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EXHIBIT 10.1
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WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE-FAMILY MORTGAGE LOANS)
BETWEEN
BNC MORTGAGE, INC.,
A DELAWARE CORPORATION
AND
BANK UNITED,
A FEDERAL SAVINGS BANK
DATED AS OF FEBRUARY 2, 1999
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TABLE OF CONTENTS
1. DEFINITIONS ........................................................ Page 1
1.1 Defined Terms ............................................... Page 1
1.2 Other Definitional Provisions ............................... Page 11
2. THE CREDIT ......................................................... Page 11
2.1 The Commitment .............................................. Page 11
2.2 Procedures for Obtaining Advances ........................... Page 13
2.3 Note ........................................................ Page 14
2.4 Interest .................................................... Page 14
2.5 Principal Payments .......................................... Page 15
2.6 Expiration of Commitment .................................... Page 16
2.7 Method of Making Payments ................................... Page 17
2.8 Commitment Fee .............................................. Page 17
2.9 Miscellaneous Charges ....................................... Page 17
2.10 Bailee ...................................................... Page 17
3. COLLATERAL ......................................................... Page 18
3.1 Grant of Security Interest .................................. Page 18
3.2 Security Interest in Mortgage-backed Securities ............. Page 19
3.3 Delivery of Collateral Documents ............................ Page 19
3.4 Delivery of Additional Collateral or Mandatory Prepayment ... Page 20
3.5 Right of Redemption from Pledge ............................. Page 20
3.6 Collection and Servicing Rights ............................. Page 20
3.7 Return or Release of Collateral at End of Commitment ........ Page 21
4. CONDITIONS PRECEDENT ............................................... Page 21
4.1 Initial Advance ............................................. Page 21
4.2 Each Advance ................................................ Page 22
5. REPRESENTATIONS AND WARRANTIES ..................................... Page 23
5.1 Organization; Good Standing; Subsidiaries ................... Page 23
5.2 Authorization and Enforceability ............................ Page 24
5.3 Financial Condition ......................................... Page 24
5.4 Litigation .................................................. Page 24
5.5 Compliance with Laws ........................................ Page 25
5.6 Regulations G and U ......................................... Page 25
5.7 Investment Company Act ...................................... Page 25
5.8 Agreements .................................................. Page 25
5.9 Title to Properties ......................................... Page 25
5.10 ERISA ....................................................... Page 25
5.11 Eligibility ................................................. Page 26
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5.12 Special Representations Concerning Collateral ........... Page 26
5.13 RICO .................................................... Page 28
5.14 Proper Names ............................................ Page 28
5.15 Direct Benefit From Loans ............................... Page 28
5.16 Loan Documents Do Not Violate Other Documents ........... Page 28
5.17 Consents Not Required ................................... Page 29
5.18 Material Fact Representations ........................... Page 29
5.19 Place of Business ....................................... Page 29
5.20 Use of Proceeds; Business Loans ......................... Page 29
5.21 No Undisclosed Liabilities .............................. Page 29
5.22 Tax Returns and Payments ................................ Page 29
5.23 Subsidiaries ............................................ Page 30
5.24 Holding Company ......................................... Page 30
5.25 Year 2000 Issue ......................................... Page 30
6. AFFIRMATIVE COVENANTS .......................................... Page 30
6.1 Payment of Note ......................................... Page 30
6.2 Financial Statements and Other Reports .................. Page 30
6.3 Maintenance of Existence; Conduct of Business ........... Page 31
6.4 Compliance with Applicable Laws ......................... Page 32
6.5 Inspection of Properties and Books ...................... Page 32
6.6 Notice .................................................. Page 32
6.7 Payment of Debt, Taxes, etc. ............................ Page 32
6.8 Insurance ............................................... Page 33
6.9 Closing Instructions .................................... Page 33
6.10 Other Loan Obligations .................................. Page 33
6.11 Use of Proceeds of Advances ............................. Page 33
6.12 Special Affirmative Covenants Concerning Collateral ..... Page 33
6.13 Cure of Defects in Loan Documents ....................... Page 34
6.14 Year 2000 Compliant ..................................... Page 35
7. NEGATIVE COVENANTS ............................................. Page 35
7.1 Contingent Liabilities .................................. Page 35
7.2 Pledge of Mortgage Loans ................................ Page 35
7.3 Loss of Eligibility ..................................... Page 35
7.4 Debt to Adjusted Tangible Worth Ratio ................... Page 35
7.5 Minimum Adjusted Tangible Net Worth ..................... Page 35
7.6 Limits on Corporate Distributions ....................... Page 35
7.7 RICO .................................................... Page 36
7.8 No Loans or Investments Except Approved Investments ..... Page 36
7.9 Charter Documents and Business Termination .............. Page 36
7.10 Changes in Accounting Methods ........................... Page 36
7.11 No Sales. Leases or Dispositions of Property ............ Page 37
7.12 Changes in Business or Assets ........................... Page 37
7.13 Changes in Office or Inventory Location ................. Page 37
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7.14 Special Negative Covenants Concerning Collateral .............. Page 37
7.15 No Indebtedness ............................................... Page 37
8. DEFAULTS; REMEDIES ................................................... Page 38
8.1 Events of Default ............................................. Page 38
8.2 Remedies ...................................................... Page 41
8.3 Application of Proceeds ....................................... Page 43
8.4 Lender Appointed Attorney-in-Fact ............................. Page 44
8.5 Right of Set-Off .............................................. Page 44
9. NOTICES .............................................................. Page 44
10. REIMBURSEMENT OF EXPENSES; INDEMNITY ................................. Page 45
11. FINANCIAL INFORMATION ................................................ Page 46
12. MISCELLANEOUS ........................................................ Page 46
12.1 Terms Binding Upon Successors; Survival of Representations .... Page 46
12.2 Assignment .................................................... Page 46
12.3 Amendments .................................................... Page 47
12.4 Governing Law ................................................. Page 47
12.5 Participations ................................................ Page 47
12.6 Relationship of the Parties ................................... Page 47
12.7 Severability .................................................. Page 47
12.8 Usury ......................................................... Page 48
12.9 CONSENT TO JURISDICTION ....................................... Page 48
12.10 Arbitration ................................................... Page 49
12.11 ADDITIONAL INDEMNITY .......................................... Page 50
12.12 No Waivers Except in Writing .................................. Page 50
12.13 Waiver of Jury Trial .......................................... Page 51
12.14 Multiple Counterparts ......................................... Page 51
12.15 No Third Party Beneficiaries .................................. Page 51
12.16 RELEASE OF LENDER LIABILITY ................................... Page 51
12.17 Entire Agreement; Amendment ................................... Page 51
12.18 NO ORAL AGREEMENTS ............................................ Page 51
EXHIBIT "A" ............................................................... Page 53
EXHIBIT "B" ............................................................... Page 56
EXHIBIT "C" ............................................................... Page 57
EXHIBIT "D" ............................................................... Page 61
EXHIBIT "E" ............................................................... Page 62
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EXHIBIT "F" ......................................................... Page 64
ANNEX "A" ........................................................... Page 65
EXHIBIT "G" ......................................................... Page 67
EXHIBIT "H" ......................................................... Page 68
EXHIBIT "I" ......................................................... Page 69
EXHIBIT "J" ......................................................... Page 70
EXHIBIT "K" ......................................................... Page 71
EXHIBIT "L" ......................................................... Page 73
EXHIBIT "M" ......................................................... Page 74
EXHIBIT "N" ......................................................... Page 77
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WAREHOUSING CREDIT AND SECURITY AGREEMENT
THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Agreement"), is
dated as of February 2, 1999, by and between BNC MORTGAGE, INC., a Delaware
corporation (the "Company"), having its principal office at 1603 McGaw Avenue,
Irvine, California 92614, and BANK UNITED, a federal savings bank (the
"Lender"), having its principal office at 3200 Southwest Freeway, Suite 1300,
Houston, Texas 77027.
WHEREAS, the Company has requested the Lender to make certain loans to
the Company to finance the origination or purchase of Mortgage Loans (as that
term is herein defined) which loans are for the benefit of the Company;
WHEREAS, the Lender is willing to make such loans as herein provided,
upon the terms, agreements and covenants and subject to the conditions
hereinafter set forth and in reliance on the representations and warranties
herein made and referred to; and
WHEREAS, the Company and the Lender desire to set forth herein the
terms and conditions upon which the Lender shall provide warehouse financing to
the Company;
NOW, THEREFORE, for good and valuable consideration, the amount and
sufficiency of which are hereby acknowledged by the parties hereto, to induce
the Lender to provide the warehouse financing facility to the Company and in
reliance of the representations and warranties made herein, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or elsewhere in this
Agreement (including the exhibits hereto) shall have the following meanings:
"Adjusted Tangible Net Worth" means, with respect to Company
at any date, the Tangible Net Worth of Company at such date plus 1.0%
of the sum of the outstanding principal balances of Mortgage Loans
serviced by Company plus Subordinated Debt of the Company.
