15-
(1) In a Federal Funds Rate Month, interest shall accrue at the Fixed
Rate for such month; provided, however, that to the extent that
Bank's Average Advances exceeds the Bank's Average Deposit
Balance in any calendar month, as determined as of the last day
of such calendar month, the amount of such excess shall bear
interest for such month at a rate per annum equal to the lesser
of (a) the sum of the Federal Funds Rate and three and three
quarters percent (3.75%) or (b) the Maximum Rate.
(2) In a Base Rate Month, interest shall accrue at the Fixed Rate for
such month; provided, however, that to the extent that Bank's
Average Advances exceeds Bank's Average Deposit Balance in any
calendar month, as determined as of the last day of such calendar
month, the amount of such excess shall bear interest for such
month at the rate per annum equal to the lesser of (a) the sum of
the Base Rate and one and three quarters percent (1.75%) or (b)
the Maximum Rate.
In the event that at any time any of the rates set forth in this
subparagraph (c) shall exceed the Maximum Rate, thereby causing the interest on
----------------
such portion of the principal balance of a Note to be limited to the Maximum
Rate, then any subsequent reduction in any interest rate shall not reduce the
rate of interest below the Maximum Rate until the total amount of interest
accrued on the Note equals the amount of interest which would have accrued on
the Note if the rate so limited had at all times been in effect.
(d) After a Default, interest shall accrue on the outstanding principal
balance of a Note at a rate per annum equal to the lesser of (x) the Base Rate
plus 6%, or (y) the Maximum Rate. All calculations of interest shall be on the
basis of a 360 day year, except that calculations of interest based on the
Maximum Rate shall be on the basis of a 365/366 day year, as applicable.
Section 2.05 Net Collateral Deficit. At any time that a Net Collateral
----------------------
Deficit is found to exist, Borrower shall within three (3) Business Days
eliminate such Net Collateral Deficit either (a) by delivering to the Bank
Mortgage Collateral, the Collateral Value of which is equal to or greater than
the amount of such Net Collateral Deficit, or (b) by paying to the Bank, the
amount of such deficit in accordance with Section 2.06 hereof.
------------
Section 2.06 (a) Payment Procedure. All payments of the principal of and
-----------------
interest upon the Note shall be paid by Borrower to Bank before 12:00 noon
(Dallas, Texas time) in federal or other immediately available funds on the
respective dates when due at Bank's principal office at 0000 Xxxxxxx Xxxxxx,
Xxxxxx, Xxxxx 00000, in each case to be applied in accordance with the terms of
this Agreement. Funds received after 12:00 noon (Dallas, Texas time) shall be
treated for all purposes as having been received by Bank on the Business Day
next following the date of receipt of such funds.
(b) Order and Notice of Payments. Contemporaneously with the making of
----------------------------
any payments in respect of the Advances, the Borrower shall give the Bank
telecopy notice of the amount being repaid. If no Default or Event of Default
exists, all payments shall be applied to principal or interest on the Note, or
to fees and other amounts payable by the Borrower hereunder, as the Borrower may
direct. At any time when a Default or Event of Default exists, all payments in
respect of the Obligations shall be applied first, to all costs, expenses, fees
-----
and reasonable attorneys' fees incurred by, and Custodian Fees due to, Bank
arising out of or in connection with this Agreement, the Note or the other Loan
Documents, including, without limitation, to the extent not previously paid, all
costs, expenses, fees and reasonable attorneys' fees arising out of or in
connection with the negotiation, preparation and enforcement of such documents;
second, to the payment of all expenses due and payable under Section 6.05;
------ ------------
third, to the payment of fees due and payable under Section 11.02 and 11.03;
----- ------------- -----
fourth, to the payment of interest then due and payable under the Note; and
------
fifth, to the payment of principal of the Note.
-----
-16-
Section 2.07 Business Days. If the date for any payment hereunder falls on
-------------
a day which is not a Business Day, then for all purposes of the Note and this
Agreement such payment shall be deemed to have fallen on the next following
Business Day, and such extension of time shall be included in the computation of
payments of interest.
Section 2.08 Yield Protection. If at any time after the date hereof, and
----------------
from time to time, the Bank reasonably determines that the adoption or
modification of any applicable law, rule or regulation regarding taxation,
Bank's required levels of reserves, deposits, insurance or capital (including
any allocation of capital requirements or conditions), or similar requirements,
or any interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation,
administration or compliance of Bank with any of such requirements, has or would
have the effect of (a) increasing Bank's costs relating to the obligation
hereunder, or (b) reducing the yield or rate of return of Bank on the obligation
hereunder, to a level below that which Bank could have achieved but for the
adoption or modification of any such requirements, the Borrower shall, within
thirty (30) days of any request by Bank, either (i) agree in writing to pay to
Bank such additional amounts as Bank reasonably determines is necessary to
maintain the yield, rate of return and/or level of Bank's costs, which Bank
would have achieved but for the above-referenced adoption or modification of
applicable law, rule or regulation or (ii) pay in full all sums owed hereunder
including all principal, interest, expenses and fees and deliver to the Bank
notification that the Bank shall have no further obligation to make Advances
hereunder and that the Bank shall have no further obligations to Borrower
hereunder. No failure by Bank to immediately demand payment of any additional
amounts payable hereunder shall constitute a waiver of Bank's right to demand
payment of such amounts at any subsequent time. Such additional amounts shall
not be charged retroactively, that is all such additional amounts shall only be
charged for that period of time following the thirty (30) day notice period
required in this paragraph. Nothing herein contained shall be construed or so
operate as to require Borrower to pay any interest, fees, costs or charges
greater than is permitted by applicable law.
ARTICLE III
-----------
COLLATERAL
----------
Section 3.01 Collateral. To secure the payment of the Note and the
----------
performance by Borrower of its Obligations hereunder and under the Loan
Documents, Borrower has granted to the Bank, pursuant to the Security Agreement
a first and prior security interest in and to the Collateral, and shall execute
all documents and instruments, and perform all other acts reasonably deemed
necessary by Bank, to perfect and maintain the security interest and priority of
Bank, in and to such Collateral. The Borrower hereby confirms such grant in all
respects and acknowledges and agrees that:
(a) This Agreement constitutes the "Loan Agreement" as defined in the
Security Agreement; and
(b) the Obligations (as defined herein) constitute "obligations"
secured by the security interests granted under the Security Agreement.
From time to time the Borrower may grant the Bank, a security interest in
additional collateral pursuant to this Agreement and the Security Agreement.
The Borrower hereby agrees to execute all documents and instruments, and perform
all other acts reasonably deemed necessary by Bank, to perfect the security
interest of the Bank in and to the collateral identified in the granting clause
of the Security Agreement.
Section 3.02 Delivery to Bank. Simultaneously with delivery to Bank of a
----------------
Credit Request and Collateral Schedule identifying the Mortgage Notes offered as
security for the Obligations and setting forth the Collateral Value
-17-
attributed to each such item at the time of delivery thereof, as required by
Section 4.02 hereof, Borrower shall deliver to Bank the following items with
------------
respect to the Mortgage Notes thereby offered as security:
(a) the original of each Mortgage Note referenced in such Collateral
Schedule, endorsed as follows:
"Pay to the order of ____________________, ______________________.
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation d/b/a Home, Inc.
By: _______________________
Name:___________________
Title:__________________"
(b) the original filed copy, or a copy of the original filed copy,
certified by the title company that insured title to the mortgaged
property, as being true and complete, of the Mortgage relating to each
Mortgage Note;
(c) an original assignment (leaving the name of the assignee blank)
executed by Borrower, for each Mortgage Note and the Mortgage securing such
Mortgage Note, in recordable form, and otherwise in form satisfactory to
the Bank [and if the Borrower is not the named payee on the face of such
Mortgage Note, copies (bearing evidence of recordation or certification by
the Borrower that such intervening assignment has been sent to the
appropriate Governmental Authority for recordation) of all intervening
assignments of such Mortgage Note and the related Mortgage];
(d) Evidence satisfactory to Bank that all Mortgage Loans pledged as
Collateral hereunder including those listed on the Collateral Schedule are
Covered Mortgage Loans and no later than the Business Day following the
date of the Credit Request, Borrower shall deliver to Bank a true and
complete photocopy (or if requested by Bank, an original) of the executed
Take-Out Commitment relating to such Mortgage Note; and
(e) a true and complete photocopy of the closing instructions
executed by Borrower and the title company closing the transaction (which
shall not be an Affiliate of Borrower) evidenced by such Mortgage Note,
along with a copy of the title commitment, borrower's closing statement
showing among other items payment of the title insurance policy premium and
evidence of compliance with the Federal Truth in Lending Act and the Real
Estate Settlement Procedures Act;
provided, however, that if the requested Borrowing is a Wet Advance, the items
specified in Sections 3.02(a) through 3.02(e) shall be delivered by Borrower to
-----------------------
the Bank at the time specified in Section 2.03 (b). Borrower shall hold in
----------------
trust for the Bank, with respect to each Mortgage Note, a mortgagee policy of
title insurance insuring Borrower's perfected, first-priority Lien (and in the
case of a Second Lien Mortgage Loan, a second-priority lien) created by the
Mortgage securing such Mortgage Note, the original insurance policies referred
to in Section 6.06 hereof, if required by Appraisal Laws and Regulations, an
------------
Appraisal complying with the Appraisal Laws and Regulations and all other
original documents executed in connection with such Mortgage Note and not
delivered to the Bank, and shall specifically identify such items in the Credit
Request and upon request of the Bank shall immediately deliver such items to the
Bank. The Bank in its reasonable discretion may reject as unsatisfactory any
items so delivered and in such event such Mortgage Loans shall have a Collateral
Value of zero.
-18-
Section 3.03 Power of Attorney. Borrower hereby irrevocably appoints the
-----------------
Bank its attorney in fact, with full power of substitution, for and on behalf
and in the name of Borrower, to (i) endorse and deliver to any Person any check,
instrument or other paper coming into the Bank's possession and representing
payment made in respect of any Mortgage Note delivered hereunder as Mortgage
Collateral or in respect of any other collateral or Take-Out Commitment; (ii)
prepare, complete, execute, deliver and record any assignment of any Mortgage to
the Bank or to any other Person; (iii) endorse and deliver any Mortgage Note
delivered hereunder as Mortgage Collateral, and to do every other thing
necessary or desirable to effect transfer of all or any part of the Mortgage
Collateral to the Bank or to any other Person; (iv) take all necessary and
appropriate action with respect to all Obligations and the Mortgage Collateral
to be delivered to the Bank or held by Borrower in trust for the Bank; (v)
commence, prosecute, settle, discontinue, defend, or otherwise dispose of any
claim relating to any Take-Out Commitment or any part of the Mortgage
Collateral; and (vi) sign Borrower's name wherever appropriate to effect the
performance of this Agreement. This section shall be liberally, not
restrictively, construed so as to give the greatest latitude to Bank's power, as
attorney-in-fact, to collect, sell, and deliver any of the Mortgage Collateral
and all other documents relating thereto. The powers and authorities herein
conferred on the Bank may be exercised by the Bank through any Person who, at
the time of the execution of a particular instrument, is an officer of the Bank.
The power of attorney conferred by this Section 3.03 shall be effective upon the
------------
occurrence of an Event of Default and is grounds for a valuable consideration
and is coupled with an interest and irrevocable so long as the Obligations, or
any part thereof, shall remain unpaid or the Commitment is outstanding. All
Persons dealing with the Bank, or any officer thereof acting pursuant hereto, or
any substitute, shall be fully protected in treating the powers and authorities
conferred by this Section 3.03 as existing and continuing in full force and
------------
effect until advised by the Bank that the Obligations have been fully and
finally paid and satisfied and the Commitment has been terminated.
Section 3.04 Redemption of Mortgage Collateral.
---------------------------------
(a) Generally. So long as no Default or Event of Default shall be in
---------
existence, the Borrower may obtain the release of Bank's security interest
in all or any part of the Mortgage Collateral at any time, and from time to
time, by paying to the Bank as a repayment hereunder, the Collateral Value
of the Mortgage Collateral to be so released and curing any Net Collateral
Deficit which may be occasioned thereby in accordance with Section 2.05.
------------
Any such release shall be evidenced by the return to Borrower of the
Mortgage Note and all other Mortgage Loan documents relating to such
Mortgage Note in the possession of Bank evidencing the Mortgage Collateral
to be released with Bank's accompanying written acknowledgment that such
Mortgage Collateral is released from the Bank's security interest.
(b) Net Collateral Surplus. In the event of the existence of a Net
----------------------
Collateral Surplus and so long as no Default or Event of Default shall be
in existence, Borrower may from time to time request and obtain from the
Bank the release of the Bank's security interest in such of the Mortgage
Collateral as constitutes a Net Collateral Surplus. Any such release shall
be evidenced by the return to Borrower of the Mortgage Note and all other
Mortgage Loan documents relating to such Mortgage Note in the possession of
Bank evidencing the Mortgage Collateral to be released with the Bank's
accompanying written acknowledgment that such Mortgage Collateral is
released from the Bank's security interest.
(c) Redemption Pursuant to Sale. Borrower may from time to time sell
---------------------------
Mortgage Collateral pursuant to a Take-Out Commitment or otherwise. Upon
the receipt by the Bank of a request from Borrower, and so long as no
Default or Event of Default shall be in existence:
(i) The Bank shall deliver to the Investor (under Bank's
Bailee Letter in the form attached hereto as Exhibit "E") the items of
-----------
Mortgage Collateral being sold which are held by Bank pursuant to
Section 3.02 hereof, with the release of Bank's security interest in
------------
such items being conditioned upon timely payment to Bank of the amount
described in Subsection 3.04(c)(iii);
-----------------------
-19-
(ii) Borrower shall, as agent for the Bank, deliver to such
Investor the items held by Borrower pursuant to Section 3.02 hereof;
------------
and
(iii) Within a period of time acceptable to Bank, but in no
event more than ten (10) days after the delivery by Bank to such
Investor of the items of Mortgage Collateral described in Subsection
----------
3.04(c)(i), Borrower shall cause the Investor to pay directly to the
----------
Bank, as a repayment hereunder an amount equal to the Collateral Value
of such Mortgage Collateral (such Collateral Value being determined as
of the date such Mortgage Collateral was first delivered by Borrower
to the Bank).
Notwithstanding the foregoing, prior to the delivery to an Investor of
Mortgage Collateral as provided in Section 3.04(c)(i) Bank in its sole
------------------
discretion may require (i) receipt of an amount equal to the Collateral Value of
such Mortgage Collateral, or (ii) a written agreement executed by the applicable
Investor as to such matters as Bank may require relating to (A) Bank's
continuing security interest in the Mortgage Collateral to be delivered, and (B)
payment of the Collateral Value of such Mortgage Collateral upon delivery.
(d) Continuation of Lien. The security interest granted to the Bank
--------------------
in all Mortgage Collateral transmitted pursuant to Subsection 3.04(c)
------------------
shall continue in effect until such time as the Bank shall have received
the payment described in Subsection 3.04(c)(iii).
-----------------------
(e) Application of Proceeds; No Duty. Subject to the next sentence
--------------------------------
of this subsection 3.04(e), the Bank shall be under no duty at any time to
------------------
credit Borrower for any amounts due from any Investor in respect of any
purchase of any Mortgage Collateral contemplated under Section 3.04(c)
---------------
above, until the Bank has actually received immediately available funds for
such Mortgage Collateral in the amount required pursuant to Subsection
----------
3.04(c)(iii). Any funds so received will be treated as payments under and
------------
processed and applied in accordance with Section 2.06. The Bank shall be
------------
under no duty at any time to collect any amounts or otherwise enforce any
obligations due from any Investor in respect of any such purchase.