"Advance" means a disbursement by the Lender under the
Commitment pursuant to Article 2 of this Agreement.
"Advance Request" has the meaning set forth in Section 2.2(a)
hereof.
"Affiliate" shall mean any Person controlling, controlled by
or under common control with any other Person. For purposes of this
definition "control" (including "controlled by" and "under common
control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise or owning or possessing
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the power to vote 10% or more of any class of voting securities of any
Person. Without limiting the generality of the foregoing, for purposes
of this Agreement, Company and each of its respective Subsidiaries
shall be deemed to be Affiliates of one another.
"Aged Mortgage Loans" means an Eligible Mortgage Loan that has
been included in Collateral for a period of more than ninety (90) days.
"Agreement" means this Warehousing Credit and Security
Agreement (Single Family Mortgage Loans), either as originally executed
or as it may from time to time be supplemented, modified or amended.
"Applicable Law" shall mean the laws of the State of Texas and
the United States of America in effect from time to time and applicable
to the transactions between the Lender and the Company pursuant to this
Agreement and the other Loan Documents whichever permits the charging
and collection of the highest nonusurious rate of interest on such
transactions. For purposes of determining Texas law with respect to the
highest nonusurious rate of interest, the weekly ceiling permitted
under Chapter 1D. of the Texas Credit Title, as amended, shall be
controlling.
"Approved Custodian" means a Person acceptable to the Lender
from time to time in its sole discretion, who possesses Mortgage Loans
that secure Mortgaged-backed Securities.
"Bailee Letter" has the meaning set forth in Section 3.3
hereof.
"Business Day" means any day excluding Saturday, Sunday and
any day on which Lender is closed for business.
"Capitalized Lease" shall mean any lease under which rental
payments are required to be capitalized on a balance sheet of the
lessee in accordance with GAAP.
"Capitalized Rentals" shall mean the amount of aggregate
rentals due and to become due under all Capitalized Leases under which
the Company is a lessee that would be reflected as a liability on a
balance sheet of the Company.
"Change of Control" means
(a) a sale of substantially all of the Company's
assets or common stock to any Person or related group of
Persons; or
(b) a change in two or more of the executive
management of the Company, including, without limitation, a
change in the chief executive officer, president or chief
financial officer; or
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(c) any merger or consolidation of the Company where
the Company is not the surviving entity.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Collateral Documents" means all of the documents and other
items described on EXHIBIT "C" hereto and required to be delivered to
the Lender in connection with an Advance.
"Collateral Value" means
(a) with respect to any Eligible Mortgage Loan, an
amount equal to the least of (i) the actual out-of-pocket cost
of such Mortgage Loan to the Company, i.e., the net amount
actually funded against such Mortgage Loan or the net purchase
price of such Mortgage Loan, (ii) the Par Value thereof, or
(iii) the Fair Market Value of such Mortgage Loan;
(b) with respect to Mortgage-backed Securities, an
amount equal to the least of (i) the sum of the principal
balances of the Mortgage Loans from which such Mortgage-backed
Securities were created, (ii) the amount which the Investor
has committed to pay for such Mortgage-backed Securities
pursuant to a Purchase Commitment, or (iii) the Fair Market
Value of such Mortgage-backed Security;
(c) with respect to Collateral that is not described
within (a) or (b), and that is pledged pursuant to Section 3.4
hereof, Collateral Value shall equal an amount established by
Lender in its sole discretion;
(d) with respect to Collateral that is not described
in (a), (b), or (c) the Collateral Value shall be equal to
$0.00;
(e) notwithstanding the foregoing, with respect to
Mortgage Loans that are not Eligible Mortgage Loans, the
Collateral Value thereof shall equal $0.00.
"Commitment" has the meaning set forth in Section 2.1(a)
hereof.
"Commitment Fee" has the meaning set forth in Section 2.8
hereof.
"Company" has the meaning set forth in the first paragraph of
this Agreement.
"Conventional Mortgage Loan" means a Single-family Mortgage
Loan, other than an FHA Loan or VA Loan, that complies with all
applicable requirements for purchase under the FNMA or FHLMC standard
form of conventional mortgage purchase contract.
"Debt" means, with respect to any Person, at any date (a) all
indebtedness or other obligations of such Person which, in accordance
with GAAP, would be included in
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determining total liabilities as shown on the liabilities side of a
balance sheet of such Person at such date; and (b) all indebtedness or
other obligations of such Person for borrowed money or for the
deferred purchase price of property or services; provided that for
purposes of this Agreement, there shall be excluded from Debt at any
date loan loss reserves, deferred taxes arising from capitalized excess
service fees, and operating leases.
"Default" means the occurrence of any event or existence of
any condition which, but for the giving of notice, the lapse of time,
or both, would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 2.4(c)
hereof.
"Electronic Request" has the meaning set forth in Section
2.2(a) hereof.
"Eligible Mortgage Loan" means a Conventional Mortgage Loan,
FHA Loan, Jumbo Loan, VA Loan, Second Mortgage Loan, or a Subprime
Mortgage Loan that, at all times during the term of this Agreement, (a)
is evidenced by loan documents that are the standard forms approved by
FNMA or FHLMC or forms previously approved, in writing, by the Lender
in its sole discretion; (b) is validly pledged to the Lender, subject
to no other Liens; (c) is not in default in the payment of principal
and interest or in the performance of any obligation under the Mortgage
Note or the Mortgage evidencing or securing such Eligible Mortgage Loan
for a period of 60 days or more; (d) has closed less than 45 days prior
to the date of the Advance made in connection with such Eligible
Mortgage Loan; and (e) is covered by a Purchase Commitment except for
Subprime Mortgage Loans that comply with all applicable underwriting
guidelines and other requirements of an Investor or Investors relating
to the purchase of such Subprime Mortgage Loans and remain, at all
times during the term of this Agreement, eligible for purchase by such
Investor.
"Eligible Mortgage Pool" means a pool of Mortgage Loans that
will secure a "mortgage related security", as defined in Section
3(a)(41) of the Exchange Act administered or to be administered by a
trustee acceptable to Lender in its sole discretion where the Mortgage,
Mortgage Note and other documents relating to such Mortgage Loans are
held or to be held by an Approved Custodian.
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules and regulations promulgated thereunder, as amended
from time to time and any successor statute.
"Event of Default" means any of the conditions or events set
forth in Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time and any successor statute.
"Fair Market Value" shall mean, at any date, with respect to:
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(a) any Mortgage-backed Security, the bid price rate
reflected on the Telerate screen for a Mortgage-backed
Security with the closest coupon rate that does not exceed
that of the Mortgage-backed Security in question multiplied by
the original face amount of such Mortgage-backed Security, and
multiplied by the current pool factor for such Mortgage-backed
Security.
(b) any Mortgage Loan, the market price rate
reflected on the Telerate screen for thirty (30) day mandatory
future delivery of such Mortgage Loan multiplied by the
outstanding principal balance thereof.
In the event Telerate ceases to publish either the market or
bid price referenced in (a) and (b) above, the average bid price quoted
in writing to the Lender as of the date of determination by any two
nationally recognized dealers selected by Lender that are making a
market in similar Mortgage Loans or Mortgaged-backed Securities shall
be utilized in lieu of the market or bid price, as the case may be.
"FHA" means the Federal Housing Administration and any
successor thereto.
"FHA Loan" means a Single-family Mortgage Loan, payment of
which is partially or completely insured by the FHA under the National
Housing Act or Title V of the Housing Act of 1949 or with respect to
which there is a current, binding and enforceable commitment for such
insurance issued by the FHA.
"FHLMC" means the Federal Home Loan Mortgage Corporation and
any successor thereto.
"FHLMC Guide" means the Freddie Mac Sellers' and Servicers'
Guide, dated September 17, 1984, applicable bulletins, the applicable
MIDANET Users Guide (or the MIDAPHONE User's Guide) and any particular
purchase documents as defined in the Sellers' and Servicers' Guide, as
revised prior to the date hereof.
"FICA" means the Federal Insurance Contributions Act.
"First Mortgage" means a mortgage or deed of trust which
constitutes a first Lien on improved real property containing one to
four family residences.
"First Mortgage Loan" means a Mortgage Loan secured by a First
Mortgage.
"Floating Rate" has the meaning set forth in Section 2.4(a)
hereof.
"FNMA" means the Federal National Mortgage Association and any
successor thereto.