(f) Mandatory Redemption of Mortgage Collateral. Borrower shall,
-------------------------------------------
within three (3) Business Days after an event requiring mandatory
redemption of Mortgage Collateral and the reasonable request of the Bank at
any time during the term hereof, (i) pay to the Bank in immediately
available funds the Collateral Value of any Mortgage Collateral designated
by the Bank (except to the extent of any Net Collateral Surplus), or (ii)
deliver to the Bank other Mortgage Collateral in substitution for such
designated Mortgage Collateral, the Collateral Value of which substituted
Mortgage Collateral is equal to or greater than the Collateral Value of the
Mortgage Collateral being replaced.
Events requiring mandatory redemption of Mortgage Collateral are as
follows:
(1) Within the earlier to occur of (A) the date in which the
time limit provided in the applicable Take-Out Commitment with respect
to any Mortgage Loan expires or (B) the date that is (I) sixty (60)
days following the date of delivery to the Bank for any type of
Mortgage Loan such Mortgage Loan shall not have been sold or exchanged
for other Mortgage Collateral; or the issuer of such Take-Out
Commitment shall decline to purchase such Mortgage Loan for any
reason, including without limitation, for the reason that such
Mortgage Loan was not made in compliance with applicable federal
and/or state laws or regulations; or
(2) Any obligor of a Mortgage Loan shall have contested the
validity of the Mortgage Loan pursuant to the Federal Truth in Lending
Act, the Real Estate Settlement Procedures Act, the Equal Credit
Opportunity Act, or any other federal or state law or regulation,
-20-
or any such Mortgage Loan shall have been rescinded, or the Bank, in
its sole judgment, determines that such Mortgage Loan is not in
compliance with applicable federal and/or state laws or regulations;
or
(3) The obligor of any Mortgage Loan shall have failed to
perform any obligation required to be performed thereunder or under
the related Mortgage or any other related document, which failure
shall have continued for a period of more than forty-five (45) days,
or foreclosure or similar proceedings shall have been commenced and
are continuing with respect to any such Mortgage Loan; or
(4) Any of the Mortgage Collateral or the property covered
thereby shall become subject to any Lien (other than a Lien for taxes
which are not delinquent) which is not inferior to the Lien of the
Loan Documents, and such Lien shall not be discharged, or provision
for such discharge satisfactory to the Bank shall not have been made,
within five (5) days after written notice is sent by the Bank to
Borrower, or after Borrower otherwise obtains knowledge of such Lien;
or
(5) Any Mortgage deposited as Mortgage Collateral shall not
continue to be (A) a valid and enforceable first Lien (or second Lien
in the case of Second Lien Mortgage Loans, Conventional Equity
Recovery Loan, Conventional Home Improvement Loan, or Conventional
Purchase Money Second Lien Loan) on the mortgaged property covered
thereby, and in compliance with all laws applicable thereto, (B)
insured in favor of Borrower and its assignees by a reputable, duly
licensed title insurance company acceptable to the Bank under a policy
of title insurance in the full amount of the loan related thereto, (C)
in full force and effect, and (D) fully serviced by or for Borrower
(including the collection of all amounts due thereon); or
(6) Any issuer of a Take-Out Commitment covering a Mortgage Loan
held by or for the Bank as Mortgage Collateral hereunder shall have
bankruptcy, insolvency, reorganization, liquidation, receivership, or
similar proceedings or actions, including a general assignment for the
benefit of creditors, instituted by or against such issuer; or
(7) Any Mortgage Loan ceases to be subject to the related Take-
Out Commitment; or
(8) Any Mortgage Loan ceases to conform to the eligibility
requirements published and established from time to time by FNMA, GNMA
or FHLMC, as applicable, or ceases to conform to the requirements of a
Take-Out Commitment acceptable to the Bank; or
(9) Any Documents required relating to any Mortgage Loan
described in any Delivery Commitment Certificate shall not have been
received by the Bank on or before the fifth (5th) Business Day
following the date such Mortgage Loan was first counted as Mortgage
Collateral hereunder.
(g) Subsequent to an Event of Default, references made to Sections 8.02
--------------------------------- -------------
hereof and Section 5 of the Security Agreement (collectively, the "Other
--------- -----
Provisions") for certain rights of the Bank to dispose of the Collateral
----------
upon the occurrence of an Event of Default. In the event of any conflict
between the Other Provisions and the provisions of this Section 3.04, the
------------
Other Provisions shall be controlling.
Section 3.05 Correction of Mortgage Notes. Borrower may from time to time
----------------------------
request that the Bank transfer a Mortgage Note (the "Correction Note") that
---------------
constitutes Mortgage Collateral so that such Mortgage Note
-21-
may be corrected by the maker of such Mortgage Note. Upon receipt by the Bank of
such a request from Borrower, and so long as no Default or Event of Default
shall be in existence, the Bank shall deliver to the Borrower in trust, with
Borrower acting as the agent and bailee of Bank, pursuant to the Borrower's
"Trust Receipt and Bailee Letter" in the form attached hereto as Exhibit "F",
------------------------------- -----------
the Correction Note with the temporary transfer of the Note being conditioned
upon the prompt return (but in no event later than fourteen (14) days from the
date of delivery from Bank to Borrower) to the Bank of the Correction Note in
form and content acceptable to Bank; provided, that (i) at no time shall there
--------
be more than $200,000.00 of Correction Notes (such value being determined by the
Collateral Value assigned to such Mortgage Notes when they were delivered to the
Bank by Borrower hereunder) in the possession of Borrower and (ii) in the event
any Correction Note is not returned to Bank within fourteen (14) days, Borrower
shall pay to Bank no later than the fourteenth (14th) day the Collateral Value
attributed to such Correction Note.
Section 3.06 Concerning the Funding Account, the Settlement Account and
----------------------------------------------------------
the Operating Account. The Borrower hereby expressly acknowledges that the
---------------------
Funding Account, the Settlement Account and the Operating Account are subject in
all respects to the right of offset in favor of the Bank granted under Section
-------
11.12. Further, it is expressly agreed that:
-----
(a) the Funding Account shall be subject to the sole dominion and control
of the Bank who shall disburse amounts from time to time on deposit therein in
accordance with the terms of Section 6.11 of this Agreement;
------------
(b) the Settlement Account shall be subject to the sole dominion and
control of the Bank who shall disburse amounts from time to time on deposit
therein in accordance with the terms of this Agreement;
(c) subject to the right of offset in favor of the Bank, the Operating
Account shall be subject to the sole dominion and control of the Borrower;
(d) nothing other than proceeds of Borrowings shall be deposited in the
Funding Account;
(e) the Settlement Account shall only be used for (i) proceeds from the
sale or other disposition of Collateral and (ii) the payment of the Obligations;
(f) proceeds of Advances, other than in respect of Wet Advances, shall be
disbursed by the Bank from the Funding Account to the Operating Account for use
by the Borrower in accordance with the terms of Section 6.10 of this Agreement;
------------
(g) proceeds of Borrowings in respect of Wet Advances shall either be
wired directly from the Funding Account to such title company as the Borrower
may identify or be disbursed pursuant to checks drawn on the Funding Account;
and
(h) proceeds from the redemption of Mortgage Collateral shall be deposited
in the Settlement Account.
Section 3.07 Representations and Warranties Regarding Mortgage Notes.
---------------------------------------- --------------
Effective with the delivery of the Credit Request on which such Mortgage Note is
identified, the Borrower represents and warrants to Bank with respect to each
Mortgage Note that:
(a) The Borrower (and, if the Borrower did not originate the loan
evidenced by such Mortgage Note, the originator of such loan) complied, and the
Mortgage Collateral comply, in all material respects with all applicable
Requirements of Law, including, without limitation, (i) any usury laws, (ii) the
Real Estate Settlement Procedures Act of 1974, as amended, (iii) the Equal
Credit Opportunity Act, as amended, (iv) the Federal Truth
-22-
in Lending Act, as amended, (v) Regulation Z of the Board of Governors of the
Federal Reserve System, as amended, and (vi) any consumer protection laws;
(b) the full Face Amount of such Mortgage Note (less any discount points
paid by or on behalf of the borrower under such Mortgage Note) was funded to the
borrower thereunder and any such discount points paid were normal and customary;
(c) such Mortgage Note is "covered," within the meaning of Section 6.19,
------------
by a Take-Out Commitment and was underwritten in compliance with the
requirements of the Investor under such Take-Out Commitment;
(d) the Mortgage related to such Mortgage Note creates a perfected first-
priority Lien (or second-priority Lien in the case of Second Lien Mortgage Loan,
Conventional Equity Recovery Loan, Conventional Home Improvement Loan, or
Conventional Purchase Money Second Lien Loan) on residential real property
consisting of land and a one-to-four family dwelling thereon which is completed
and ready for occupancy and such Mortgage, the title policy relevant thereto and
the other Mortgage documents relevant thereto comply in all respects with the
requirements of the Investor under the Take-Out Commitment by which such
Mortgage Note is "covered;
(e) the Mortgage Loan qualifies under the definition of Mortgage Loan; and
(f) the Borrower has all requisite power and authority to grant the Bank a
security interest in such Mortgage Loan.
In the event that any of the representations and warranties contained in
Sections 3.07(a), (c) and (d) is at any time incorrect, with respect to such
--------------------- --
Mortgage Note(s) which causes such representation and warranty to be incorrect,
Borrower shall within three (3) Business Days after the request of the Bank pay
to the Bank in immediately available funds the Collateral Value of such Mortgage
Collateral designated by the Bank at which time such Mortgage Collateral will be
returned by Bank to Borrower and shall be considered redeemed Collateral. After
the expiration of such three (3) day period without the required payment by
Borrower, such failure by Borrower to make such payment shall result in an Event
of Default under Section 8.01(b) hereof. With respect to a misrepresentation
---------------
and breach of warranty under Section 3.07(b), such misrepresentation shall be an
---------------
Event of Default under Section 8.01(b) hereof without any notice and opportunity
---------------
to cure period.
Section 3.08 Borrower Appointed Agent. The Bank hereby appoints the
------------------------
Borrower (and, in the case of any loan evidenced by a Mortgage Note originated
by a Person other than the Borrower, also appoints such other Person) as its
agent for purposes of (a) obtaining Appraisals with respect to the property
covered by the Mortgages which relate to the Mortgage Notes and (b) complying
with Appraisal Laws and Regulations.
ARTICLE IV
----------
CONDITIONS PRECEDENT
--------------------
The obligation of the Bank to make Advances hereunder is subject to
fulfillment of the conditions precedent stated in this Article IV.
----------
Section 4.01 Initial Advance. The obligation of Bank to make the initial
---------------
Advance hereunder shall be subject to, in addition to the conditions precedent
specified in Section 4.02 hereof, delivery to the Bank of the following (each of
------------
the following documents being duly executed and delivered and in form and
substance satisfactory to the Bank):
-23-
(a) executed counterparts of this Agreement and of all instruments,
certificates and opinions referred to in this Article IV not theretofore
----------
delivered;
(b) the Note;
(c) a Security Agreement and Financing Statement, in form and
substance acceptable to the Bank, granting to the Bank a perfected, first
priority security interest in all Collateral required to be pledged to the
Bank;
(d) an Omnibus Certificate (herein so called) of the Secretary or
Assistant Secretary of Borrower containing (i) resolutions of Borrower's
board of directors authorizing the execution and performance of the Note,
this Agreement and any Loan Documents provided herein and identifying the
officers of Borrower authorized to sign such instruments, (ii) specimen
signatures of the officers so authorized and (iii) a copy, certified as
true by the Secretary or Assistant Secretary of Borrower, of the articles
or certificate of incorporation and the bylaws of Borrower, together with
all amendments thereto;
(e) [INTENTIONALLY DELETED.];
(f) such other documents and submissions as Bank may reasonably
request at any time at or prior to the date of the initial Advance
hereunder;
(g) the Commitment Fees referred to in Section 11.02; and
-------------
(h) the Custodian Fees referred to in Section 11.03."
-------------
Section 4.02 All Borrowings. The obligation of the Bank to make any
--------------
Advance and to fund any Borrowing pursuant to this Agreement is subject to the
following further conditions precedent:
(a) (i) prior to 9:00 p.m. (Dallas, Texas time) on the Business Day
prior to the Borrowing Date, Borrower shall give to the Bank telephonic or
telecopy notice of the amount of such Borrowing and (ii) prior to 10:30
a.m. (Dallas, Texas time) on each Borrowing Date, Bank shall have received
from the Borrower via telecopy or Federal Express an executed Credit
Request;
(b) along with each Credit Request, Borrower shall telecopy or
Federal Express for receipt prior to the deadline stated in Section
-------
4.02(a)(ii) to the Bank a Collateral Schedule, identifying the Mortgage
-----------
Notes offered pursuant to such Credit Request as security for the
Obligations;
(c) prior to the deadlines stated in Section 2.03(b)(i), Borrower
------------------
shall deliver to the possession of the Bank (i) all of the items required
to be delivered to the Bank by Section 2.03(b)(i) if the Credit Request is
------------------
for a Wet Advance, or (ii) all the items required to be delivered to the
Bank by Section 3.02 if the Credit Request is for a Dry Advance;
------------
(d) the representations and warranties of Borrower contained in this
Agreement or any Loan Document (other than those representations and
warranties which are by their terms limited to the date of the agreement in
which they are initially made) shall be true and correct in all material
respects on and as of the date of such Advance;
(e) no Default or Event of Default shall have occurred and be
continuing as of the date of such Advance;
-24-
(f) no circumstance or event, as determined by the Bank in its
reasonable discretion, having a Material Adverse Effect shall have occurred
and be continuing;
(g) the Funding Account, the Settlement Account and the Operating
Account shall be established and in existence;
(h) if the Credit Request is with respect to a Wet Advance, the
requirements of Section 2.03(b) shall be satisfied; and
---------------
(i) no Net Collateral Deficit shall exist.
Each Credit Request shall be deemed to constitute a representation and warranty
by Borrower on the date of the requested Advance as to the facts specified in
Sections 4.02(d), (e) and (f).
---------------- --- ---
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Bank to enter into this Agreement, and to make
Advances to Borrower, Borrower represents and warrants to the Bank that:
Section 5.01 Organization and Good Standing. Borrower is a corporation
------------------------------
duly incorporated and existing in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified as a foreign corporation
and in good standing in all jurisdictions in which it conducts business and has
the corporate power and authority to own its properties and assets and to
transact the business in which it is engaged and is or will be qualified in
those states wherein it proposes to transact business in the future.
Section 5.02 Authorization and Power. Borrower has the corporate power and
-----------------------
requisite authority to execute, deliver and perform this Agreement, the Note and
the Loan Documents to be executed by it; Borrower is duly authorized to, and has
taken all corporate action necessary to authorize it to, execute, deliver and
perform this Agreement, the Note and the Loan Documents to be executed by it and
is and will continue to be duly authorized to perform this Agreement, the Note
and such Loan Documents.