"FNMA Guide" means the FNMA Servicing Guide dated June 30,
1990, as revised prior to the date hereof.
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"Funding Account" means the non-interest bearing demand
checking account established with, maintained by, and pledged to Lender
into which shall be deposited the proceeds of Advances, the proceeds
from any sale of Collateral, and from which funds shall be disbursed
for the acquisition of Mortgage Loans.
"GAAP " means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of determination.
"GNMA" means the Government National Mortgage Association and
any successor thereto.
"GNMA Guide" means the GNMA I Mortgage-Backed Securities
Guide, Handbook GNMA 5500.1 REV. 6, as revised prior to the date
hereof, and as may be revised from time to time, and GNMA II
Mortgage-Backed Securities Guide Handbook GNMA 5500.2, as revised prior
to the date hereof.
"HUD" means the Department of Housing and Urban Development
and any successor thereto.
"Indebtedness" shall mean and include, without duplication,
(1) all items which in accordance with GAAP, consistently applied,
would be included on the liability side of a balance sheet on the date
as of which Indebtedness is to be determined (excluding shareholders'
equity), (2) Capitalized Rentals under any Capitalized Lease, (3)
guaranties, endorsements and other contingent obligations in respect
of, or any obligations to purchase or otherwise acquire, Indebtedness
of others, and (4) indebtedness secured by any mortgage, pledge,
security interest or other Lien existing on any property owned by the
Person with respect to which indebtedness is being determined, whether
or not the indebtedness secured thereby shall have been assumed.
"Indemnified Liabilities" has the meaning set forth in Article
10 hereof.
"Interim Date" has the meaning set forth in Section 4.1
(a)(5) hereof.
"Internal Revenue Code" means the Internal Revenue Code of
1986, or any subsequent federal income tax law or laws, as any of the
foregoing have been or may from time to time be amended.
"Investor" means FNMA, FHLMC, GNMA, any of the Persons listed
in EXHIBIT "L" hereto, or a financially responsible institution which
is acceptable to Lender, in its sole discretion; provided that at any
time by written notice to Company Lender may disapprove any Investor in
its sole discretion, whether or not that Person is named as an Investor
in this
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definition or in EXHIBIT "L" or has been previously approved as an
Investor by Lender. Upon receipt of such notice, the Persons named in
Lender's notice shall no longer be Investors from and after the date of
the receipt of such notice.
"Jumbo Loan" means a Single-family Mortgage Loan (other than a
FHA Loan or VA Loan) that complies with all applicable requirements for
purchase under the FNMA or FHLMC standard form of conventional mortgage
purchase contract then in effect except that the amount of such
Mortgage Loan exceeds the maximum amount under those requirements, but
in no event shall the amount of such Single-family Mortgage Loan exceed
$650,000.00.
"Lender" has the meaning set forth in the first paragraph of
this Agreement.
"LIBOR Rate" means a rate of interest equal to the London
Interbank Offered Rate for U. S. dollar deposits as quoted by Telerate,
Bloomberg or any other rate quoting service, selected by Lender in its
sole discretion for an interest period of one month, effective two (2)
Business Days from the date of quotation. In the event such rate ceases
to be published, LIBOR Rate shall mean a comparable rate of interest
reasonably selected by Lender.
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Loan Documents" means this Agreement, the Note, and each
other document, instrument or agreement executed by the Company or any
other Person in connection herewith or therewith, as any of the same
may be amended, restated, renewed or replaced from time to time.
"Margin Stock" has the meaning assigned to that term in
Regulations G and U of the Board of Governors of the Federal Reserve
System as in effect from time to time.
"Maximum Rate" shall mean the maximum lawful non-usurious rate
of interest (if any) that, under Applicable Law, the Lender may charge
the Company on the Advances from time to time. To the extent that the
interest rate laws of the State of Texas are applicable and unless
changed in accordance with law, the applicable rate ceiling shall be
the weekly ceiling determined in accordance with Chapter 1D. of the
Texas Credit Title, as amended.
"Monthly Average LIBOR Rate" means the average of all LIBOR
Rates quoted during a given month. In the event (i) the Note is paid in
full and the Commitment is terminated prior to a month end; or (ii) the
initial Advance hereunder occurs on a date other than the first day of
that month on which LIBOR Rates are quoted, the Monthly Average LIBOR
Rate shall mean, in the case of clause (i), the average of all LIBOR
Rates quoted that month up to and including the last Business Day prior
to such payment in full; or, in the case of clause (ii), the LIBOR
Rates quoted on the date of the initial Advance through the end of that
month.
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"Mortgage" means a First Mortgage or Second Mortgage on
improved real property.
"Mortgage-backed Securities" means FHLMC, GNMA or FNMA
securities that are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note. A
Mortgage Loan, unless otherwise expressly stated herein, means a
Single-family Mortgage Loan.
"Mortgage Note" means a note secured by a Mortgage.
"Mortgage Note Amount" means, as of the date of determination,
the then outstanding unpaid principal amount of a Mortgage Note.
"Mortgage Pool" means a pool of Mortgage Loans that were
warehoused with the Lender, on the basis of which there is to be issued
a Mortgage-backed Security.
"Mortgaged Property" means the property, real, personal,
tangible or intangible, securing a Mortgage Note.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001 (a)(3) of ERISA that is maintained for employees of the
Company or a Subsidiary of the Company.
"Net Investable Balances" means the average collected balances
in non-interest bearing deposit accounts controlled or maintained by
the Company and its Subsidiaries in accounts at the Lender, less
balances to support float, activity charges, reserve requirements,
Federal Deposit Insurance Corporation insurance premiums and such other
assessments as may be imposed by governmental authorities from time to
time.
"Note" has the meaning set forth in Section 2.3 hereof.
"Notices" has the meaning set forth in Article 9 hereof.
"Obligations" shall mean any and all indebtedness, obligations
and liabilities of the Company to the Lender (whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly
owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred),
arising out of or related to the Loan Documents, or any of them.
"Officer's Certificate" means a certificate executed on behalf
of the Company by its chief financial officer or its treasurer or by
such other officer as may be designated herein, in form and substance
satisfactory to Lender.
"OTS" means the Office of Thrift Supervision.
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"Par Value" means, with respect to any Mortgage Loan, the
unpaid principal balance of such Mortgage Loan, on the date of the
Advance made against such Mortgage Loan.
"Participant" has the meaning set forth in Section 12.5
hereof.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether
or not legal entities, and federal and state governments and agencies
or regulatory authorities and political subdivisions thereof.
"Plans" has the meaning set forth in Section 5.10 hereof.
"Pledged Mortgages" has the meaning set forth in Section 3.1
(a) hereof.
"Pledged Securities" has the meaning set forth in Section
3.1(b) hereof.
"PMI" means any private mortgage insurance company which is
acceptable to Lender, in its sole discretion; provided that at any time
by written notice to Company, Lender may disapprove any PMI because it
has determined in its sole discretion and for any reason that it is no
longer comfortable with that Person being a PMI, whether or not that
Person has been previously approved as a PMI by Lender. Upon receipt of
such notice, the Persons named in Lender's notice shall no longer be
PMIs from and after the date of receipt of such notice.
"Purchase Commitment" means a written commitment, in form and
substance satisfactory to the Lender, issued in favor of the Company by
an Investor pursuant to which that Investor commits to purchase
Mortgage Loans or Mortgage-backed Securities.
"Redemption Amount" has the meaning set forth in Section 3.5
hereof.
"RICO" means the Racketeer Influenced and Corrupt
Organizations Act of 1970, as amended.
"Second Mortgage" means a mortgage or deed of trust which
constitutes a second Lien on improved real property containing one to
four family residences.
"Second Mortgage Loan" means a Single-family Mortgage Loan
secured by a Second Mortgage that has a combined loan to collateral
value ratio not to exceed 90% (ratio to be based upon the aggregate
amount of all loans secured by the Mortgaged Property securing such
Second Mortgage Loan).
"Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such Person
has the right to service Mortgage Loans.
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"Servicing Rights" means (a) the rights, obligations,
remedies, powers, and responsibilities of a Person to service Mortgage
Loans owned by that Person, including without limitation the right to
collect principal and interest payments, administer escrow accounts,
and the right to own and possess loan files and all records, documents,
and data relating to such Mortgage Loans, and (b) the obligations,
rights, remedies, powers, privileges, benefits and responsibilities of
a Person to service Mortgage Notes for GNMA, FNMA or FHLMC under and in
accordance with the GNMA Guide, the FNMA Guide and the FHLMC Guide,
respectively or for any Investor under any Servicing Contract,
including, without limitation, (i) the right to receive servicing fees,
termination fees, net sales proceeds, late charges, insufficient fund
fees, and other ancillary income relating to the Mortgage Notes (ii)
the right to hold and administer the escrow accounts, and (iii) the
right to all loan files, insurance files, tax records, collection
records, documents, ledgers, computer printouts, computer tapes and
other records, data or information relating to the Mortgage Notes, the
escrow accounts or the servicing or otherwise necessary or proper to
perform the obligations of servicer.