Section 5.03 No Conflicts or Consents. Neither the execution and delivery
------------------------
of this Agreement, the Note or the Loan Documents, nor the consummation of any
of the transactions herein or therein contemplated, nor compliance with the
terms and provisions hereof or with the terms and provisions thereof, will
materially contravene or conflict with any provision of law, statute or
regulation to which Borrower is subject or any judgment, license, order or
permit applicable to Borrower, or any indenture, mortgage, deed of trust, or
other agreement or instrument to which Borrower is a party or by which Borrower
may be bound, or to which Borrower may be subject, or violate any provision of
the Articles of Incorporation or Bylaws of Borrower.
Section 5.04 Enforceable Obligations. This Agreement, the Note and the Loan
-----------------------
Documents are the legal, valid and binding obligations of Borrower, enforceable
in accordance with their respective terms.
Section 5.05 Priority of Liens. The Bank has a valid, enforceable,
-----------------
perfected, first priority Lien and security interest in each Mortgage Note
heretofore delivered to the Bank by the Borrower and upon delivery to the Bank
of each Credit Request, the Bank shall have a valid, enforceable, perfected,
first priority Lien and Security Interest in each Mortgage Note identified
therein or delivered therewith. The Bank has a valid, enforceable,
-25-
perfected and first priority Lien and Security Interest in the Borrower's
interest in each Take-Out Commitment relating to the Mortgage Collateral except
to the extent disclosed in a written notice by Borrower to Bank.
Section 5.06 No Liens. All the Mortgage Collateral is free and clear of
--------
all Liens and other adverse claims of any nature, other than the Liens of Bank,
and Borrower has good and indefeasible title to such Mortgage Collateral.
Section 5.07 Financial Condition. Borrower has delivered to the Bank
-------------------
copies of the balance sheets of Borrower dated March 31, 1996 and the related
statements of income, stockholders' equity and changes in financial position for
the year ended such date; such financial statements fairly present the financial
condition of Borrower as of such date and have been prepared in accordance with
GAAP, subject to normal year-end adjustments; as of the date thereof, there were
no obligations, liabilities or Indebtedness (including material contingent and
indirect liabilities and obligations or unusual forward or long-term
commitments) of Borrower which are not reflected in such financial statements;
no change having a Material Adverse Effect has occurred since the date of such
financial statements.
Section 5.08 Full Disclosure. There is no material fact that Borrower have
---------------
not disclosed to the Bank which could adversely affect the properties, business,
prospects or condition (financial or otherwise) of Borrower or could adversely
affect the Mortgage Collateral. Neither the financial statements referred to in
Section 5.07 hereof, nor any certificate or statement delivered herewith or
------------
heretofore by Borrower to the Bank in connection with negotiation of this
Agreement, contains any untrue statement of material fact.
Section 5.09 Material Agreements. Borrower is not in default (and no event
-------------------
exists which with notice or the passage of time could become a default) under
any loan agreement, mortgage, security agreement or other material agreement or
obligation to which it is a party or by which any of its properties is bound
including but not limited to the Loan Documents.
Section 5.10 No Litigation. There are no actions, suits or legal,
-------------
equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower threatened, against Borrower, which either individually or
in the aggregate would have a Material Adverse Effect.
Section 5.11 Taxes. All tax returns required to be filed by the Borrower
-----
in any jurisdiction have been filed and all taxes, assessments, fees and other
governmental charges upon Borrower or upon any of its properties, income or
franchises have been paid prior to the time that such taxes could give rise to a
Lien thereon, unless protested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been established on the
books of Borrower. The Borrower has no knowledge of any proposed tax assessment
against Borrower.
Section 5.12 Principal Office, etc., Taxpayer Identification Number. The
------------------------------------------------------
principal office, chief executive office and principal place of business of
Borrower is at 0000 Xxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxx, Xxxxx 00000.
Borrower's mailing address is 0000 Xxxxxx Xxxxxx Xxxx., Xxxxx 000, Xxxxxx, Xxxxx
00000. Borrower's taxpayer identification number is 00-0000000.
Section 5.13 Employee Benefit Plans.
----------------------
(a) Neither Borrower nor any Subsidiary of Borrower, nor any of their
respective ERISA Affiliates, nor any Plan, is in material violation of any
provision of ERISA or any other applicable state or federal law, including
the Code.
(b) No Prohibited Transaction or Reportable Event has occurred with
respect to any Plan.
-26-
(c) No notice of intent to terminate a Plan has been filed within the
24-month period preceding the date hereof, nor has any Plan been terminated
under Section 4041(c) of ERISA.
(d) The PBGC has not instituted proceedings to terminate, or appoint
a trustee to administer, any Plan and no event or condition has occurred or
exists which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
(e) Neither Borrower nor any Subsidiary of Borrower, nor any of their
respective ERISA Affiliates has incurred or expects to incur any withdrawal
liability to any multiemployer plan within the meaning of Section
4001(a)(3) of ERISA.
(f) Each Plan meets the minimum funding requirements of Section 412
of the Code and no waiver from such minimum funding requirements has been
applied for or approved pursuant to Section 412(d) of the Code.
(g) No fact exists that could result in any material liability other
than as disclosed on Borrower's financial statements) to Borrower relating
to any former Plan.
(h) No amendment to any Plan has been adopted such that security is
required to be given pursuant to Section 401(a)(29) of the Code, and no
lien exists under Section 412(n) of the Code with respect to any Plan.
(i) With respect to each Plan, the value of unfunded benefit
liabilities (within the meaning of Section 4001(a)(18) of ERISA) does not
exceed $50,000.
(j) Neither the Borrower nor any Subsidiary of Borrower maintains any
plan, arrangement, or commitment which provides medical or dental benefits
to an employee or the employee's dependents after the employee terminates
employment, other than as provided in the continuation coverage provisions
of the Code and ERISA.
Section 5.14 Ownership. HomeCapital Investment Corporation owns,
---------
beneficially and of record, 100% of the issued and outstanding shares of each
class of the stock of Borrower.
Section 5.15 Subsidiaries. As of the date hereof, Borrower has no
------------
subsidiaries. As of the date hereof, Borrower does not own, directly or
indirectly, any interest in any Person.
Section 5.16 Indebtedness. As of the date hereof, Borrower has no
------------
Indebtedness outstanding other than the Note and the Indebtedness listed on
Exhibit "G".
-----------
Section 5.17 Permits, Patents, Trademarks, etc.
---------------------------------
(a) Borrower has all permits and licenses necessary for the operation of
its business, except where the failure to have such permits or licenses does not
have a Material Adverse Effect upon the operation of its business.
(b) Borrower owns or possesses (or is licensed or otherwise has the
necessary right to use) all patents, trademarks, service marks, trade names and
copyrights, technology, know-how and processes, and all rights with respect to
the foregoing, which are necessary for the operation of its business, without
any known material conflict with the rights of others. The consummation of the
transactions contemplated hereby will not alter or impair in any material
respect any of such rights of Borrower.
-27-
Section 5.18 Status Under Certain Federal Statutes. Borrower is not (a) a
-------------------------------------
"holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (b) a "public utility", as such term is defined in the Federal
Power Act, as amended, (c) an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1949, as amended, or (d) a "rail carrier", or a "person controlled by or
affiliated with a rail carrier", within the meaning of Title 49, U.S.C., and
Borrower is not a "carrier" to which 49 U.S.C. (S) 11301(b)(1) is applicable.
Section 5.19 Securities Acts and Securities Credit Transaction Regulations.
------------------------------------- -----------------------
The Borrower has not issued any unregistered securities in violation of the
Securities Act of 1933, as amended, or of any other Requirement of Law, and is
not violating any rule, regulation, or requirement under the Securities Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended. The
Borrower is not required to qualify an indenture under the Trust Indenture Act
of 1939, as amended, in connection with its execution and delivery of the Note.
The Borrower is not a party, whether as a customer or a creditor, to any
transaction that is subject to the Securities Credit Transaction Regulations.
Section 5.20 No Approvals Required. Other than consents and approvals
---------------------
previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Note and the Loan Documents, nor the
consummation of any of the transactions contemplated hereby or thereby requires
the consent or approval of, the giving of notice to, or the registration,
recording or filing by Borrower of any document with, or the taking of any other
action in respect of, any Person.
Section 5.21 No Insider. Neither the Borrower nor any Person having
----------
"control" (as defined in 12 U.S.C. (S)375(b)(9) and the regulations promulgated
pursuant thereto) of the Borrower is, an "executive officer," "director," or
"principal shareholder" (as such terms are defined in 12 U.S.C. (S)375(b)(9) and
the regulations promulgated pursuant thereto) of any Bank, of any bank holding
company of which any Bank is a Subsidiary, or of any Subsidiary of any bank
holding company of which any Bank is a Subsidiary.
Section 5.22 Governmental Requirements. Borrower is in compliance with all
-------------------------
Governmental Requirements, the non-compliance of which would have a Material
Adverse Effect.
Section 5.23 Eligibility. Borrower is an eligible FHA mortgagee, FNMA
-----------
seller/servicer, GNMA servicer, FHLMC servicer, is approved by GNMA as an issuer
of GNMA Securities, by FNMA to be a lender with regard to FNMA Securities, by
FHLMC to be a seller with regard to FHLMC Securities, and is eligible as a
lender under the VA loan guaranty program.
Section 5.24 Solvency. Borrower is not "insolvent" on the date hereof
--------
(that is, the sum of Borrower's absolute and contingent liabilities, including
Borrower's obligations to the Bank, does not exceed the fair market value of
Borrower's assets). Borrower's capital is adequate for the businesses in which
Borrower is engaged and intends to be engaged. Borrower has not hereby
incurred, nor does Borrower intend to incur or believe that it will incur, debts
which will be beyond its ability to pay as such debts mature.
Section 5.25 Environmental Laws. (i) the Related Persons are conducting
------------------
their businesses in material compliance with all applicable federal, state or
local laws, including without limitation those pertaining to environmental
matters; (ii) none of the operations of any Related Person is the subject of
federal, state or local investigation evaluating whether any material remedial
action is needed to respond to a release of any hazardous or toxic waste,
substance or constituent into the environment; (iii) no Related Person (and to
the best knowledge of Borrower, no other Person) has filed any notice under any
federal, state or local law indicating that any Related Person is responsible
for the release into the environment, or the improper storage, of any material
amount of any hazardous or toxic waste, substance or constituent or that any
such waste, substance or constituent has been
-28-
released, or is improperly stored, upon any property of any Related Person; (iv)
no Related Person otherwise has any known material contingent liability in
connection with the release into the environment, or the improper storage, of
any such waste, substance or constituent; and (v) to Borrower's knowledge, no
Property securing a Mortgage Loan contains any hazardous material and complies
with all applicable environmental laws.
Section 5.26. Use of Proceeds, Margin Stock. Borrower is in compliance
-----------------------------
with Section 6.10.
------------
Section 5.27. Take-Out Commitments. Borrower represents and warrants to
--------------------
Bank that all Mortgage Loans submitted to Bank as Collateral are and shall be
covered by Take-Out Commitments and Borrower has sufficient Take-Out Commitments
to cover each and every Mortgage Loan serving as Collateral hereunder.
Section 5.28 Assumed Names. Since the date which is five (5) years prior
-------------
to the date hereof, the Borrower has not engaged in any business under any name,
assumed name or trade name other than HomeOwners Mortgage & Equity, Inc., a
Delaware corporation d/b/a Home, Inc.
Section 5.30. Survival of Representations. All representations and
---------------------------
warranties by Borrower herein (other than representations and warranties which
by their terms are limited to the time initially made) shall survive delivery of
the Note and the making of the Advances, and any investigation at any time made
by the Bank shall not diminish the right of the Bank to rely thereon.
ARTICLE VI
----------
AFFIRMATIVE COVENANTS
---------------------
Borrower shall at all times comply with the covenants contained in this
Article VI from the date hereof and for so long as any part of the Obligations
----------
or the Commitment of the Bank is outstanding.
Section 6.01 Financial Statements and Reports. Borrower shall furnish to
--------------------------------
Bank the following, all in form and detail reasonably satisfactory to Bank,
prepared in accordance with GAAP and with a Certificate Accompanying Financial
Statements in the form of Exhibit "H" attached;
-----------
(a) As soon as available and in any event within one hundred twenty
(120) days after the close of each fiscal year of Borrower, copies of the
consolidated and consolidating balance sheet of Borrower as of the close of
such fiscal year and consolidated statements of income and retained
earnings, cash flow statements and changes in stockholders' equity for such
fiscal year, each setting forth in comparative form the corresponding
figures for the preceding fiscal year, all in reasonable detail together
with all notes thereto and accompanied by an opinion thereon (which shall
not be qualified by reason of any limitation imposed by Borrower) by
Coopers & Xxxxxxx LLP or by independent certified public accountants
selected by Borrower and satisfactory to Bank, to the effect that such
financial statements have been prepared in accordance with GAAP and such
other professional practices as may then conform to the usual and customary
professional standards, practices and disclosures then in existence in
connection with the preparation and publication of financial statements by
independent certified public accountants and that the examination of such
accounts in connection with such financial statements has been made in
accordance with GAAP and, accordingly, includes such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances;
(b) As soon as available, and in any event within thirty (30) days
after the end of each month of each fiscal year of Borrower, copies of the
consolidated and consolidating balance sheet of Borrower as of the end of
such month and consolidated and consolidating statements of income and
retained earnings and cash flow statement and of changes in stockholders'
equity for such month, each setting forth in
-29-
comparative form the corresponding figures for the preceding fiscal year of
Borrower for such month and for the portion of the fiscal year ending with
such month, all in reasonable detail, and certified by the chief financial
officer of Borrower as being true and correct and as having been prepared
in accordance with GAAP;
(c) Promptly upon receipt thereof, a copy of each other report
submitted to Borrower by independent accountants in connection with any
annual, interim or special audit of the books of Borrower;
(d) As soon as available and in any event within thirty (30) days
after the end of each month in form and detail acceptable to Bank, prepared
as of the end of such month, a report setting forth (i) a commitment
position/contingent liability report indicating investor, type, original
principal amount, amounts funded and unfunded, rate, price and yield,
expiration dates, futures contracts, hedged positions, profit and loss and
repurchase agreements; (ii) a pipeline position report indicating the rate,
amount and price of Mortgage Loans in Borrower's "pipeline" and profit,
loss and exposure; (iii) a servicing delinquency report indicating, by
investor, the amount of Mortgage Loans serviced by Borrower which are
delinquent or in foreclosure with a breakdown (30, 60, 90, 120 days) for
all past-due loans including total principal balance, number of loans,
which loans Borrower is required to repurchase by an Agency or Investor,
foreclosure experience, investor type, geographic mix, weighted average
coupon, weighted average maturity and cost of servicing and (iv) a
production report;
(e) As soon as available and in any event within thirty (30) days
after delivery of such reports to any Agency, HUD, FHA or VA, Borrower
shall provide to Bank all audits, evidence, auditors certifications and
other financial information supplied to such governmental or quasi-
governmental agencies, including but not limited to, any audits or self-
compliance reviews prepared in connection with Borrower's continuing agency
certifications;
(f) Promptly and in any event within twenty (20) days after the
request of Bank at any time and from time to time, a certificate, executed
by the president or chief financial officer of Borrower, setting forth all
of Borrower's borrowings other than under this Loan;
(g) As soon as available and in any event within thirty (30) days of
filing and no later than two hundred twenty-five (225) days from the end of
each fiscal year of Borrower, copies of all tax returns filed by Borrower;
(h) Within thirty (30) days after the end of each month, a Compliance
Certificate executed by the President or Chief Executive Officer of
Borrower;
(i) As soon as available and in any event within fifteen (15) days of
their respective Securities and Exchange Commission filing due dates, the
10(K) and 10(Q) reports for HomeCapital Investment Corporation, the parent
corporation of Borrower;
(j) Promptly and in any event within five (5) days of such event,
notification of the departure of any of the following officers: President
or Executive Vice President; and
(k) Such other information, reports and loan package supporting
documentation concerning the Mortgage Loans, business, properties or
financial condition of Borrower or any Investor (in the possession or under
the control of Borrower and Borrower shall make such requests for
additional information as reasonably required by Bank), or originals or
copies of Take-Out Commitments as Bank may reasonably request. Upon two
Business Days notice to Borrower, Bank shall have the right to inspect the
books, records and procedures of Borrower at any reasonable time at any of
the Properties of Borrower, take copies and extracts from, and inspect and
discuss the procedures, affairs, finances and accounts of
-30-
Borrower with Borrower's officers, accountants and auditors, all at such
reasonable times and as often as the Bank may desire. Borrower shall
furnish such reports and Mortgage Loan package supporting documentation as
the Bank shall reasonably request. Borrower shall permit and shall use all
reasonable efforts to cause each Person from whom it purchases Mortgage
Loans to permit any officer, employee or agent of Bank to visit and inspect
the properties of Borrower and such Person relevant to such compliance, to
take copies and extracts therefrom, and to discuss Appraisals relevant to
the Mortgage Loans from time to time pledged to the Bank with the
responsible officers, employees and agents (including any third party
appraisers) of the Borrower and such Person, all at such reasonable times
and as often as the Bank may desire.