"Single-family Mortgage Loan" means a Mortgage Loan secured by
a Mortgage covering improved real property containing one to four
family residences.
"Statement Date" has the meaning set forth in Section 4.1
(a)(5) hereof.
"Subordinated Debt" means, with respect to any Person, all
Indebtedness of such Person, for borrowed money, which is, by its terms
(which terms shall have been approved by the Lender) or by the terms of
a subordination agreement, in form and substance satisfactory to the
Lender, effectively subordinated in right of payment to all other
present and future obligations and all indebtedness of such Person, of
every kind and character, owed to the Lender.
"Subprime Mortgage Loan" means a Single-family Mortgage Loan
that (a) is, in the reasonable judgment of the Lender, consistent in
all respects with traditional standards imposed by whole loan
purchasers, relevant rating agencies and pool insurers for
classification as "A-" or less Mortgage Loans; (b) has a maximum loan
amount that does not exceed $500,000.00; provided, however, if the loan
amount exceeds $350,000.00, such Mortgage Loan must be approved by
Lender prior to its pledge hereunder and; (c) is secured by a First
Mortgage or Second Mortgage; and (d) has a loan-to-collateral value
ratio not greater than 95%.
"Subsidiary" means any corporation, association or other
business entity in which more than fifty percent (50%) of the total
voting power or shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"Tangible Net Worth" means, with respect to any Person at any
date, the sum of the total shareholders' equity in such Person
(including capital stock, additional paid-in capital,
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and retained earnings, but excluding treasury stock, if any), on a
consolidated basis; less the aggregate book value of all intangible
assets of such Person (as determined in accordance with GAAP),
including without limitation, goodwill, trademarks, trade names,
service marks, copyrights, patents, licenses, franchises, and Servicing
Rights, each to be determined in accordance with GAAP consistent with
those applied in the preparation of the financial statements referred
to in Section 5.3 hereof, provided that, for purposes of this
Agreement, there shall be excluded from total assets, advances or loans
to shareholders, officers or Affiliates, investments in Affiliates,
assets pledged to secure any liabilities not included in the Debt of
such Person and those other assets which would be deemed by HUD to be
non-acceptable in calculating adjusted net worth in accordance with its
requirements in the Audit Guide for Audit of Approved Non-Supervised
Mortgagees", as in effect as of such date.
"Termination Date" shall mean February 1, 2000, or such
earlier date upon which Lender's obligation to fund shall be terminated
pursuant to the terms of this Agreement.
"Tribunal" shall mean any court or governmental department,
commission, board, bureau, agency, or instrumentality of any state,
commonwealth, nation, territory, possession, county, parish, or
municipality, whether now or hereafter constituted and/or existing.
"VA" means the Veterans Administration and any successor
thereto.
"VA Loan" means a Single-family Mortgage Loan, payment of
which is partially or completely guaranteed by the VA under the
Servicemen's Readjustment Act of 1944 or Chapter 37 of Title 38 of the
United States Code or with respect to which there is a current binding
and enforceable commitment for such a guaranty issued by the VA.
"Wet Settlement Advance" means a disbursement by the Lender
under the Commitment and pursuant to Section 2.2(a) of this Agreement,
in respect of the closing or settlement of a Single-family Mortgage
Loan, in anticipation of and pending subsequent delivery and
examination of the Collateral Documents as provided in Section II of
EXHIBIT "C".
"Year 2000 Issue" means the failure of computer software,
hardware, and firmware systems and equipment containing embedded
computer chips to properly receive, transmit, process, manipulate,
store, retrieve, re-transmit or in any other way utilize data and
information due to the occurrence of the year 2000 or the inclusion of
dates on or after January 1, 2000.
1.2 Other Definitional Provisions.
(a) Accounting terms not otherwise defined herein shall have the
meanings given the terms under GAAP.
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(b) Defined terms may be used in the singular or the plural, as the
context requires.
2. THE CREDIT.
2.1 The Commitment.
(a) Subject to the terms and conditions of this Agreement and
provided no Default or Event of Default has occurred and is continuing,
the Lender agrees, from time to time during the period from the date
hereof to and including the Termination Date, to make Advances to the
Company, provided the sum of the total aggregate principal amount
outstanding at any one time of all such Advances shall not exceed FIFTY
MILLION AND N0/100 DOLLARS ($50,000,000.00). The obligation of the
Lender to make Advances hereunder up to such limit is hereinafter
referred to as the "Commitment." Within the Commitment, the Company may
borrow, repay and reborrow. All Advances under this Agreement shall
constitute a single indebtedness, and all of the Collateral shall be
security for the Note and for the performance of all the Obligations of
the Company to the Lender.
(b)Advances shall be used by the Company solely for the purpose
of funding the acquisition or origination of Mortgage Loans, as
specified in the Advance Request and none other, and shall be made at
the request of the Company in the manner hereinafter provided in Section
2.2, against the pledge of such Mortgage Loans and such other collateral
as is set forth in Section 3.1 hereof as Collateral therefor. Advances
shall also be subject to the following restrictions:
(1) No Advance shall be made against Mortgage Loans
which are not Eligible Mortgage Loans.
(2) The aggregate amount of Wet Settlement Advances
outstanding at any one time shall not exceed SEVENTEEN MILLION
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($17,500,000.00).
(3) The aggregate amount of Advances against Second
Mortgage Loans outstanding at any one time shall not exceed
TWO MILLION AND NO/100 DOLLARS ($2,000,000.00).
(4) The aggregate amount of Advances against Aged
Mortgage Loans outstanding at any one time shall not exceed
FIVE MILLION AND N0/100 DOLLARS ($5,000,000.00).
(c)Advances against a Mortgage Loan that is not a Subprime
Mortgage Loan or a Second Mortgage Loan shall not exceed, in the
aggregate, an amount equal to 100% of the Collateral Value of such
Mortgage Loan, to be determined as of the date such Mortgage Loan is
pledged to Lender.
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(d) Advances against a Mortgage Loan that is a Subprime Mortgage Loan
or a Second Mortgage Loan shall not exceed, in the aggregate, an amount equal to
95% of the Collateral Value of such Mortgage Loan, to be determined as of the
date such Mortgage Loan is pledged to the Lender.
2.2 Procedures for Obtaining Advances.
(a) The Company may obtain an Advance hereunder subject to the
following:
(1) The Company may obtain an Advance hereunder, subject to
the satisfaction of the conditions set forth in Sections 4.1 and 4.2
hereof, upon compliance with the procedures set forth in this Section
2.2 and in EXHIBIT "C" attached hereto and made a part hereof. Requests
for Advances shall be initiated by the Company (i) by delivering to the
Lender and its designee, by telecopy (with original to be sent
immediately thereafter by overnight mail) a completed and signed
request for an Advance (an "Advance Request") in the form of EXHIBIT
"A" attached hereto and made a part hereof, or (ii) by using the
electronic data transmission service provided by the Lender and its
licensor, MBMS Incorporated, to transmit to the Lender a request for
Advance ("Electronic Request"), which shall include all information
required by EXHIBIT "A" through the Warehouse Management System
software provided by the Lender and its licensor, MBMS Incorporated.
The Lender shall have the right, on not less than three (3) Business
Days' prior notice to the Company, to modify the Advance Request,
Electronic Request, or any exhibits hereto to conform to current legal
requirements or Lender practices, and, as so modified, said Advance
Request, Electronic Request or exhibits shall be deemed a part hereof.
In consideration of the Lender permitting the Company to make
Electronic Requests for Advances utilizing the Warehouse Management
System software or Advance Requests by telecopy, the Company covenants
and agrees to assume liability for and to protect, indemnify and save
the Lender harmless from, any and all liabilities, obligations,
damages, penalties, claims, causes of action, costs, charges and
expenses, including attorneys' fees and expenses of employees, which
may be imposed, incurred by or asserted against the Lender by reason of
any loss, damage or claim howsoever arising or incurred because of, out
of or in connection with (i) any action of the Lender pursuant to
Electronic Requests or Advance Requests by telecopy, (ii) the breach of
any provisions of this Agreement by the Company, (iii) the transfer of
funds pursuant to such Electronic Requests or Advance Requests by
telecopy, or (iv) the Lender's honoring or failing to honor any
Electronic Request or Advance Request by telecopy for any reason or no
reason whatsoever. The Lender is entitled to rely upon and act upon
Electronic Requests or Advance Requests by telecopy, and the Company
shall be unconditionally and absolutely estopped from denying (x) the
authenticity and validity of any such transaction so acted upon by the
Lender once the Lender has advanced funds and has deposited or
transferred such funds as requested in any such Electronic Request or
Advance Request by telecopy, and (y) the Company's liability and
responsibility therefor.