Section 6.02 Taxes and Other Liens. Borrower shall pay and discharge
---------------------
promptly all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or upon any of its Property as well as all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a Lien upon any or all of its Property; provided, however,
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings diligently conducted by or on
behalf of Borrower and if Borrower shall have established reserves therefor
adequate under GAAP.
Section 6.03 Maintenance. Borrower shall (i) maintain its corporate
-----------
existence, rights and franchises, (ii) observe and comply in all material
respects with all Governmental Requirements, and (iii) maintain its Properties
(and any Properties leased by or consigned to it or held under title retention
or conditional sales contracts) in good and workable condition at all times and
make all repairs, replacements, additions, betterments and improvements to its
Properties as are reasonable and proper so that the business carried on in
conjunction therewith may be conducted properly and efficiently at all times.
Section 6.04 Further Assurances. Borrower shall, within three (3) Business
------------------
Days of Bank's request, cure any defects in the execution and delivery of the
Note, this Agreement and the Loan Documents and Borrower shall, at its expense,
promptly execute and deliver to Bank upon request all such other and further
documents, agreements and instruments in compliance with or accomplishment of
the covenants and agreements of Borrower in this Agreement and in the Loan
Documents or to further evidence and more fully describe the collateral intended
as security for the Note, or to correct any omissions in the Loan Documents, or
more fully to state the security obligations set out herein or in any of the
Loan Documents, or to perfect, protect or preserve any Liens created (or
intended to be created) pursuant to any of the Loan Documents, or to make any
recordings, to file any notices, or obtain any consents.
Section 6.05 Reimbursement of Expenses. Borrower shall pay (i) all
-------------------------
reasonable legal fees incurred by the Bank in connection with the preparation,
negotiation or execution of this Agreement, the Note and the Loan Documents and
any amendments, modifications, renewals, extensions, consents or waivers
executed in connection therewith, (ii) all fees, charges or taxes for the
recording or filing of the Loan Documents, (iii) all out-of-pocket expenses of
the Bank incurred in connection with the administration of this Agreement, the
Note and the Loan Documents, including courier expenses incurred in connection
with the Mortgage Collateral, and (iv) all reasonable amounts expended, advanced
or incurred by the Bank to satisfy any obligation of Borrower under this
Agreement or any Loan Document or to collect the Note, or to enforce the rights
of the Bank under this Agreement or any Loan Document, which amounts shall
include all court costs, attorneys' fees and expenses (including, without
limitation, legal fees and expenses for trial, appeal or other proceedings),
fees of auditors and accountants, and investigation expenses reasonably incurred
by the Bank in connection with any such matters, together with interest at the
post-maturity rate specified in the Note on each such amount from ten (10) days
after the date of written demand or request for reimbursement until the date of
reimbursement.
Section 6.06 Insurance. Borrower shall maintain with financially sound and
---------
reputable insurers, insurance with respect to its Properties and business
against such liabilities, casualties, risks and contingencies and in such
-31-
types and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated, including, without limitation, a
fidelity bond or bonds in form and with coverage and with a company satisfactory
to the Agencies and with respect to such individuals or groups of individuals as
the Agencies may designate, and in no event shall such insurance coverage (with
respect to types of insurance coverage and levels of insurance coverage) be less
than those required by any Agency, Investor or governmental or quasi-
governmental authority for financial institutions engaging in the origination
and servicing of Mortgages. Upon request of the Bank, Borrower shall furnish or
cause to be furnished to the Bank from time to time a summary of the insurance
coverage of Borrower and if requested shall furnish the Bank copies of the
applicable policies.
Section 6.07 Accounts and Records. Borrower shall keep books of record and
--------------------
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities, in accordance with
GAAP. Borrower shall maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate all records
pertaining to the performance of Borrower's obligations under the Servicing
Agreements in the event of the destruction of the originals of such records) and
keep and maintain all documents, books, records, computer tapes and other
information reasonably necessary or advisable for the performance by Borrower of
its obligations under the Servicing Agreements.
Section 6.08 Notice of Certain Events. Borrower shall promptly notify the
------------------------
Bank upon (i) the receipt of any notice from, or the taking of any other action
by, the holder of any promissory note, debenture or other evidence of
Indebtedness of Borrower with respect to a claimed default, together with a
detailed statement by a responsible officer of Borrower specifying the notice
given or other action taken by such holder and the nature of the claimed default
and what action Borrower is taking or proposes to take with respect thereto;
(ii) the commencement of, or any determination in, any legal, judicial or
regulatory proceedings to which Borrower is a party or relating to or affecting
the Collateral or any part thereof or the security interests granted herein or
in the Security Agreement; (iii) any dispute between Borrower and any
governmental or regulatory body; (iv) any material adverse change in the
business, operations, prospects or financial condition of Borrower or any
Affiliate of Borrower, provided that in the case of an Affiliate of Borrower,
Borrower shall be required to give such notice to Bank only if Borrower has
knowledge of such material adverse change; or (v) any event or condition which
could result in a Material Adverse Effect.
Section 6.09 Performance of Certain Obligations. Borrower shall perform
----------------------------------
and observe in all respects each of the provisions of each Take-Out Commitment
and will cause all things to be done which are necessary to have each Mortgage
Loan which constitutes Mortgage Collateral covered by a Take-Out Commitment
comply with the requirements of such Take-Out Commitment.
Section 6.10 Use of Proceeds; Margin Stock. The proceeds of the Advances
-----------------------------
shall be used by Borrower solely for the funding of Mortgage Notes in the
ordinary course of business, for the payment of costs incurred by Borrower
directly relating to the funding of such Mortgage Notes including commissions
paid to non-Affiliates and for general working capital purposes. In no event
shall the funds from any Advance be used directly or indirectly by any Person
for personal, family, household or agricultural purposes or for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U, or for the
purpose of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulation U or of Regulation G of the Board of Governors of the Federal Reserve
System (12 C.F.R. 207, as amended) or otherwise take or permit to be taken any
action which would involve a violation of such Regulation G or Regulation U or
Regulation T (12 C.F.R. 220, as amended) or Regulation Z (12 C.F.R. 224, as
amended) or any other regulation of such board. Neither Borrower nor any Person
acting on behalf of Borrower shall take any action in violation of Regulation U
or Regulation X or shall violate Section 7 of the Securities Exchange Act of
1933 or any rule or regulation thereunder, in each case as now in effect or as
the same may hereinafter be in effect or engage in any transaction which is
subject to the Securities Credit Transaction Regulations.
-32-
Section 6.11 Notice of Default. Borrower shall furnish to the Bank
-----------------
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto.
Section 6.12 Compliance with Loan Documents. Borrower shall promptly
------------------------------
comply with any and all covenants and provisions of this Agreement, the Note and
the Loan Documents. All representations and warranties, except those which by
their terms are limited to the time initially made, contained in the Loan
Documents shall continue to be true and correct in all respects.
Section 6.13 Compliance with Material Agreements. Borrower shall comply in
-----------------------------------
all material respects with all material agreements, indentures, mortgages or
documents binding on it or affecting its properties or business.
Section 6.14 Operations and Properties. Borrower shall act prudently and
-------------------------
in accordance with customary industry standards in managing and operating its
Property.
Section 6.15 ERISA and Plans. Borrower shall promptly furnish to the Bank:
---------------
(a) Within ten (10) Business Days after the occurrence of a
Reportable Event with respect to any Plan, a copy of any materials required
to be filed with the PBGC with respect to such Reportable Event;
(b) A copy of any notice of intent to terminate a Plan, no later than
the date such notice is required to be provided to participants of such
Plan under Section 4041(a)(2) of ERISA, and copies of any notices of
noncompliance received from the PBGC under Section 4041(b)(2)(C) of ERISA,
within ten (10) Business Days after the receipt by Borrower or its
Subsidiary of such notice;
(c) Not later than ten (10) Business Days after the receipt thereof
by Borrower, any Subsidiary of Borrower, any ERISA Affiliate of Borrower or
such Subsidiary, or the administrator of any Plan, a copy of any notice to
Borrower or such Subsidiary that the PBGC has instituted proceedings to
terminate such Plan or to appoint a trustee to administer such Plan;
(d) A statement from the chief financial officer of Borrower
describing any event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of any Plan or for the
appointment of a trustee to administer any Plan, within ten (10) Business
Days after Borrower knows or has reason to know such event or condition
exists; and
(e) Within ten (10) Business Days after receipt thereof by Borrower
or any ERISA Affiliate of Borrower, a copy of any notice concerning the
imposition of any withdrawal liability under Section 4202 of ERISA.
Section 6.16 Maintenance of Collateral. Borrower will keep and maintain
-------------------------
at all times each Mortgage securing the Mortgage Notes constituting Mortgage
Collateral or other instruments or documents evidencing Mortgage Collateral held
by or for Bank (i) as a valid and enforceable lien on the mortgaged property
covered thereby, enforceable and in compliance with all laws applicable thereto;
(ii) insured in favor of Borrower and its assignees by a reputable, duly
licensed title insurance company (which is not an Affiliate of Borrower), under
a mortgagee policy of title insurance in the full amount of the loan related
thereto; and (iii) in full force and effect, without any default. The
improvements on the land covered by each Mortgage relating to a Mortgage Note
constituting Mortgage Collateral shall be kept continuously insured at all times
by reasonable insurance companies against fire and extended coverage hazards
under policies, binders, letters, or certificates of insurance, with a standard
mortgagee clause in favor of Borrower and its assigns. Borrower shall, and does
hereby, assign all such insurance to the Bank only so long as the related
Mortgage Note shall constitute Mortgage Collateral. Each such
-33-
policy must be in an amount equal to the lesser of the maximum insurable value
of the improvements or the original principal amount of the Mortgage, without
reduction by reason of any co-insurance, reduced rate contribution, or similar
clause of the policies or binders.
Section 6.17 Servicing of Collateral. Borrower shall (i) service or cause
-----------------------
to be serviced for Bank all Mortgage Loans constituting Mortgage Collateral
hereunder and use its best efforts to effect collection of all amounts payable
thereunder as they become due; (ii) comply in all material respects with all
provisions of contracts relating to the servicing of such Mortgage Loans or
other mortgage servicing contracts to which Borrower is a party; and (iii) upon
the occurrence of an Event of Default and pursuant to the request of the Bank,
notify each obligor of such Mortgage Loan of the assignment thereof to the Bank
pursuant hereto, including in the notice instructions that such obligor shall
thereafter make all payments to Borrower as trustee for the Bank until further
notice, or directly to the Bank if the Bank shall request the same.
Section 6.18. Take-Out Commitments. The Borrower shall enter into and
--------------------
maintain Agency Commitments and Take-Out Commitments sufficient at all times to
cover each Mortgage Loan constituting Mortgage Collateral hereunder. Upon the
request of the Bank, Borrower will provide evidence satisfactory to the Bank
that (i) Borrower is in compliance with the requirements of each Take-Out
Commitment and will adhere to the procedures provided in such Take-Out
Commitment; (ii) Borrower will give notice of Bank's security interest in each
Mortgage Loan to the Investor under the Take-Out Commitment therefor and that
such notice will be given in compliance with the requirements hereof and of such
Take-Out Commitment; (iii) each Mortgage Loan can and will be assigned to the
purchaser under the Take-Out Commitment therefor; and (iv) the Bank, in the
event of such assignment, will receive the full purchase price for the Mortgage
Loans.
Section 6.19 Compliance with Agreements and Law. Each Related Person will
----------------------------------
perform all material obligations it is required to perform under the terms of
each indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound. Each Related Person will conduct
its business and affairs in compliance with all laws, regulations, and orders
applicable thereto (including those relating to pollution and other
environmental matters), including, but not limited to, all applicable HUD, FHA,
VA, FNMA, FHLMC and GNMA regulatory requirements.
Section 6.20 Maintenance of Qualifications. Borrower will not commit or
-----------------------------
suffer to be committed any act which would adversely affect its eligibility to
participate as an FHA approved mortgagee or as an approved lender under the VA
guaranty program.
Section 6.21 Servicing Portfolio. Borrower will not commit or suffer to
-------------------
be committed any act which would constitute a breach of any contract to which
Borrower now is or hereafter becomes a party under which Borrower is obligated
to service Mortgage Loans for another Person which breach would materially
impair Borrower's mortgage loan servicing portfolio.
Section 6.22 Evidence of Compliance with Article V. Upon request by the
-------------------------------------
Bank, Borrower shall provide to the Bank evidence of its continued compliance
with the representations and warranties under Article V, including but not
---------
limited to, such certificates and documents as the Bank may require in its sole
discretion.
Section 6.23 Appraisals. The Borrower shall obtain and maintain a copy of
----------
an Appraisal with respect to the underlying property covered by each Mortgage
included as Mortgage Collateral, shall require that all Appraisals delivered to
Borrower in connection with the Mortgage Loans constituting Mortgage Collateral
(whether originated by the Borrower or purchased by Borrower) comply in all
respects with the Appraisal Laws and Regulations, shall implement and maintain
administrative and operating procedures which permit the Borrower, the Bank to
verify such compliance.
-34-
ARTICLE VII
-----------
NEGATIVE COVENANTS
------------------
Borrower shall at all times comply with the covenants contained in
this Article VII, from the date hereof and for so long as any part of the
-----------
Obligations or the Commitment of the Bank is outstanding:
Section 7.01 No Merger. Borrower shall not merge or consolidate with
---------
or into any corporation, or acquire by purchase or otherwise all or
substantially all of the assets or capital stock of any Person unless approved
fifteen (15) days in advance by the Bank in writing.