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(2) In the case of any Wet Settlement Advances, the
Company shall follow the procedures and, at or prior to the
Lender's making of such Wet Settlement Advance, shall deliver
to the Lender or its designee the documents set forth in
Section 11 of EXHIBIT "C" hereto. In case of Collateral
financed through a Wet Settlement Advance, the Company shall
cause all Collateral Documents to be delivered to the Lender
or its designee within seven (7) Business Days after the date
of the Wet Settlement Advance relating thereto.
(3) Before funding, the Lender and its designee shall
have a reasonable time to examine such Advance Request and the
Collateral Documents to be delivered prior to such requested
Advance, as set forth in the applicable Exhibit hereto, and
may reject such of them as do not meet the requirements of
this Agreement or of the related Purchase Commitment. The
Advance Request and the Collateral Documents must be received
by Lender no later than 2:00 p.m. Houston, Texas time in order
for funding to occur the same day.
(b) To make an Advance, the Lender shall credit the Funding
Account upon compliance by the Company with the terms of this
Agreement.
2.3 Note. The Company's obligation to pay the principal of, and
interest on, all Advances made by the Lender shall be evidenced by a promissory
note (the "Note") of the Company dated as of the date hereof, in form of EXHIBIT
"N" hereto. The term "Note" shall include all extensions, renewals and
modifications of the Note and all substitutions therefor. All terms and
provisions of the Note are hereby incorporated herein.
2.4 Interest.
(a) (1) The unpaid amount of each Advance against
Mortgage Loans that are not Aged Mortgage Loans shall bear
interest from the date of such Advance until paid in full, at
a rate of interest equal to the lesser of (i) the Maximum
Rate, or (ii) a floating rate of interest (the "Floating
Rate") which is equal to 150 basis points (1.50%) per annum
over the Monthly Average LIBOR Rate.
(2) The unpaid amount of each Advance outstanding
against Mortgage Loans that are Aged Mortgage Loans shall bear
interest from the date such Mortgage Loans become Aged
Mortgage Loans until such Advance is paid in full at a rate of
interest equal to the lesser of (i) the Maximum Rate or (ii) a
variable rate of interest which is equal to 225 basis points
(2.25%) per annum over the Monthly Average LIBOR Rate.
(3) Notwithstanding Section 2.4(a)(1) above to the
contrary, the unpaid portion of Advances against Mortgage
Loans that are not Aged Mortgage Loans equal to Net Investable
Balances shall bear interest at the rate of 1.50% per annum.
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(b) Interest shall be computed on the basis of a 360-day year and
applied to the actual number of days elapsed in each interest calculation period
and shall be payable monthly in arrears, on the first day of each month,
commencing with the first month following the date of this Agreement, and ending
on Termination Date.
(c) Obligations not paid when due (whether at stated maturity, upon
acceleration following the occurrence of an Event of Default or otherwise) shall
bear interest, from the date due until paid in full, at a rate of interest
("Default Rate") at all times equal to the lesser of (i) four percent (4%) per
annum over the Floating Rate; or (ii) the Maximum Rate, said interest to be
payable on demand by Lender.
2.5 Principal Payments.
(a) The outstanding unpaid principal amount of all Advances shall be
payable in full upon February 1, 2000.
(b) The Company shall have the right to prepay the outstanding Advances
in whole or in part, from time to time, without premium or penalty, subject to
the Company's obligation to pay the Non-Usage Fee pursuant to Section 2.8
hereof.
(c) The Company shall be obligated to pay to the Lender, without the
necessity of prior demand or notice from the Lender, and the Company authorizes
the Lender to charge the Funding Account or any other accounts of the Company
(excluding any monies held by Company in trust for third parties) in Lender's
possession for the amount of any outstanding Advance against a specific Mortgage
Loan, upon the earliest occurrence of any of the following events:
(1) The expiration of ninety (90) days from the date of any
Advance for any Mortgage Loan (excluding Aged Mortgage Loans);
(2) The expiration of thirty (30) days from the date the
Mortgage Loan was delivered to an Investor for examination and
purchase, without the purchase being made, or upon rejection of the
Mortgage Loan as unsatisfactory by an Investor;
(3) The expiration of forty-five (45) days from the date
Mortgage Loan is delivered to the certificating custodian acceptable to
the Lender for the issuance of a Mortgage-backed Security;
(4) The expiration of seven (7) Business Days from the date a
Wet Settlement Advance was made without receipt of all Collateral
Documents relating to such Mortgage Loan, or such Collateral Documents,
upon examination by the Lender, are found not to be in compliance with
the requirements of this Agreement or the related Purchase Commitment;
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(5) The expiration of ten (10) calendar days from the date a
Collateral Document in connection with such Mortgage Loan was delivered
to the Company for correction or completion, without being returned to
the Lender, corrected or completed;
(6) The Mortgage Loan is in default and such default continues
for a period of sixty (60) days or more;
(7) The expiration of three (3) Business Days after the date
on which the related Purchase Commitment, if any, expires, is
terminated or otherwise canceled or no longer in full force and effect
and the specific Mortgage Loan was not delivered under the Purchase
Commitment prior to such termination, expiration or cancellation;
(8) Upon sale of the Mortgage Loan.
Upon receipt of such payment by the Lender, such Mortgage Loans or
Mortgage-backed Securities shall be considered to have been redeemed from
pledge, and the Collateral Documents relating thereto which have not been
delivered to the Investor or the pool custodian or pool trustee shall be
released by the Lender to the Company.
(d) With respect to Aged Mortgage Loans, the Company shall be obligated
to pay to the Lender (and the Company authorizes the Lender to charge the
Funding Account or any other accounts of the Company [excluding monies held by
the Company in trust for third parties] in Lender's possession for the payment
thereof) the principal payments in the amounts and on the dates specified below:
(1) On the date a Pledged Mortgage becomes an Aged Mortgage
Loan, a principal payment in an amount necessary to reduce the
outstanding unpaid Advances made against such Aged Mortgage Loan to an
amount equal to 80% of the Collateral Value of such Aged Mortgage Loan;
(2) On the date an Aged Mortgage Loan has been included in the
Collateral for 120 days, a principal payment in an amount necessary to
reduce the outstanding unpaid Advances made against such Aged Mortgage
Loan to an amount equal to 70% of the Collateral Value of such Aged
Mortgage Loan;
(3) On the date an Aged Mortgage Loan has been included in the
Collateral for 150 days, a principal payment in an amount necessary to
reduce the outstanding unpaid Advances made against such Aged Mortgage
Loan to an amount equal to 60% of the Collateral Value of such Aged
Mortgage Loan;
(4) On the date an Aged Mortgage Loan has been included in the
Collateral for 180 days, an amount equal to the balance of the
aggregate outstanding unpaid Advances against such Aged Mortgage Loan.
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2.6 Expiration of Commitment. Unless extended or terminated earlier as
permitted hereunder, the Commitment shall expire of its own term, and without
the necessity of action by the Lender, at the close of business on the
Termination Date. However, the remainder of this Agreement shall remain in full
force and effect until all amounts due on the Obligations have been paid in
full. The Lender has not made, and does not hereby make, any commitment to
renew, extend, rearrange or otherwise refinance the outstanding and unpaid
principal of the Note or accrued interest thereon. In the event, however, the
Lender from time to time renews, extends, rearranges, increases and/or otherwise
refinances any portion or all of any Obligation and any accrued interest thereon
at any time, such refinancing shall be evidenced by an appropriate promissory
note in form and substance satisfactory to the Lender and, unless otherwise
noted or modified at such time or times by the terms of such promissory note or
any agreements executed in connection therewith, any such promissory note or
notes and refinancing evidenced thereby shall be governed in all respects by the
terms of this Agreement.
2.7 Method of Making Payments. Except as otherwise specifically
provided herein, all payments hereunder shall be made to the Lender not later
than the close of business (Houston time) on the date when due unless such date
is a non-Business Day, in which case, such payment shall be due on the first
Business Day thereafter, and shall be made in lawful money of the United States
of America in immediately available funds.
2.8 Commitment Fee. In consideration of Lender's agreement to make
Advances available to Company under the Commitment, subject to the terms of this
Agreement, Company shall pay to Lender, at the execution and delivery of this
Agreement, a commitment fee equal to $125,000.00 (the "Commitment Fee"). The
Commitment Fee shall be deemed fully earned and nonrefundable upon the execution
and delivery of this Agreement by the parties, notwithstanding the Commitment is
never fully funded during the term of this Agreement.