Section 7.02 Limitation on Indebtedness. Borrower shall not, without
--------------------------
the prior written consent of the Bank, incur, create, contract, assume, have
outstanding, guarantee or otherwise be or become, directly or indirectly, liable
in respect of any Indebtedness, except (i) the Obligations, (ii) current
liabilities for taxes and assessments, (iii) Existing Indebtedness listed on
Exhibit "G" attached hereto and incorporated herein by this reference, (iv)
-----------
current amounts payable or accrued (other than for borrowed funds or purchase
money obligations) which have been incurred in the ordinary course of business
and (v) Indebtedness incurred in the ordinary course of business not to exceed
on a cumulative basis $100,000.00 at any time; provided that all such
liabilities, accounts and claims permitted under clauses (i) through (v) shall
-----------------------
be promptly paid and discharged when due or in conformity with customary trade
terms, unless the same shall be contested in good faith by Borrower.
Section 7.03 Fiscal Year, Method of Accounting. Borrower shall not
----------------------------------------------
change its fiscal year or method of accounting.
Section 7.04 Lines of Business. Borrower shall not directly or
-----------------
indirectly engage in any business other than that currently engaged in by
Borrower and any business incidental thereto.
Section 7.05 Liquidations, Consolidations and Dispositions of
------------------------------------------------
Substantial Assets. Borrower shall not dissolve or liquidate or sell, transfer,
------------------
pledge, lease or otherwise dispose of any portion of its property or assets or
business (other than Mortgage Loans sold in compliance with the provisions of
the Loan Documents in the ordinary course of business); provided, however, that
nothing herein shall be construed to prohibit Borrower from selling Mortgage
Notes to Investors in the ordinary course of its business subject to the terms
of this Agreement.
Section 7.06 Loans, Advances, and Investments. Borrower shall not
--------------------------------
make any loan (other than loans made in the ordinary course of its business as a
mortgage company), advance, or capital contribution to, or investment in, or
purchase or otherwise acquire any of the capital stock, securities, or evidences
of indebtedness of, any Person (collectively, "Investment"), or otherwise
----------
acquire any interest in, or control of, another Person, except for the
following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness
of others when acquired by Borrower in settlement of accounts
receivable or other debts arising in the ordinary course of business,
so long as the aggregate amount of any such securities or evidences of
indebtedness is not material to the business or condition (financial
or otherwise) of Borrower;
(c) Mortgage Backed Securities acquired in the ordinary course
of Borrower's business; and
(d) Owned real estate and Mortgage Loans, required to be
repurchased by Investors, not to exceed at any one time $75,000.00 on
an annual basis.
-35-
Section 7.07 Use of Proceeds. Borrower shall not permit the proceeds
---------------
of the Advances to be used for any purpose other than those permitted by Section
-------
6.10 hereof.
----
Section 7.08 Actions with Respect to Mortgage Collateral. Borrower
-------------------------------------------
shall not without the consent of Bank:
(a) Compromise, modify, extend, release, or adjust payments on
any Mortgage Collateral, accept a conveyance of mortgaged property in
full or partial satisfaction of any Mortgage Collateral, or release
any Mortgage securing or underlying any Mortgage Collateral;
(b) Agree to the amendment or termination of any Take-Out
Commitment in which the Bank has a security interest or to any
substitution of a Take-Out Commitment for a Take-Out Commitment in
which the Bank has a security interest hereunder; or
(c) Transfer, sell, assign, or deliver any Mortgage Collateral
pledged to the Bank to any Person other than the Bank, except pursuant
to a Take-Out Commitment and subject to the terms of the Loan
Documents.
Section 7.09 Operational Changes. Borrower shall not (a) change the
-------------------
location of any Collateral for the Loan, (b) change its taxpayer identification
number, (c) change its address for its chief executive office or its mailing
address or change its name, identity or corporate structure in any manner which
might make any financing or continuation statement filed in connection with the
Security Agreement seriously misleading within the meaning of Section 9.402 of
the UCC (or any other then applicable provision of the UCC) unless Borrower
shall have given the Bank at least sixty (60) days' prior written notice thereof
and shall have taken all action (or made arrangements to take such action
substantially simultaneously with such change if it is impossible to take such
action in advance) necessary or reasonably requested by the Bank to amend such
financing statement or continuation statement so that it is not seriously
misleading, or (d) change its principal place of business or remove the records
concerning the Collateral unless it has given the Bank at least thirty (30)
days' prior written notice of its intent to do so and has taken such action as
is necessary or advisable in the opinion of the Bank to cause the security
interest of the Bank in the Collateral to continue to be a first priority
perfected security interest.
Section 7.10 Compliance with ERISA. Borrower shall not, and shall
---------------------
not permit any ERISA Affiliate to:
(a) (i) engage in any transaction in connection with which
Borrower or any ERISA Affiliate could be subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed
by Section 4975 of the Code, (ii) fail to make full payment when due
of all amounts which, under the provisions of any Plan, applicable law
or applicable collective bargaining agreement, Borrower or any ERISA
Affiliate is required to pay as contributions thereto, or (iii) permit
to exist any accumulated funding deficiency, whether or not waived,
with respect to any Plan if, in the case of any of subdivision (i),
(ii) or (iii) above, such penalty or tax, or the failure to make such
payment, or the existence of such deficiency, as the case may be, will
likely have a Material Adverse Effect on the financial position of
Borrower;
(b) permit the amount of unfunded benefit liabilities (within the
meaning of Section 4001 (a) (18) of ERISA) under each Plan maintained
at such time by Borrower or any of its Related Persons (other than
Multiemployer Plans or "multiple employer Plans") to exceed $50,000; or
(c) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with respect to all Plans which are 'multiple
employer Plans" and all Multiemployer Plans incurred by Borrower or any
Related Person to exceed $50,000.
-36-
Section 7.11 Net Worth. Borrower's Net Worth shall not be less than the
---------
sum of (a) $500,000.00, (b) 80% of Borrower's Net Income for the preceding
calendar quarter, plus (c) 100% of all contributions to stockholders' equity of
Borrower after the date hereof, less all fees and costs directly incurred in
connection with such contribution.
Section 7.12 Tangible Net Worth. Borrower's Tangible Net Worth will never
------------------
be less than the minimum required by the respective purchasers of the Mortgages,
including HUD, FNMA, GNMA and FHLMC requirements in existence at any time.
Section 7.13 Adjusted Tangible Net Worth. Borrower's Adjusted Tangible Net
---------------------------
Worth shall not be less than the sum of (a) $500,000.00, (b) 80% of Borrower's
Net Income for the preceding calendar quarter, plus (c) 100% of all
contributions to stockholders' equity of Borrower after the date hereof, less
all fees and costs directly incurred in connection with such contribution.
Section 7.14 Total Liabilities to Adjusted Tangible Net Worth Ratio. The
------------------------------------------------------
ratio of Borrower's Total Liabilities to Borrower's Adjusted Tangible Net Worth
shall not at any time be more than 10.0 to 1.0.
Section 7.15 Management. The President of Borrower shall not be changed
----------
without the prior written consent of the Bank.
Section 7.16 Interested Transactions. Except with respect to any
-----------------------
transaction not exceeding $50,000.00 in value, Borrower shall not engage in any
transaction with any of its Affiliates (a) except on an arm's-length basis and
on terms no less favorable to Borrower than those obtainable from persons who
have no such relationship to Borrower and (b) provided that Borrower shall have
given the Bank prior written notice of such transaction with any director,
officer or managerial personnel.
Section 7.17 Transfer of Stock. Individually and on a cumulative no more
-----------------
than 35% of the stock in Borrower shall be sold, transferred or conveyed to or
by any party without the prior written consent of the Bank.
Section 7.18 Investors. Borrower shall furnish to the Bank upon demand
---------
financial information on all Investors to the extent that such information is
not confidential.
Section 7.19 Subsidiaries. Borrower shall not create any Subsidiaries
------------
without the prior written consent of the Bank.
ARTICLE VIII
------------
EVENTS OF DEFAULT
Section 8.01 Nature of Event. A Default shall exist if any one or more of
---------------
the following occurs:
(a) Borrower fails to make any payment of principal of or interest on
any Note, or payment of any fee, expense or other amount due hereunder,
under any Note or under any Loan Document, on or before the date such
payment is due;
(b) Default is made in the due observance or performance by Borrower
of any of the other covenants or agreements of Borrower contained in this
Agreement or in any Loan Document; provided, however, with respect to such
defaults other those specified in Sections 8.01(a), 8.01(c) through
---------------------------------
8.01(k), 8.01(p), 8.01(q) and 8.01(s) through 8.01(y) (for which no notice
------- ---------------- ------- -------
and opportunity to cure shall be available unless such opportunity is
specifically provided in such individual sections), Borrower shall have
thirty (30) days after notice of default from Bank within which to cure
such default;
-37-
(c) Any statement, warranty or representation by or on behalf of
Borrower contained in this Agreement or any Loan Document or any
certificate furnished in connection with this Agreement, proves to have
been incorrect or misleading as of the date made or deemed made and
constitutes a Material Adverse Effect;
(d) Borrower fails to make when due any payment on any other
Indebtedness, including but not limited to the Existing Indebtedness as
shown on Exhibit "G", which failure constitutes a Material Adverse Effect;
-----------
(e) Borrower shall generally not pay its debts as they become due or
shall admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors;
(f) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian, intervenor or liquidator of Borrower or of
all or a substantial part of Borrower's assets, (ii) file a voluntary
petition in bankruptcy, (iii) make a general assignment for the benefit of
creditors, (iv) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or
insolvency laws, (v) file an answer admitting the material allegations of,
or consent to, or default in answering, a petition filed against Borrower
in any bankruptcy, reorganization or insolvency proceeding, (vi) allow any
of its assets to be attached or seized, or (vi) take corporate action for
the purpose of effecting any of the foregoing;
(g) An involuntary petition or complaint shall be filed against
Borrower seeking bankruptcy or reorganization of Borrower or the
appointment of a receiver, custodian, trustee, intervenor or liquidator of
Borrower, or all or substantially all of Borrower's assets, and such
petition or complaint shall not have been dismissed within sixty (60) days
of the filing thereof; or an order, order for relief, judgment or decree
shall be entered by any court of competent jurisdiction or other competent
authority approving a petition or complaint seeking reorganization of
borrower or appointing a receiver, custodian, trustee, intervenor or
liquidator of Borrower, or of all or substantially all of Borrower's
assets;
(h) Any default or event of default shall occur under any other
Indebtedness of Borrower to the Bank;
(i) The failure of Borrower to pay any money judgment against
Borrower;
(j) The failure to have discharged any levy on, seizure, attachment,
sequestration, or similar proceedings against any of Borrower's assets;
(k) Bank's security interests in any of the Mortgage Collateral should
become unenforceable, or cease to be first priority security interests;
(l) A Reportable Event or Prohibited Transaction shall have occurred
with respect to a Plan which could have a Material Adverse Effect;
(m) A notice of intent to terminate a Plan under a "distress
termination" as described in Section 4041(c) of ERISA shall be filed which
could, in the opinion of the Bank, have a Material Adverse Effect;
(n) The Plan administrator or Borrower shall receive a notice that
the PBGC has instituted proceedings to terminate a Plan or appoint a
trustee to administer a Plan;
-38-
(o) Borrower or any ERISA Affiliate of Borrower shall withdraw from a
multiemployer Plan and the Bank shall determine that such withdrawal could
have a Material Adverse Effect;
(p) Any provision of any Loan Document shall for any reason cease to
be in full force and effect or be declared null and void or unenforceable
in whole or in part, or the validity or enforceability of any such document
shall be challenged or denied;
(q) Any change of the office of president of Borrower shall occur
without the prior written consent of the Bank;
(r) The occurrence of a Material Adverse Effect;
(s) The disqualification of Borrower to act as an approved FHA, FNMA
or GNMA (if Borrower has been approved by GNMA as a servicer) mortgagee, or
a lender under the VA loan guaranty program;
(t) If Borrower has been approved by GNMA as a servicer, GNMA shall
revoke or terminate any servicing of Borrower, or GNMA shall issue a letter
of extinguishment under any GNMA guaranty agreement, or GNMA shall seek any
judicial relief;
(u) Borrower shall cease to be an eligible seller or servicer under
any FNMA guide, or FNMA shall impose any sanctions upon or terminate or
revoke any servicing of Borrower, or FNMA shall initiate any transfer of
servicing from Borrower to another Person, or FNMA shall seek any judicial
relief;
(v) If Borrower has been approved by GNMA as a servicer, GNMA shall
send any notice to the Borrower that GNMA intends to or will revoke or
terminate any servicing of the Borrower or issue a letter of extinguishment
and such notification is not withdrawn within thirty (30) days of receipt
by Borrower;
(w) Borrower shall receive notice that FNMA intends to or will
terminate or transfer any servicing and such notice is not withdrawn by
FNMA within thirty (30) days of receipt by Borrower;
(x) If any property of Borrower is seized or attached; and
(y) If more than 35% of the stock (on an individual or cumulative
basis) in Borrower is sold, transferred or conveyed to or by any party
without the prior written consent of the Bank.
Upon the occurrence of an Event of Default described in Section 8.01(f) or (g),
----------------------
all of the Obligations shall thereupon be immediately due and payable, without
presentment, demand, protest, notice of protest, declaration or notice of
acceleration or intention to accelerate, or any other notice or declaration of
any kind, all of which are hereby expressly waived by Borrower and each Related
Person. Upon the occurrence of any other Event of Default, Bank, at any time
and from time to time may without notice to Borrower or any other person declare
any or all of the Obligations immediately due and payable, and all such
Obligations shall thereupon be immediately due and payable, without presentment,
demand, protest, notice of protest, notice of acceleration or of intention to
accelerate, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Related Person. After any such
acceleration Bank shall have no obligation to make any further Advances or loans
of any kind under any agreement with any Related Person.
Section 8.02 Remedies. If any Event of Default shall occur and be
--------
continuing, Bank may protect and enforce the Bank's rights under the Loan
Documents by any appropriate proceedings, including proceedings for
-39-
specific performance of any covenant or agreement contained in any Loan
Document, and Bank may enforce the payment of any Obligations due or enforce any
other legal or equitable right. All rights, remedies and powers conferred upon
Bank under the Loan Documents shall be deemed cumulative and not exclusive of
any other rights, remedies or powers available under the Loan Documents or at
law or in equity.
Upon the occurrence of an Event of Default, Bank may:
(a) Termination. Terminate Bank's Commitment to lend hereunder and
-----------
stop all advances hereunder.
(b) Acceleration. Declare all unpaid amounts under the Note and any
------------
other portion of the Obligations immediately due and payable, without
further notice, presentment, protest, demand or action of any nature
whatsoever (each of which is hereby expressly waived by Borrower) whereupon
the same shall become immediately due and payable.
(c) Judgment. Reduce to Judgment any claim arising under this
--------
Agreement that Bank have standing to assert.
(d) Foreclosure. Take such steps as are appropriate to foreclose or
-----------
otherwise enforce all Liens granted to Bank to secure payment and
performance of the Obligations, and to exercise any and all rights afforded
secured parties by the UCC, the Loan Documents, at law, in equity or
otherwise.
In addition to, and without limiting or restricting in any way the
foregoing, Bank or its designee may take possession of any Collateral and
related documents securing the obligations or any portion thereof not already in
the possession of Bank or its designee, and of any documents or instruments held
by Borrower for the benefit of Bank and may direct Borrower to, and Borrower
will, gather or assemble all of such Collateral and documents or any portion
thereof at the principal offices of Bank or its designee as Bank shall determine
or any other place reasonably convenient to Borrower and Bank as such parties
shall agree, may notify any party obligated on any Collateral securing the
Obligations or a portion thereof to make all payments due or to become due with
respect thereto directly to Bank or its designee, with the amounts of such
payments to be held for the benefit of Bank, and Bank or its designee may
collect such payments; enforce collection of any Collateral securing the
obligations or a portion thereof by suit or otherwise in its own name or in the
name of Borrower; assign, negotiate or transfer any such Collateral for purposes
of collection; surrender, release, substitute or exchange all or any part of
such Collateral or any collateral, security or guaranty therefor; or compromise
or extend or renew for any period (whether or not longer than the original
period) any indebtedness thereunder or evidenced thereby. Upon the request of
Bank or its designee, Borrower will, at its own expense, notify any person
obligated upon any Collateral securing the obligations or a portion thereof to
make payment to Bank or its designee of any amounts due or to become due
thereunder.
Section 8.03 Performance by Bank. Should any covenant, duty or agreement
-------------------
of Borrower fail to be performed in accordance with the terms and conditions of
any of the Loan Documents to which it is party, Bank may, at its option,
perform, or attempt to perform, such covenant, duty or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of Bank, promptly pay
any amount expended by Bank in such performance or attempted performance to Bank
at the office of Bank listed on the signature pages hereof, together with
interest thereon at the Maximum Rate from the date of such expenditure by Bank
until paid. Notwithstanding the foregoing, it is expressly understood that Bank
does not assume and shall never have, except by express written consent, any
liability or responsibility for the performance of any duties of Borrower
hereunder, or under or in connection with all or any part of the Collateral.
-40-
ARTICLE IX
----------
[INTENTIONALLY DELETED]
ARTICLE X
---------
INDEMNIFICATION
---------------
SECTION 10.01 INDEMNIFICATION. IN CONSIDERATION OF THE COMMITMENT OF BANK,
---------------
BORROWER AGREES TO INDEMNIFY AND DEFEND THE BANK AND ANY PERSON DEEMED TO
CONTROL THE BANK AND THEIR RESPECTIVE DIRECTORS, OFFICERS, ATTORNEYS,
AFFILIATES, AND EMPLOYEES (ANY AND ALL OF WHOM ARE REFERRED TO AS THE
"INDEMNIFIED PARTY") FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL
-----------------
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, DEFICIENCIES, INTEREST,
JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING BUT NOT LIMITED TO
ATTORNEYS' FEES) INCURRED BY THEM OR ANY OF THEM DIRECTLY OR INDIRECTLY ARISING
OUT OF OR BY REASON OF (I) ANY INVESTIGATION, LITIGATION OR OTHER PROCEEDING
BROUGHT OR THREATENED, ARISING OUT OF OR BY REASON OF THE BANK'S EXECUTION OF
THIS AGREEMENT OR ANY LOAN DOCUMENT AND THE TRANSACTION CONTEMPLATED THEREBY,
INCLUDING, BUT NOT LIMITED TO, ANY USE EFFECTED OR PROPOSED TO BE EFFECTED BY
BORROWER OF THE PROCEEDS OF THE ADVANCES, (II) ANY IMPOUNDMENT, ATTACHMENT OR
RETENTION OF ANY OF THE MORTGAGE COLLATERAL OR ANYTHING WHICH RESULTS IN THE
FAILURE OF ANY INVESTOR TO PAY THE ENTIRE PURCHASE PRICE OF ANY OF THE MORTGAGE
COLLATERAL PURSUANT TO ANY TAKE-OUT COMMITMENT, (III) ANY ALLEGED VIOLATION OF
ANY FEDERAL OR STATE LAW RELATING TO USURY OR TRUTH IN LENDING IN CONNECTION
WITH ANY MORTGAGE COLLATERAL, AND (IV) ANY REPRESENTATION MADE BY BORROWER
HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT NOTHING
CONTAINED HEREIN SHALL BE CONSTRUED AS AN AGREEMENT BY BORROWER TO INDEMNIFY AND
HOLD THE BANK, ANY PERSON DEEMED TO CONTROL THE BANK, OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS OR EMPLOYEES HARMLESS FROM OR AGAINST ANY LOSSES, CLAIMS,
DAMAGES, LIABILITIES, COSTS OR EXPENSES ARISING OUT OF THE GROSS NEGLIGENCE,
WILLFUL MISCONDUCT OR FRAUD OF THE BANK, OR ANY OF ITS OFFICERS, DIRECTORS OR
EMPLOYEES. WITHOUT LIMITING ANY PROVISION OF THIS PARAGRAPH, IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT EACH PERSON OR ENTITY TO BE INDEMNIFIED
HEREUNDER SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, DEFICIENCIES, INTEREST,
JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING BUT NOT LIMITED TO
ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF SUCH PERSON OR ENTITY. THE BANK SHALL NOT BE RESPONSIBLE OR
LIABLE TO BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY CONSEQUENTIAL DAMAGES
THAT MAY BE ALLEGED AS A RESULT OF OR IN CONNECTION WITH (I), (II), (III) AND
(IV) LISTED IN THIS PARAGRAPH. BORROWER'S OBLIGATIONS UNDER THIS PARAGRAPH
SHALL SURVIVE THE COMMITMENT TERMINATION DATE, NOTWITHSTANDING ANYTHING TO THE
CONTRARY. BORROWER SHALL PROVIDE SUCH INDEMNIFICATION AND DEFENSE UPON WRITTEN
NOTICE FROM THE BANK.
-41-
ARTICLE XI
----------
MISCELLANEOUS
-------------
Section 11.01 Notices. Any notice or request required or permitted to be
-------
given under or in connection with this Agreement, the Loan Documents (except as
may otherwise be expressly required therein) or the Note shall be in writing and
shall be mailed by first class mail, postage prepaid, or sent by telex,
telegram, telecopy or other similar form of rapid transmission confirmed by
mailing (by first class mail, postage prepaid) written confirmation at
substantially the same time as such rapid transmission, or personally delivered
to an officer of the receiving party. All such communications shall be mailed,
sent or delivered to the parties hereto at their respective addresses as
follows:
Borrower: Home, Inc.
--------
0000 Xxxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Mr. Xxxx Xxxxxxx
President
Bank: Guaranty Federal Bank, F.S.B.
----
0000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: Mortgage Finance Division
Mr. W. Xxxxx Xxxxxxxx
or at such other addresses or to such individual's or department's attention as
either party may have furnished the other party in writing. Any communication
so addressed and mailed shall be deemed to be given when so mailed, except that
notices and requests given pursuant to Section 3.04(f) hereof, Credit Requests
---------------
and communications related to Credit Requests shall not be effective until
actually received by the Bank, as the case may be; and any notice so sent by
rapid transmission shall be deemed to be given when receipt of such transmission
is acknowledged, and any communication so delivered in person shall be deemed to
be given when receipted for by, or actually received by, an authorized officer
of Borrower or Bank, as the case may be.
Section 11.02. Commitment Fees. Borrower shall pay to the Bank a
---------------
Commitment Fee (herein so called), calculated based upon the actual number of
days elapsed when Bank has an outstanding Commitment hereunder, equal to the per
annum rate (based upon a 360 day year) of one eighth of one percent (0.125%) of
the Commitment of Bank payable in advance in quarterly installments (each equal
to one-fourth of the annual Commitment Fee) on the date hereof and on the first
day of each calendar quarter (January, April, July and October).
Section 11.03. Custodian Fees. Borrower shall pay to Bank Custodian Fees
--------------
(herein so called) of $20.00 per Mortgage Loan.
Section 11.04 Amendments and Waivers. Any provision of this Agreement, any
----------------------
Loan Document or the Note may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed by the Borrower and the Bank.
Section 11.05 Invalidity. In the event that any one or more of the
----------
provisions contained in the Note, this Agreement or any Loan Document shall, for
any reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of such document.
-42-
Section 11.06 Survival of Agreements. All covenants and agreements herein
----------------------
and in the Loan Documents not fully performed before the date hereof or the date
of the Loan Documents, and all representations and warranties of Borrower herein
or in the Loan Documents, shall survive until payment in full of the Obligations
and termination of the Commitment.
Section 11.07 Regulatory Requirements. This Agreement is subject to all
-----------------------
governmental regulations to which the Bank is subject. Notwithstanding anything
to the contrary, in no event shall the Bank be obligated to advance to Borrower
hereunder or under the Loan Documents any amounts which would cause the Bank to
exceed applicable governmental lending limit regulations.
Section 11.08 Waiver. No course of dealing on the part of any Bank, its
------
officers, employees, consultants or agents, nor any failure or delay by the Bank
with respect to exercising any right, power or privilege of the Bank under the
Note, this Agreement or any Loan Document shall operate as a waiver thereof.
Section 11.09 Cumulative Rights. Rights and remedies of Bank under the
-----------------
Note, this Agreement and each Loan Document shall be cumulative, and the
exercise or partial exercise of any such right or remedy shall not preclude the
exercise of any other right or remedy.
SECTION 11.10 CHOICE OF LAW. THIS AGREEMENT, THE NOTE AND EACH LOAN
-------------
DOCUMENT IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF TEXAS,
EXCEPT AS OTHERWISE SPECIFIED HEREIN OR THEREIN, AND, WITH RESPECT TO USURY
LAWS, IF ANY, APPLICABLE TO THE BANK AND TO THE EXTENT ALLOWED THEREBY, AS SUCH
LAWS MAY HEREAFTER BE IN EFFECT WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS
INTEREST RATE THAN SUCH LAWS NOW ALLOW. TEX. REV. CIV. STAT. XXX. ART. 0000,
XX. 15 (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTE.
Section 11.11 Interest. Notwithstanding anything contained herein or in
--------
the Note to the contrary, the Bank shall never be deemed to have contracted for
or be entitled to receive, collect or apply as interest on any Note, any amount
in excess of the amount permitted and calculated at the maximum rate permitted
by applicable law (the "Maximum Rate"), and, in the event Bank ever receives,
-------------
collects or applies as interest any amount in excess of the amount permitted and
calculated at the Maximum Rate, such amount which would be excessive interest
shall be applied to the reduction of the unpaid principal balance of Note, and,
if the principal balance of Note is paid in full, any remaining excess shall
forthwith be paid to Borrower. In determining whether or not the interest paid
or payable under any specific contingency exceeds the Maximum Rate, Borrower and
Bank shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment (other than payments which are expressly
designated as interest payments hereunder) as an expense, fee, or premium,
rather than as interest, (ii) exclude voluntary prepayments and the effect
thereof, and (iii) spread the total amount of interest throughout the entire
contemplated term of such Note.
To the extent that Article 5069-1.04 of the Texas Revised Civil Statutes is
relevant to the Bank for the purpose of determining the Maximum Rate, the Bank
hereby elects to determine the applicable rate ceiling under such Article by the
"indicated rate ceiling" from time to time in effect, subject to the Bank's
right subsequently to change such method in accordance with applicable law.
Section 11.12 Right of Offset. Borrower hereby grants to the Bank and to
---------------
any assignee or participant of Bank a right of offset, to secure the repayment
of the Obligations, upon any and all monies, securities or other property of
Borrower, and the proceeds therefrom now or hereafter held or received by or in
transit to such Person, from or for the account of Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general or special, time or demand, provisional or
final) and credits of Borrower, and any and all claims of Borrower against such
Person at any time existing. Upon the occurrence
-43-
of any Event of Default, such Person is hereby authorized at any time and from
time to time, without notice to Borrower, to offset, appropriate, and apply any
and all items hereinabove referred to against the Obligations. The Bank's
contractual right of offset granted by Borrower hereunder is separate and
independent of the Bank's common law right of offset and is not governed by any
restrictions existing under the common law right of offset. Notwithstanding
anything in this Section 11.12 or elsewhere in this Agreement to the contrary,
-------------
the Bank and any assignee or participant of the Bank shall not have any right to
offset, appropriate or apply any accounts of Borrower which consist of escrowed
funds (except and to the extent of any beneficial interest of Borrower in such
escrowed funds) which have been so identified by Borrower in writing at the time
of deposit thereof.
Section 11.13 Assignments, etc.
----------------
(a) Assignments and Participations. All covenants and agreements by or on
------------------------------
behalf of Borrower in the Note, this Agreement, or any other Loan Document shall
bind Borrower's successors and assigns and shall inure to the benefit of the
Bank and its successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest herein, without
the prior written consent of the Bank. The Bank may assign to one or more
Persons all or any part of, and may grant participations to one or more Persons
in all or any part of, its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the Advances
owing to it and the Note held by it). In the event that Bank sells
participations in the Note or other Obligations of Borrower incurred or to be
incurred pursuant to this Agreement, to other lenders, each of such other
lenders shall have the rights of set off against such Obligations and similar
rights or Liens to the same extent as may be available to the Bank.
(b) Additional Bank. From time to time additional Bank may be added hereto
---------------
upon execution by the Borrower, the Bank and such additional Bank of
documentation in form and substance satisfactory to each of such parties.
Section 11.14 Exhibits. The exhibits attached to this Agreement are
--------
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
Section 11.15 Titles of Articles, Sections and Subsections. All titles or
--------------------------------------------
headings to articles, sections, subsections or other divisions of this Agreement
or the exhibits hereto are only for the convenience of the parties and shall not
be construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
Section 11.16 Counterparts. This Agreement may be executed in two or more
------------
counterparts, and it shall not be necessary that the signatures of both parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all counterparts together shall constitute one and the
same instrument.
SECTION 11.17. WAIVER OF TRIAL BY JURY. AS A SPECIFICALLY BARGAINED
-----------------------
INDUCEMENT FOR THE BANK TO ENTER INTO THIS AGREEMENT AND EXTEND CREDIT TO
BORROWER, BORROWER AND THE BANK EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY
ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT AND/OR THE CONDUCT OF THE RELATIONSHIP BETWEEN THE
BANK AND BORROWER.
Section 11.18. CONSENT TO JURISDICTION. THE BORROWER HEREBY AGREES THAT
-----------------------
THE OBLIGATIONS CONTAINED HEREIN ARE PERFORMABLE IN DALLAS COUNTY, TEXAS. ALL
PARTIES HERETO AGREE THAT (I) ANY ACTION ARISING OUT OF THIS TRANSACTION MAY BE
FILED IN DALLAS COUNTY, TEXAS, (II) VENUE FOR ENFORCEMENT OF ANY OF THE
OBLIGATIONS CONTAINED IN THE LOAN DOCUMENTS SHALL BE IN DALLAS COUNTY, TEXAS,
-44-
(III) PERSONAL JURISDICTION SHALL BE IN DALLAS COUNTY, TEXAS, (IV) ANY ACTION OR
PROCEEDING UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE COMMENCED
AGAINST BORROWER IN DALLAS COUNTY, (V) SUCH ACTION MAY BE INSTITUTED IN THE
COURTS OF THE STATE OF TEXAS LOCATED IN DALLAS COUNTY, TEXAS OR IN THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS LOCATED IN DALLAS
COUNTY, TEXAS, AT THE OPTION OF THE BANK AND (VI) THE BORROWER HEREBY WAIVES ANY
OBJECTION TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING AND ADDITIONALLY
WAIVES ANY RIGHT IT MAY HAVE TO BE SUED ELSEWHERE. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE BANK TO ACCOMPLISH SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
Section 11.19. Confidentiality. Except as provided herein to the contrary,
---------------
all correspondence from the Bank to Borrower and all of the Loan Documents are
confidential and may not be shown by Borrower to or discussed by Borrower with
any third party (other than on a confidential basis with Borrower's legal
counsel and independent public accountants) without Bank's prior written
consent.