2.9 Miscellaneous Charges. At the end of each month during the term of
this Agreement, the Company shall pay to the Lender in arrears on or before five
(5) days after the later of (a) the end of each calendar month or (b) the
Company's receipt of the Lender's bill for such monthly period, a transaction
fee equal to $15.00 per Pledged Mortgage held by Lender during such month and
for which Lender has not previously received a transaction fee, for the handling
and administration of Advances and Collateral. For the purposes hereof, Company
shall, at its sole cost and expense, pay all miscellaneous charges and expenses
incurred by the Lender in connection with the handling and administration of
Advances and Collateral, including, without limitation, all charges for security
delivery fees and charges for overnight delivery of Collateral to Investors.
Miscellaneous charges are due when incurred, but shall not be delinquent if paid
within ten (10) days after receipt of an invoice or an account analysis
statement from the Lender.
2.10 Bailee. Lender appoints Company - and Company shall act - as its
bailee to (i) hold in trust for Lender (A) the original recorded copy of the
mortgage, deed of trust, or trust deed securing each Pledged Mortgage, (B) a
mortgagee policy of title insurance (or binding unexpired and unconditional
commitment to issue such insurance if the policy has not yet been delivered to
Company) insuring the Company's perfected, first priority Lien created by that
mortgage, deed of trust, or trust deed, (C) the original insurance policies for
each Pledged Mortgage, and (D) all other
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original documents relating to each Pledged Mortgage, including, without
limitation, any promissory notes, any other loan documents, supporting
documentation, purchase commitments, surveys, settlement statements, closing
instructions, and Mortgage-backed Securities, and (ii) deliver to Lender any of
the foregoing items as soon as reasonably practicable upon Lender's request.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of the Note
and for the performance of all of the Company's Obligations hereunder, the
Company hereby assigns and transfers all right, title and interest in and to and
grants a security interest to the Lender in the following described property,
whether now owned or hereafter acquired (the "Collateral"):
(a) All Mortgage Loans including all Mortgage Notes and
Mortgages evidencing such Mortgage Loans including without limitation
all Mortgage Loans in respect of which Wet Settlement Advances have
been made by the Lender, which from time to time are delivered or
caused to be delivered to the Lender or its designee, come into the
possession, custody or control of the Lender for the purpose of
assignment or pledge or in respect of which an Advance has been made by
the Lender hereunder (the "Pledged Mortgages").
(b) All Mortgage-backed Securities which are from time to time
delivered or caused to be delivered to, or are otherwise in the
possession of the Lender, or its designee, its agent, bailee or
custodian as assignee or pledged to the Lender, or for such purpose are
registered by book-entry in the name of the Lender (the "Pledged
Securities").
(c) All private mortgage insurance and all commitments issued by
the FHA or VA to insure or guarantee any Mortgage Loans included in the
Pledged Mortgages; all guaranties related to Pledged Securities; all
Purchase Commitments held by the Company covering the Pledged Mortgages
or the Pledged Securities and all proceeds resulting from the sale
thereof to Investors pursuant thereto; all personal property, contract
rights, servicing and servicing fees and income or other proceeds,
amounts and payments payable to the Company as compensation or
reimbursement, accounts and general intangibles of whatsoever kind
relating to the Pledged Mortgages, the Pledged Securities and all other
documents or instruments relating to the Pledged Mortgages, the Pledged
Securities, including, without limitation, any interest of the Company
in any fire, casualty or hazard insurance policies and any awards made
by any public body or decreed by any court of competent jurisdiction
for a taking or for degradation of value in any eminent domain
proceeding as the same relate to the Pledged Mortgages.
(d) All right, title and interest of the Company in and to all
escrow accounts, documents, instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records (including all information, records, tapes, data,
programs, discs and cards necessary or helpful in the administration or
servicing of the foregoing Collateral) and other information and data
of the Company relating to the foregoing Collateral.
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(e) All now existing or hereafter acquired cash delivered to
or otherwise in the possession of the Lender or its agent, bailee or
custodian or designated on the books and records of the Company as
assigned and pledged to the Lender.
(f) All cash and non-cash proceeds of the foregoing
Collateral, including all dividends, distributions and other rights in
connection with, and all additions to, modifications of and
replacements for, the foregoing Collateral, and all products and
proceeds of the foregoing Collateral, together with whatever is
receivable or received when the foregoing Collateral or proceeds
thereof are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, including,
without limitation, all rights to payment with respect to any cause of
action affecting or relating to the foregoing Collateral or proceeds
thereof.
3.2 Security Interest in Mortgage-backed Securities. The Company's
ability to convert Mortgage Loans that are within the Collateral to
Mortgage-backed Securities are subject to the following conditions:
(a) Pledged Mortgages that are to be transferred to a pool
custodian in connection with the issuance of Mortgage-backed
Securities, shall be released from the Lender's security interest only
against payment to the Lender of the amount due the Lender in
connection with such Pledged Mortgages as determined in accordance with
Section 3.5 of this Agreement or against the issuance of such
Mortgage-backed Securities and the continuation of the Lender's first
priority, perfected security interest in such Mortgage-backed
Securities and the proceeds thereof until payment due the Lender in
respect of said Pledged Mortgages is made to the Lender.
(b) In the case of Mortgage-backed Securities created from
Pledged Mortgages, the Lender shall have the exclusive right to the
possession of the Mortgage-backed Securities or, if the Mortgage-backed
Securities are not to be issued in certificated form, shall have the
right to have the book entries for the Mortgage-backed Securities
issued in the Lender's name or the name or names of its designees.
Lender shall cause delivery of the Mortgage-backed Securities to be
made to the Investor or the book entries registered in the name of the
Investor or the Investor's designee only against payment therefor. The
Company acknowledges that the Lender may enter into one or more
standing arrangements with other financial institutions for the
issuance of Mortgage-backed Securities in book entry form in the name
of such other financial institutions, as agent for the Lender, and the
Company agrees upon request of the Lender, to execute and deliver to
such other financial institutions the Company's written concurrence in
any such standing arrangements.
3.3 Delivery of Collateral Documents. The Lender or its designee
exclusively shall deliver Pledged Mortgages or Pledged Securities to (a) an
Investor that has issued a Purchase Commitment with respect thereto for its
examination and purchase, or (b) an Approved Custodian for purposes of
examination or delivery in connection with the issuance of Mortgage-backed
Securities. In such cases where the Lender must deliver documents to an Investor
or Approved Custodian, the Lender must receive signed shipping instructions (in
the form of EXHIBIT "D"
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attached hereto), no later than 2:00 p.m. Houston, Texas time one (1) Business
Day prior to the expiration of the appended Purchase Commitment, in addition to
any other documents listed in Section III of EXHIBIT "C" in respect of the
issuance of Mortgage-backed Securities. If shipping instructions are received by
Lender before 2:00 p.m. Houston, Texas time of any Business Day, Lender will
ship the documents together with the Bailee Letter (in form of EXHIBIT "K") to
the Investor or Approved Custodian on the same Business Day, otherwise Lender
will ship the documents the next Business Day following receipt of shipping
instructions. In any case in which an Advance has been made hereunder against
Pledged Mortgages, based on the existence of a Purchase Commitment covering such
Pledged Mortgages, the Company agrees that such Pledged Mortgages will not be
placed in any mortgage pool other than an Eligible Mortgage Pool, unless such
Pledged Mortgages have been redeemed from pledge as permitted hereunder or other
arrangements, satisfactory to the Lender in its sole discretion, have been made
for the redemption of such Pledged Mortgages from pledge hereunder. The Lender
may deliver any document relating to the Collateral to the Company for
correction or completion against a trust receipt in the form of EXHIBIT "E"
attached hereto executed by the Company. The Company hereby represents and
warrants to and agrees with the Lender that any request by the Company for
release of the Collateral consisting of or relating to Mortgage Loans to the
Company shall be solely for the purposes of correcting clerical or
non-substantial documentation problems in preparation for returning such
Collateral to the Lender for ultimate sale or exchange and the aggregate
Collateral Value of the Collateral released to the Company pursuant to this
Section 3.3 will not exceed $500,000.00; the Company shall request such release
in compliance with all of the terms and conditions of such release set forth
herein; and the Company will return to the Lender such documentation released to
the Company pursuant to this Section 3.3 within ten (10) calendar days after
such delivery.
3.4 Delivery of Additional Collateral or Mandatory Prepayment. At any
time that the aggregate Collateral Value of the Collateral then pledged
hereunder is less than the aggregate amount of the Advances then outstanding
hereunder (the "Deficiency"), the Lender may request, and the Company shall
within two (2) Business Days after Notice by the Lender, either (a) deliver to
the Lender or its designee for pledge hereunder additional Mortgage Loans and/or
cash, in aggregate amounts sufficient to cover the Deficiency, or (b) repay the
Advances in an amount equal to the Deficiency.
3.5 Right of Redemption from Pledge. So long as no Event of Default has
occurred, the Company may redeem a Mortgage Loan or, Mortgage-backed Security,
by notifying the Lender of its intention to redeem such Mortgage Loan or
Mortgage-backed Security, from pledge and by paying, or causing an Investor to
pay, to the Lender, for application to prepayment of the principal balance of
the Note, an amount (the "Redemption Amount") equal to the amount of the Advance
made with respect to or relating to such Mortgage Loan or Mortgage-backed
Security.
3.6 Collection and Servicing Rights. So long as no Event of Default
shall have occurred, the Company shall be entitled to service and receive and
collect directly all sums payable to the Company in respect of the Collateral
other than proceeds of any Purchase Commitment or proceeds of the sale of any
Collateral. Following the occurrence of any Event of Default, the Lender or its
designee shall thereafter be entitled to service and receive and collect all
sums payable to the Company in respect of the Collateral, and in such case (a)
the Lender or its designee in its discretion
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may, in its own name or in the name of the Company or otherwise, demand, sue
for, collect or receive any money or property at any time payable or receivable
on account of or in exchange for any of the Collateral, but shall be under no
obligation to do so, (b) the Company shall, if the Lender so requests, forthwith
pay to the Lender at its principal office all amounts thereafter received by the
Company upon or in respect of any of the Collateral, advising the Lender as to
the source of such funds, and (c) all amounts so received and collected by the
Lender shall be held by it as part of the Collateral.
3.7 Return or Release of Collateral at End of Commitment. If (a) the
Commitment shall have expired or been terminated, and (b) no Advances, interest
or other Obligations evidenced by the Loan Documents or due under this Agreement
shall be outstanding and unpaid, the Lender shall deliver or release all
Collateral in its possession to the Company. The receipt of the Company for any
Collateral released or delivered to the Company pursuant to any provision of
this Agreement shall be a complete and full acquittance for the Collateral so
returned, and the Lender shall thereafter be discharged from any liability or
responsibility therefor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the initial
Advance under this Agreement is subject to the satisfaction, in the sole
discretion of the Lender, on or before the date thereof, of the following
conditions precedent:
(a) The Lender shall have received the following, all of which
must be satisfactory in form and content to the Lender, in its sole
discretion:
(1) The Loan Documents dated as of the date hereof
duly executed by the Company;
(2) Certified copies of the Company's articles of
incorporation and bylaws and certificates of good standing
dated no less recently than ninety (90) days prior to the date
of this Agreement and a certification from the taxing
authority of the state of incorporation stating that the
Company is in good standing with said taxing authority;
(3) An original resolution of the board of directors
of the Company, certified as of the date of this Agreement by
its corporate secretary, authorizing the execution, delivery
and performance of this Agreement and the other Loan
Documents, and all other instruments or documents to be
delivered by the Company pursuant to this Agreement;
(4) A certificate (in the form of EXHIBIT "J") of the
Company's corporate secretary as to the resolution of the
board of directors of the Company authorizing the execution,
delivery and performance of this Agreement and the other Loan
Documents and the incumbency and authenticity of the
signatures of the officers of the Company executing this
Agreement and the other Loan Documents and each
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Advance Request and all other instruments or documents to be
delivered pursuant hereto (the Lender being entitled to rely
thereon until a new such certificate has been furnished to the
Lender);
(5) Financial statements of the Company (and its
Subsidiaries, on a consolidated basis) containing a balance
sheet as of June 30, 1998 (the "Statement Date") and related
statements of income, changes in stockholders' equity and cash
flows for the period ended on the Statement Date and a balance
sheet as of September 30, 1998 ("Interim Date") and related
statement of income for the period ended on the Interim Date,
all prepared in accordance with GAAP applied on a basis
consistent with prior periods and in the case of the
statements as of the Statement Date, audited by independent
certified public accountants of recognized standing acceptable
to the Lender;
(6) A favorable written opinion of counsel to the
Company, dated as of the date of this Agreement, to be in
substantially the form of EXHIBIT "M" hereto, and addressed to
the Lender;
(7) A tax, lien and judgment search of the
appropriate public records for the Company, including a search
of Uniform Commercial Code financing statements, which search
shall not have disclosed the existence of any prior Lien on
the Collateral other than in favor of the Lender or as
permitted hereunder;
(8) Copies of the certificates, documents or other
written instruments which evidence the Company's eligibility
described in Section 5.11 hereof, all in form and substance
satisfactory to the Lender;
(9) Copies of the Company's errors and omissions
insurance policy or mortgage impairment insurance policy and
blanket bond coverage policy, all in form and content
satisfactory to the Lender, showing compliance by the Company
as of the date of this Agreement with the related provisions
of Section 6.8 hereof and showing Lender as an additional loss
payee on such policies;
(10) Executed financing statements in recordable form
covering the Collateral and ready for filing in all
jurisdictions required by the Lender;
(11) Evidence that the Funding Account has been
established with the Lender.
4.2 Each Advance. The obligation of the Lender to make the initial and
each subsequent Advance under this Agreement is subject to the satisfaction, in
the sole discretion of the Lender, as of the date of each such Advance, of the
following additional conditions precedent:
(a) In connection with an Advance, the Company shall have
delivered to the Lender the Advance Request or the Electronic Request,
Collateral Documents, and
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documents required under and shall have satisfied the procedures set
forth in Section 2.2 and EXHIBIT "C", according to the type of
Collateral to be financed through the requested Advance. All items
delivered to the Lender or its designee shall be satisfactory to the
Lender in form and content, and the Lender may reject such of them as
do not meet the requirements of this Agreement or of the related
Purchase Commitment.
(b) The Lender shall have received evidence satisfactory to it
as to the making and/or continuation of any book entry or the due
filing and recording in all appropriate offices of all financing
statements and other instruments as may be necessary to perfect the
security interest of the Lender in the Collateral under the Uniform
Commercial Code of Texas or other applicable law.
(c) The representations and warranties of the Company
contained in Article 5 hereof shall be accurate and complete in all
material respects as if made on and as of the date of each Advance.
(d) The Company shall have performed all agreements to be
performed by it hereunder, including without limitation, the payment of
all Non-Usage Fees when due hereunder, and, as of the date of the
Advance Request, and after giving effect to the requested Advance,
there shall exist no Default or Event of Default hereunder.
(e) The Company shall not have incurred any material
liabilities, direct or contingent, except as approved by Lender
pursuant to Section 7.15, since the dates of the Company's most recent
financial statements theretofore delivered to the Lender.
(f) The Lender shall have received from counsel for the
Company, if requested by the Lender in its sole discretion, an updated
opinion, in form and substance satisfactory to the Lender, addressed to
the Lender and dated as of the date of such Advance, covering such of
the matters as the Lender may reasonably request.
(g) Such additional documents, instruments, and information as
Lender or its legal counsel may reasonably require.
Acceptance of the proceeds of the requested Advance by the Company
shall be deemed a representation by the Company that all conditions set forth in
this Article 4 shall have been satisfied as of the date of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Lender, as of the
date of this Agreement and (unless otherwise notified in writing by the Company
and Lender, in its sole discretion, approves in writing) as of the date of each
Advance Request and the making of each Advance, that:
5.1 Organization, Good Standing, Subsidiaries. The Company and each
Subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws
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of the jurisdiction of its incorporation, has the full legal power and authority
to own its property and to carry on its business as currently conducted and is
duly qualified as a foreign corporation to do business and is in good standing
in each jurisdiction in which the transaction of its business makes such
qualification necessary, except in jurisdictions, if any, where a failure to be
in good standing has no material adverse effect on the business, operations,
assets or financial condition of the Company or any such Subsidiary. For the
purposes hereof, good standing shall include qualification for any and all
licenses and payment of any and all taxes required in the jurisdiction of its
incorporation and in each jurisdiction in which the Company transacts business.
The Company has no Subsidiaries except as set forth on EXHIBIT "G" hereto.
EXHIBIT "G" sets forth with respect to each such Subsidiary, its name, address,
place of incorporation, each state in which it is qualified as a foreign
corporation, and the percentage ownership of the Company in such Subsidiary.