SECTION 11.20. ENTIRE AGREEMENT. THIS WRITTEN LOAN AGREEMENT AND THE OTHER
----------------
LOAN DOCUMENTS REPRESENTED THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER:
--------
HOMEOWNERS MORTGAGE & EQUITY, INC.,
a Delaware corporation d/b/a HOME, INC.
By: /s/ Xxxx Xxxxxxx
--------------------
Xxxx Xxxxxxx, President
BANK:
----
GUARANTY FEDERAL BANK, F.S.B.,
a federal savings bank
By:______________________________________
W. Xxxxx Xxxxxxxx,
Assistant Vice President
-45-
STATE OF TEXAS (S)
(S)
COUNTY OF XXXXXX (S)
This instrument was ACKNOWLEDGED before me the 14th day of June, 1996, by
Xxxx Xxxxxxx, President of HOMEOWNERS MORTGAGE & EQUITY, INC. d/b/a Home, Inc.,
a Delaware corporation, on behalf of said corporation.
/s/ XXX XXXXXXX
----------------------------------------
Notary Public - State of Texas
My Commission expires: /s/ XXX XXXXXXX
02.14.98 ----------------------------------------
Printed Name of Notary
STATE OF TEXAS (S)
(S) (Notary Public Seal here)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the ____ day of ______, 1996, by
W. Xxxxx Xxxxxxxx, Assistant Vice President of GUARANTY FEDERAL BANK, F.S.B., a
federal savings bank, on behalf of said bank.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
_____________________ Printed Name of Notary
-46-
Exhibits:
--------
"A" -- Mortgage Warehouse Credit Request
"B" -- Form of Delivery Commitment Certificate
"C" -- Form of Promissory Note
"D" -- [Intentionally Deleted]
"E" -- Bailee Letter
"F" -- Trust Receipt and Bailee Letter
"G" -- Existing Indebtedness
"H" -- Certificate Accompanying Financial Statements
"I" -- [Intentionally Deleted]
"J" -- [Intentionally Deleted]
"K" -- [Intentionally Deleted]
"L" -- Compliance Certificate
"M" -- Interest Rate Election Notice
-47-
EXHIBIT "A"
-----------
MORTGAGE WAREHOUSE CREDIT REQUEST
From: HomeOwners Mortgage & Equity, Inc. d/b/a Home, Inc.
0000 Xxxxxx Xxxxxx Xxxx.
Xxxxx 000
Xxxxxx, Xxxxx 00000
Phone (000) 000-0000
Fax (000) 000-0000
TO: Guaranty Federal Bank, F.S.B.
1. HOMEOWNERS MORTGAGE & EQUITY, INC. D/B/A HOME, INC. requests an Advance in
the amount and on the date specified from the Bank (cumulatively, a
"Borrowing") in the cumulative amount and on the date herein specified,
----------
pursuant to the Warehouse Loan Agreement among Borrower, GUARANTY FEDERAL
BANK, F.S.B. ("Bank"), dated as of June 1, 1996, as amended to date (the
----
"Agreement"), and hereby grants to Bank, in accordance with the provisions
----------
of that certain Security Agreement, dated as of even date with the
Agreement, between Borrower and the Bank, as amended to date, a security
interest and Lien in the Mortgage Collateral described on the attached
schedule. Capitalized terms used herein and defined in the Agreement shall
be used herein as so defined.
2. (a) Borrowings requested (Borrowings other than Wet Advances):
----------------------------------
(i) Borrower hereby requests a Borrowing in the principal amount of
$__________.
(ii) Requested Borrowing Date: _______________, 199__.
(iii) Borrower hereby grants to the Bank a security interest in each
Mortgage Note described on Schedule I attached hereto.
----------
(b) Borrowing Requested (Wet Advances):
------------
(i) Borrower hereby requests a Wet Advance in the principal amount
of $_______________.
(ii) Borrower hereby grants to the Bank a security interest in each
Mortgage Note described on Schedule I attached hereto, and
----------
covenants to deliver to the Bank, not later than five (5) days
after the borrowing date set forth in subparagraph 2(b)(iii)
----------------------
below, the items specified in Subsection 2.03(b) of the
------------------
Agreement which relate thereto.
(iii) Requested Borrowing Date: _______________, 199__.
(iv) Aggregate outstanding principal amount of Wet Advances (after
giving effect to any Wet Advance requested hereby) with respect
to which the items of Mortgage Collateral described in Section
-------
3.02 of the Agreement have not yet been delivered to the Bank:
----
$____________________.
(v) Requirement of Agreement: Maximum of $500,000.00.
Requirement satisfied _______.
Requirement not satisfied _______.
(c) Requirement of Agreement: Maximum of $1,000,000.00 comprised of Second
Lien Mortgage Loans other than Conventional Equity Recovery Loans,
Conventional Purchase Money Second Lien Loans and Conventional Home
Improvements Loans.
Requirement satisfied _______.
Requirement not satisfied _______.
3. The undersigned officer of Borrower represents and warrants to the Bank:
(a) Borrower is entitled to receive the requested Borrowing under the terms
and conditions of the Agreement;
(b) all items which Borrower is required to furnish to the Bank pursuant to
the Agreement accompany this Credit Request (or, in the case of a Wet
Advance, shall be delivered to the Bank in accordance with Subsection
----------
2.03(b) of the Agreement);
-------
(c) all Mortgage Collateral offered hereby conforms in all respects with
the applicable requirements set forth in the Agreement and the Security
Agreement;
(d) no Default has occurred and is continuing under the Agreement; and
(e) no change or event which constitutes a Material Adverse Effect has
occurred.
4. Borrower represents and warrants that, except as permitted under Section
-------
3.02 of the Agreement, Borrower holds with respect to each of the Mortgage
----
Notes hereby offered the following:
(a) unless delivered herewith, the original filed copy of the Mortgage
relating to such Mortgage Note;
(b) mortgagee policies of title insurance conforming to the requirements of
the Bank or binding commitments for the issuance of same;
(c) insurance policies insuring the mortgaged premises as required by the
Bank; and
(d) unless delivered herewith, an original executed Take-Out Commitment
relating to such Mortgage Note.
Borrower agrees that it holds the above items in trust for the Bank, and
will at any time deliver the same to the Bank upon request or, upon written
instructions from the Bank, to any Person designated by the Bank. Borrower
further agrees that it will not deliver any of the above items, nor give,
transfer, or assign
-2-
any interest in same, to any Person other than the Bank (or the Person or
Persons designated by the Bank) without the prior written consent of the
Bank.
5. The representations and warranties of Borrower contained in the Agreement
and those contained in each other Loan Document to which Borrower is a
party are true and correct in all respects on and as of the date hereof.
HomeOwners Mortgage & Equity, Inc.
d/b/a Home, Inc.,
a Delaware corporation
Date:____________, 199___ By:__________________________________________
Name:
Vice President
STATE OF TEXAS (S)
(S)
COUNTY OF XXXXXX (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199___, by ____________________, __________________ of HOMEOWNERS MORTGAGE &
EQUITY, INC. D/B/A HOME, INC., a Delaware corporation, on behalf of said
corporation.
_________________________________________
Notary Public - State of Texas
My Commission expires:
_________________________________________
Printed Name of Notary
-3-
SCHEDULE I
MORTGAGE NOTES
Original
Principal Collateral Interest Maturity Loan Check Wiring
Date Amount Value Maker Payee Rate Date Number Number or Instructions
----- --------- ---------- ----- ------ -------- -------- ------ ------ -- ------------
-4-
EXHIBIT B
---------
FORM OF DELIVERY COMMITMENT CERTIFICATE
---------------------------------------
HOMEOWNERS MORTGAGE & EQUITY, INC. D/B/A HOME, INC. ("Borrower")
--------
hereby notifies GUARANTY FEDERAL BANK, F.S.B. ("Bank") under that certain Loan
----
Agreement dated as of June 1, 1996 (as amended, extended and replaced from time
to time, the "Agreement"), between Borrower and the Bank (as defined therein)
---------
that with respect to the Mortgage Loan referred to below:
( ) Such Mortgage Loan was funded and closed on____________ _____: or
( ) Such Mortgage Loan will close and fund no later than ________ ()
Business Day(s) from the date hereof.
Borrower hereby acknowledges, agrees and confirms with respect to such
Mortgage Loan as follows:
1. Such Mortgage Loan has been, or will be, closed and funded with
advance(s) (an "Advance") made by the Bank pursuant to the Agreement, such
-------
Advance constituting "new value" as that term is used in Section 9.304(d) of the
----------------
Texas Business and Commerce Code (or the corresponding provision of the Code of
any other applicable jurisdiction).
2. Bank has a first perfected security interest in and first lien upon
said Mortgage Loan, including, without limitation, in the promissory note
evidencing such Mortgage Loan (the "Mortgage Note").
-------------
3. The Mortgage Note and all other documents, instruments and agreements
required to be delivered to Bank pursuant to Section 2.03 of the Agreement with
------------
respect to such Mortgage Loan (the "Required Documents"), either have been
------------------
delivered to Bank or are being transmitted to Bank and will be in the possession
of Bank on or before the fifth (5th) Business Day after the date hereof.
4. Until the required documents for such Mortgage Loan are delivered to
Bank, they will be held in trust for Bank, segregated and conspicuously marked
to show the interest of Bank therein. Borrower assumes all responsibility for
loss, damage or deterioration of such Mortgage Loan and the Required Documents
relating thereto until the same are in the possession of Bank and will make no
disposition of such Mortgage Loan and Required Documents other than to Bank.
5. In the event the required documents for such Mortgage Loan are not
received by Bank by the date required under Paragraph 3 above, Borrower shall
-----------
immediately (a) prepay the full amount of any Advance relating to such Mortgage
Loan (and Bank may debit the Borrower's Funding Account for the full amount
thereof) or (b) deliver additional Mortgage Collateral, the Collateral Value of
which is equal to or greater than the amount of such Advance, all as set forth
in Section 2.04 of the Agreement. Borrower hereby acknowledges and agrees that
------------
any Advance relating to the Mortgage Loan described below is secured by all
Collateral in which Bank has a security interest under the Agreement and Loan
Documents.
6. Capitalized terms not otherwise defined herein shall have the meanings
assigned such terms in the Agreement.
7. Identifying Information:
Loan Number: Note Date: Note Amount:
------------------------ ------------------ --------------------
Mortgagor: Note Rate:
------------------------ ------------------
Property Address: Loan Type: Program Type:
------------------------ ---- FHA ----- ARMS
------------------------ ____ VA ----- GPM
---- Conv. Conforming ----Other
Escrow or Title Company: ---- Conv. Non-Conforming
------------------------
------------------------
DATE:______________ 19__
HOMEOWNERS MORTGAGE & EQUITY, INC.
D/B/A HOME, INC.,
a Delaware corporation
By:_________________________________
Name:__________________________
Title:_________________________
STATE OF TEXAS (S)
(S)
COUNTY OF XXXXXX (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199___, by ___________________, _________________ of HOMEOWNERS MORTGAGE &
EQUITY, INC. D/B/A HOME, INC., a Delaware corporation, on behalf of said
corporation.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
---------------------- Printed Name of Notary
Exhibit "C"
-----------
WAREHOUSE PROMISSORY NOTE
-------------------------
$2,000,000.00 Dallas, Texas June 1, 1996
FOR VALUE RECEIVED, the undersigned, HOMEOWNERS MORTGAGE & EQUITY, INC.
D/B/A HOME, INC., a Delaware corporation (herein called "Borrower"), hereby
--------
promises to pay to the order of GUARANTY FEDERAL BANK, F.S.B., a federal savings
bank (herein called "Bank"), the principal sum of TWO MILLION AND NO/100 DOLLARS
----
($2,000,000.00) or, if less, the aggregate unpaid principal amount of the Loan
made under this Note by Bank to Borrower pursuant to the terms of the Loan
Agreement (as hereinafter defined), together with interest on the unpaid
principal balance thereof as hereinafter set forth, both principal and interest
payable as herein provided in lawful money of the United States of America, for
the account of Bank, at the offices of Guaranty Federal Bank, F.S.B. at 0000
Xxxxxxx Xxxxxx, Xxxxxx, Xxxxx or at such other place within Dallas County, Texas
or such other address as may be given to Borrower by the Bank.
This Note (a) is executed and delivered pursuant to that certain Warehouse
Loan Agreement dated as of June 1, 1996 between Borrower and the Bank (herein,
as from time to time supplemented, amended or restated, called the "Loan
----
Agreement"), and is the Warehouse Promissory Note and the Note as defined
---------
therein, (b) is subject to the terms and provisions of the Loan Agreement, which
contains provisions for payments and prepayments hereunder, acceleration of the
maturity hereof upon the happening of certain stated events and the obligation
of Bank to advance funds hereunder, and (c) is secured by and entitled to the
benefits of certain Loan Documents (as identified and defined in the Loan
Agreement). Payments on this Note shall be made and applied as provided herein
and in the Loan Agreement. Interest shall be due and payable on each Interest
Payment Date. Reference is hereby made to the Loan Agreement for a description
of certain rights, limitations of rights, obligations and duties of the parties
hereto and for the meanings assigned to terms used and not defined herein and to
the Loan Documents for a description of the nature and extent of the security
thereby provided and the rights of the parties thereto. All capitalized terms
used herein and not otherwise defined herein shall have the meanings given
thereto in the Loan Agreement. The holder of this Note shall be entitled to the
benefits provided for in the Loan Agreement.
Interest shall be due and payable on the tenth day of each month, beginning
July 10, 1996, and on any other Interest Payment Date. Interest shall accrue on
the outstanding principal balance of this Note at the rates specified in the
Loan Agreement.
The principal amount of this Note, together with all unpaid interest
accrued hereon, shall be due and payable in full on January 31, 1997. All
payments of principal of and interest upon this Note shall be made by Borrower
to the Bank in federal or other immediately available funds. All payments made
hereon shall be due and payable and applied in accordance with the Loan
Agreement.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum amount of interest which, under applicable law, may
be charged on this Note, and this Note is expressly made subject to the
provisions of the Loan Agreement which more fully set out the limitations on how
interest accrues hereon. In the event applicable law provides for a ceiling
under Texas Revised Civil Statutes Annotated article 5069-1.04, that ceiling
shall be the indicated rate ceiling and shall be used in this Note for
calculating the Maximum Rate and for all other purposes. The term "applicable
law" as used in this Note shall mean the laws of the State of Texas or the laws
of the United States,
-------------
Initialed for
Identification
-1-
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court of in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment for payment, protest, notice of protest,
notice of intention to accelerate the maturity of this Note, diligence in
collecting, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any security, or any delay, indulgence or
other act of any trustee or any holder hereof, whether before or after maturity.
Borrower reserves the right to prepay the outstanding principal balance of
this Note, in whole or in part at any time and from time to time without premium
or penalty, in accordance with the terms of the Loan Agreement.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED
---------------------------------------------------------------------------
BY THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY
--------------------------------------------------------------------------------
APPLICABLE FEDERAL LAW.