5.2 Authorization and Enforceability. The Company has all requisite
corporate power and authority to execute, deliver, create, issue, comply and
perform this Agreement, the Note and all other Loan Documents to which the
Company is party and to make the borrowings hereunder. The execution, delivery
and performance by the Company of this Agreement, the Note and all other Loan
Documents to which the Company is party and the making of the borrowings
hereunder and thereunder, have been duly and validly authorized by all necessary
corporate action on the part of the Company (none of which actions has been
modified or rescinded, and all of which actions are in full force and effect)
and do not and will not conflict with or violate any provision of law or of the
articles of incorporation or by-laws of the Company, conflict with or result in
a breach of or constitute a default or require any consent under any contracts
to which Company is a party, or result in the creation of any Lien upon any
property or assets of the Company other than the Lien on the Collateral granted
hereunder, or result in or require the acceleration of any Indebtedness of the
Company pursuant to any agreement, instrument or indenture to which the Company
is a party or by which the Company or its property may be bound or affected.
This Agreement, the Note and all other Loan Documents contemplated hereby or
thereby constitute legal, valid, and binding obligations of the Company,
enforceable in accordance with their respective terms, except as limited by
bankruptcy, insolvency or other such laws affecting the enforcement of
creditors' rights generally.
5.3 Financial Condition. The balance sheet of the Company provided to
Lender pursuant to Section 4.1(a)(5) hereof (and if applicable, its
Subsidiaries, on a consolidating and consolidated basis) as at the Statement
Date, and the related statements of income, changes in stockholders' equity, and
cash flows for the fiscal year ended on the Statement Date, heretofore furnished
to the Lender, fairly present the financial condition of the Company and its
Subsidiaries as at the Statement Date and the Interim Date and the results of
its and their operations for the fiscal period ended on the Statement Date and
the Interim Date. The Company had, on the Statement Date and the Interim Date,
no known material liabilities, direct or indirect, fixed or contingent, matured
or unmatured, or liabilities for taxes, long-term leases or unusual forward or
long-term commitments not disclosed by, or reserved against in, said balance
sheet and related statements, and at the present time there are no material
unrealized or anticipated losses from any loans, advances or other commitments
of the Company except as heretofore disclosed to the Lender in writing. Said
financial statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved. Since the Statement Date,
there has been no material adverse change in the business, operations, assets or
financial condition of the Company or its Subsidiaries, nor is the Company aware
of any
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state of facts particular to the Company which (with or without notice or lapse
of time or both) would or could result in any such material adverse change.
5.4 Litigation. Except as disclosed on EXHIBIT "H", there are no
actions, claims, suits or proceedings pending, or to the knowledge of the
Company, threatened or reasonably anticipated against or affecting the Company
or any Subsidiary of the Company in any court or before any arbitrator or before
any government commission, board, bureau or other administrative agency which,
if adversely determined, may reasonably be expected to result in any material
and adverse change in the business, operations, assets or financial condition of
the Company or any of Company's Subsidiaries, as a whole.
5.5 Compliance with Laws. To the knowledge of Company, neither the
Company nor any Subsidiary of the Company is in violation of any provision of
any law, or of any judgment, award, rule, regulation, order, decree, writ or
injunction of any court or public regulatory body or authority which might have
a material adverse effect on the business, operations, assets or financial
condition of the Company or any of Company's Subsidiaries, as a whole.
5.6 Regulations G and U. The Company is not engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock, and no part of the proceeds of
any Advances made hereunder will be used to purchase or carry any Margin Stock
or to extend credit to others for the purpose of purchasing or carrying any
Margin Stock.
5.7 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
5.8 Agreements. Neither the Company nor any Subsidiary of the Company
is a party to any agreement, instrument or indenture, or subject to any
restriction, materially and adversely affecting its business, operations, assets
or financial condition, except as disclosed in the financial statements
described in Section 5.3 hereof. The Company and each Subsidiary of the Company
are not in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement, instrument, or
indenture which default could have a material adverse effect on the business,
operations, properties or financial condition of the Company as a whole. No
holder of any Indebtedness of the Company or of any of its Subsidiaries has
given notice of any alleged default thereunder or, if given, the same has been
cured or will be cured by Company within the cure period provided therein, and
no liquidation or dissolution of the Company or any of its Subsidiaries and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Company or any of its Subsidiaries or any of their
respective properties is pending, or to the knowledge of the Company,
threatened.
5.9 Title to Properties. The Company and each Subsidiary of the Company
has good, valid, insurable (in the case of real property) and marketable title
to all of its properties and assets (whether real or personal, tangible or
intangible) reflected on the financial statements described in
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Section 5.3 hereof, and all such properties and assets are free and clear of all
material Liens except as disclosed in such financial statements and not
prohibited under this Agreement.
5.10 ERISA. All plans ("Plans") of a type described in Section 3(3) of
ERISA in respect of which the Company or any Subsidiary of the Company is an
"Employer," as defined in Section 3(5) of ERISA, are in substantial compliance
with ERISA, and none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Internal Revenue Code, and neither the Company nor any Subsidiary of the
Company has incurred any material liability (including any material contingent
liability) to or on account of any such Plan pursuant to Sections 4062, 4063,
4064, 4201 or 4204 of ERISA; and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a material risk
to the Company or a Subsidiary of the Company of incurring a liability to or on
account of any such Plan pursuant to any of the foregoing Sections of ERISA. No
Plan or trust forming a part thereof has been terminated since December 1, 1974.
5.11 Eligibility. The Company has all requisite corporate power and
authority and all necessary licenses, permits, franchises and other
authorizations to own and operate its property and to carry on its business as
now conducted. If approved now or hereafter as a lender or seller/servicer for
any one or more of the governmental agencies as set forth below, the Company
will remain at all times approved and qualified and in good standing and meet
all requirements applicable to such status:
(a) FNMA approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to be sold
to FNMA.
(b) FHLMC approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to be sold
to FHLMC.
(c) GNMA approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to be sold
to GNMA.
(d) HUD approved lender, eligible to originate, purchase, hold,
sell and service FHA-insured Mortgage Loans.
(e) VA lender in good standing under the VA loan guarantee
program eligible to originate, purchase, hold, sell, and service
VA-guaranteed Mortgage Loans.
5.12 Special Representations Concerning Collateral. The Company hereby
represents and warrants to the Lender, as of the date of this Agreement and as
of the date of each Advance, that:
(a) The Company is the legal and equitable owner and holder, free
and clear of all Liens (other than Liens granted hereunder), of the
Pledged Mortgages and the Pledged Securities. All Pledged Mortgages,
Pledged Securities, and Purchase Commitments have been duly authorized
and validly granted or issued to the Company, and all of the foregoing
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items of Collateral comply with all of the requirements of this Agreement, and
have been validly pledged or assigned to the Lender, subject to no other Liens.
(b) The Company has, and will continue to have, the full right, power
and authority to pledge the Collateral pledged and to be pledged by it
hereunder.
(c) Any Mortgage Loan and related documents included in the Pledged
Mortgages (1) as of the date of the Advance Request for such Mortgage Loan, has
been duly executed and delivered by the parties thereto at a closing held not
more than sixty (60) days prior to such date; (2) has been made in material
compliance with all requirements of the Real Estate Settlement Procedures Act,
Equal Credit Opportunity Act, the federal Truth-In-Lending Act and all other
applicable laws and regulations; (3) is valid and enforceable in accordance with
its terms, without defense or offset; (4) has not been modified or amended
except in writing, which writing is part of the Collateral Documents, nor any
requirements thereof waived; and (5) complies with the terms of this Agreement
and, if applicable, with the related Purchase Commitment held by the Company.
Each Mortgage Loan has been fully advanced in the face amount thereof and each
Mortgage creates a Lien on the premises described therein.
(d) No monetary default, nor, to the knowledge of the Company, any event
which, with notice or lapse of time or both, would become a default, has
occurred and is continuing under any Mortgage Loan included in the Pledged
Mortgages; provided, however, that, with respect to Pledged Mortgages which have
already been pledged as Collateral hereunder, if the Company becomes aware that
any such default or event has occurred, the Company will promptly notify the
Lender and the same shall not have continued for more than sixty (60) days.
(e) The Company has substantially complied in all material respects with
all laws, rules and regulations in respect of the FHA insurance or VA guarantee
of each Mortgage Loan included in the Pledged Mortgages designated by the
Company as an FHA insured or VA guaranteed Mortgage Loans, and such insurance or
guarantee is in full force and effect in all material respects. All such FHA
insured and VA guaranteed Mortgage Loans comply in all material respects with
all applicable requirements for purchase under the FNMA standard form of selling
contract for FHA insured and VA guaranteed loans and any supplement thereto then
in effect.
(f) All fire and casualty policies covering Mortgaged Property
encumbered by a Pledged Mortgage (1) name the