-----------------------
THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
HOMEOWNERS MORTGAGE & EQUITY, INC. D/B/A
HOME, INC., a Delaware corporation
By:___________________________
Xxxx Xxxxxxx,
President
-------------
Initialed for
Identification
-2-
STATE OF TEXAS (S)
(S)
COUNTY OF XXXXXX (S)
This instrument was ACKNOWLEDGED before me the ____ day of June, 1996, by
Xxxx Xxxxxxx, President of HOMEOWNERS MORTGAGE & EQUITY, INC. D/B/A HOME, INC.,
a Delaware corporation, on behalf of said corporation.
________________________________
Notary Public -State of Texas
My Commission expires: ________________________________
--------------------- Printed Name of Notary
-3-
(Guaranty Federal Bank Letterhead) EXHIBIT "E"
-----------
Investor Address AIR XXXX #___________
----------------
______________________
______________________
DATE ________________
BAILEE LETTER
-------------
Ladies and Gentlemen:
Enclosed are ____ original promissory notes in the original principal
amount of $________ ("Notes") evidencing the mortgage loans described on the
-----
attached Schedule "A" along with other related documents (collectively,
------------
"Collateral"), for inspection by ___________________________ ("Investor") prior
----------- --------
to purchase pursuant to a commitment to purchase such mortgage loans from
HomeOwners Mortgage & Equity, Inc. d/b/a Home, Inc. ("Seller"). A security
------
interest in the Collateral and proceeds has been granted to GUARANTY FEDERAL
BANK, F.S.B. ("Bank"), in accordance with Seller's warehouse loan agreement (the
----
"Loan Agreement") with Bank.
--------------
All Collateral now or hereafter delivered to Investor is to be held by
Investor in trust as a custodian, bailee and agent for the benefit of Bank and
subject to only Bank's direction and control until released as provided herein.
Proceeds of all Collateral accepted for purchase must be remitted immediately,
by wire transfer, upon settlement by Investor, in immediately available funds,
to: GUARANTY FEDERAL BANK, F.S.B., ABA #________________ for benefit of
HOMEOWNERS MORTGAGE & EQUITY, INC. D/B/A HOME, INC., Account #________________,
Attn:___________________. Investor shall be responsible for making certain that
all of the proceeds from the sale of the Collateral are received in accordance
with the wire transfer instructions set forth above.
Bank has no obligation to release its security interest in the collateral
unless Bank receives the minimum amount of proceeds for each Note as set forth
on the attached Schedule "A". Upon Bank's receipt of such proceeds, its
------------
security interest in the Collateral shall terminate without further action. The
Collateral has not been assigned or transferred by Bank to any other party.
Collateral which is not purchased must be returned within ten (10) days
after the date of this Bailee Letter to the undersigned at the address listed
above. The Bank reserves the right at any time, until the Collateral has been
purchased, to demand the return of the Collateral to Bank, and Investor agrees
to return to Bank any Collateral not purchased by Investor immediately upon such
demand by Bank.
The persons listed on the attached Schedule "B" are the authorized
------------
representatives ("Authorized Representatives") of Bank. Investor shall not
--------------------------
honor any communication from Seller relating to any Collateral, which is not
confirmed by the written or telephonic consent of an Authorized Representative
of Bank, or until Bank has received the minimum amount of proceeds of the sale
of such Notes set forth on the attached Schedule "A". Investor shall not deliver
------------
any Collateral to any third party without the prior written consent of Bank. In
no event shall the Notes enclosed herein be returned to Seller.
PAGE 2
In the event Investor is not able for any reason to comply with the terms
of this Bailee Letter, Investor shall immediately return all Collateral to Bank
at the above address.
No deviation in performance of the terms of any previous Bailee Letter
will alter any of your duties or responsibilities as provided herein. If Bank
files suit to recover the Collateral, or the proceeds from the sale of the
Collateral, the prevailing party shall recover all attorneys' fees, expenses and
costs as a result of such action.
By accepting the Collateral, Investor shall be bound by the terms of this
Bailee Letter, Bank requests that Investor acknowledge receipt of the Collateral
and this Bailee Letter by signing and returning the enclosed copy of this
Bailee Letter in the enclosed self-addressed envelope; provided, however, that
Investor's failure to do so does not nullify Investor's acceptance of the terms
of this Bailee Letter.
Sincerely,
GUARANTY FEDERAL BANK, F.S.B.
By: ________________________________
Name:___________________________
Title:__________________________
ACKNOWLEDGEMENT OF RECEIPT
INVESTOR:
--------
___________________________________ [COMPANY]
By:________________________________
Name:______________________________
Title:_____________________________
Dated:_____________________________
PAGE 3
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199__, by ___________________, _________________ of ___________________________,
a _______________ __________________, on behalf of said __________________.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
--------------------- Printed Name of Notary
The undersigned Seller agrees to and acknowledges the terms of this Bailee
Letter and, notwithstanding any contrary understanding with or instructions to
Investor, Seller instructs Investor to act according to the instructions set
forth in this Bailee Letter. These instructions cannot be altered except by
written instructions executed by Bank.
SELLER:
------
HOMEOWNERS MORTGAGE & EQUITY, INC.
D/B/A HOME, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
PAGE 4
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199__, by ___________________, _________________ of ___________________________,
a _______________ __________________, on behalf of said __________________.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
--------------------- Printed Name of Notary
SCHEDULE "A"
------------
Minimum Amount Necessary to
Mortgagor Name Release Security Interest
-------------- --------------------------
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
___________________________ $___________________________
Total: $___________________________
SCHEDULE "B"
------------
The following list of persons are authorized representatives of Bank. In
accordance with the terms of this Bailee Letter, you are instructed that until
Bank has received the minimum amount of proceeds noted above from the sale of
the Collateral, you are not to honor any communication from Seller relating to
any Collateral which is not confirmed by the written or telephonic consent of
one of the authorized signers listed below:
Typed Name: Title: Signature:
----------- ------ ----------
---------------- ----------------- -----------------
---------------- ----------------- -----------------
---------------- ----------------- -----------------
---------------- ----------------- -----------------
---------------- ----------------- -----------------
---------------- ----------------- -----------------
STATE OF TEXAS (S)
(S)
COUNTY OF DALLAS (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199__, by ___________________, _________________ of HOMEOWNERS MORTGAGE &
EQUITY, INC. D/B/A HOME, INC., a Delaware corporation, on behalf of said
corporation.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
--------------------- Printed Name of Notary
EXHIBIT "F"
-----------
TRUST RECEIPT
AND BAILEE LETTER
DATE:______________________
GUARANTY FEDERAL BANK, F.S.B.
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Attn: W. Xxxxx Xxxxxxxx
Pursuant to Section 3.06 of Loan Agreement by and between Guaranty Federal Bank,
------------
F.S.B., as "Bank", Xxxxx Mortgage Acceptance Corporation, as "Borrower" (as
---- --------
defined therein) ("Loan Agreement"), Borrower requests the temporary transfer of
--------------
the original Mortgage Note(s) as listed below to allow Borrower to make
corrections to such Mortgage Notes. We acknowledge that these Mortgage Notes
are being used as Mortgage Collateral for the warehouse line of credit
established by the Loan Agreement.
Borrower Loan Amount Collateral Value
-------- ----------- ----------------
_______________ _______________ _____________________
_______________ _______________ _____________________
_______________ _______________ _____________________
Borrower agrees to hold the Mortgage Notes in trust for Bank, as a
custodian, bailee and agent for the benefit of Bank. Borrower agrees to do the
following within fourteen (14) days of this date:
(a) Return the Mortgage Notes to Bank, or
(b) Pay to Bank the Collateral Value of the Mortgage Notes.
In the event Borrower is unable for any reason to comply with the terms of
this Trust Receipt, Borrower shall immediately return the Mortgage Notes to
Bank.
By accepting the Mortgage Notes, Borrower shall be bound by the terms of
this Trust Receipt and Bailee Letter. Bank requests that Borrower acknowledge
the receipt of the Mortgage Notes and this Trust Receipt and Bailee Letter by
signing below. Capitalized terms not defined herein are used as defined in the
Loan Agreement.
REQUESTED BY:
HOMEOWNERS MORTGAGE & EQUITY, INC.
D/B/A HOME, INC.
By:____________________________
Name:________________________
Title:______________________
EXHIBIT "G"
-----------
EXISTING INDEBTEDNESS
EXHIBIT H
---------
CERTIFICATE ACCOMPANYING
------------------------
FINANCIAL STATEMENTS
--------------------
Reference is made to that certain Loan Agreement dated as of June 1, 1996
(as from time to time amended, the "Agreement"), by and between HOMEOWNERS
---------
MORTGAGE & EQUITY, INC. D/B/A HOME, INC. ("Borrower") and GUARANTY FEDERAL BANK,
--------
F.S.B. ("Bank"), which Agreement is in full force and effect on the date hereof.
----
Terms which are defined in the Agreement are used herein with the meanings given
them in the Agreement.
This Certificate is furnished pursuant to Sections 6.01(a) or 6.01(b) of
---------------------------
the Agreement. Together herewith Borrower is furnishing to Bank Borrower's
audited annual financial statements or monthly financial statement (the
"Financial Statements") dated ______________ (the "Reporting Date"). Borrower
--------------------- --------------
hereby represents, warrants, and acknowledges to Bank that:
(a) the officer of Borrower signing this instrument is the duly
elected, qualified and acting___________________________________
of Borrower and as such is Borrower's chief financial officer;
(b) the Financial Statements are accurate and complete and satisfy
the requirements of the Agreement;
(c) attached hereto is Schedule H-1 showing Borrower's compliance as
------------
of the Reporting Date with the requirements of Sections 7.02,
-----
7.06, 7.09, 7.10, 7.12, 7.13, 7.14, 7.15 and 7.16 of the
--------------------------------------------------
Agreement and Borrower's non-compliance as of such date with the
requirements of Section(s) ____________________ of the Agreement;
(d) on the Reporting Date Borrower was, and on the date hereof
Borrower is, in full compliance with the disclosure requirements
of Section 6.01 of the Agreement, and no Default otherwise
------------
existed on the Reporting Date or otherwise exists on the date of
this instrument [except for Default(s) under Section(s)
____________________ of the Agreement, which (is/are] more fully
described on a schedule attached hereto).
The officer of Borrower signing this instrument hereby certifies that he
has reviewed the Loan Documents and the Financial Statements and has otherwise
undertaken such inquiry as is in his opinion necessary to enable him to express
an informed opinion with respect to the above representations, warranties and
acknowledgments of Borrower and, to the best of his knowledge, such
representations, warranties, and acknowledgments are true, correct and complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________________,
19______.
HOMEOWNERS MORTGAGE & EQUITY, INC.
D/B/A HOME, INC., a Delaware corporation
By:_________________________________
Xxxx Xxxxxxx,
President
STATE OF TEXAS (S)
(S)
COUNTY OF XXXXXX (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199__, of HOMEOWNERS MORTGAGE & EQUITY, INC. D/B/A HOME, INC., a Delaware
corporation, on behalf of said corporation.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
Printed Name of Notary
_____________________
EXHIBIT H
---------
Schedule H-1
------------
Financial Covenants Required Actual or
------------------- -------- ---------
[IN COMPLIANCE]*
---------------
1) No Merger [7.01]: [YES] or [NO]
2 Limitation on Indebtedness
of Borrower [7.02]: [YES] or [NO] *
3) Negative Pledge [7.05]: [YES] or [NO] *
4) Loans, Advances and
Investments of Borrower
and Affiliates [7.06]: [YES] or [NO] *
5) Operational Changes [7.09]: [YES] or [NO] *
6) Compliance with ERISA
[7.10]: [YES] or [NO] *
7) Net Worth of Borrower Not less than $500,000
[7.11]: plus 7.11(a) & (b) _______
8) Adjusted Tangible Net
Worth of Borrower Not less than $500,000
[7.13]: HUD, FNMA, GNMA,
FHLMC minimum _______
9) Adjusted Tangible Net
Worth of Borrower Not less than $5000,000
[7.13]: Plus 7.13(a) & (b) _______
10) Total Liabilities to
Adjusted Tangible Net Not less than
Worth [7.14]: 10.0 to 1.0 _______
11) Management [7.15]: [YES] or [NO]*
12) Interested Transactions [7.16]: [YES] or [NO] *
13) Transfer of Stock [7.17]
[YES] or [NO] *
HOMEOWNERS MORTGAGE & EQUITY, INC.
D/B/A HOME, INC., a Delaware corporation
By: _______________________________
__________________, ___________
_______________________
[Date]
STATE OF TEXAS (S)
(S)
COUNTY OF XXXXXX (S)
This instrument was ACKNOWLEDGED before me the ____ day of __________,
199__, by _________________, _________________ of HOMEOWNERS MORTGAGE & EQUITY,
INC. D/B/A HOME, INC., a Delaware corporation, on behalf of said corporation.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
--------------------- Printed Name of Notary
EXHIBIT "L"
-----------
COMPLIANCE CERTIFICATE
----------------------
Reference is made to that certain Loan Agreement dated as of June 1, 1996
(the "Loan Agreement"), between HomeOwners Mortgage & Equity, Inc. d/b/a Home,
--------------
Inc., a Delaware corporation ("Borrower") and Guaranty Federal Bank, F.S.B.
--------
("Bank"). Terms which are defined in the Loan Agreement and which are used but
------
not defined herein shall have the meanings given them in the Loan Agreement.
The undersigned, ______________________________ does hereby certify that he/she
has made a thorough inquiry into all matters certified herein and, based upon
such inquiry, experience, and the advice of counsel, does hereby further certify
that:
1. He/she is the duly elected, qualified, and acting President or Chief
Financial Officer of Borrower.
2. All representations and warranties made by Borrower in any Loan
Document delivered on or before the date hereof are true on and as of the date
hereof as if such representations and warranties had been made as of the date
hereof.
3. No Default or Event of Default exists on the date hereof.
4. Borrower has performed and complied with all agreements and conditions
required in the Loan Documents to be performed or complied with by it on or
prior to the date hereof.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
__________________, 199__.
________________________________
________________, ______________
Name Title
STATE OF TEXAS (S)
(S)
COUNTY OF XXXXXX (S)
This instrument was ACKNOWLEDGED before me the ____ day of
_________________, 199__, by _________________, in his/her capacity as
______________ of HOMEOWNERS MORTGAGE & EQUITY, INC. D/B/A HOME, INC., a
Delaware corporation, on behalf of said corporation.
________________________________
Notary Public - State of Texas
My Commission expires: ________________________________
--------------------- Printed Name of Notary
EXHIBIT "M"
-----------
INTEREST RATE ELECTION NOTICE
-----------------------------
Reference is made to that certain Loan Agreement dated as of _____________,
1996 (the "Loan Agreement"), between HomeOwners Mortgage & Equity, Inc. d/b/a
--------------
Home, Inc., a Delaware corporation ("Borrower") and Guaranty Federal Bank,
--------
F.S.B. ("Bank"). Terms which are defined in the Loan Agreement and which are
----
used but not defined herein shall have the meanings given them in the Loan
Agreement. The undersigned is the duly elected qualified and acting officer of
Borrower. Pursuant to Paragraph 2.04(a) Borrower hereby elects to treat the
----------------
month of ____________, 199__, as a:
[_] Base Rate Month
or
[_] Federal Funds Rate Month.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as of
the ______________________, 199___.
HOMEOWNERS MORTGAGE & EQUITY, INC.
D/B/A HOME, INC., a Delaware corporation
By: ________________________________
Name:___________________________
Title:__________________________
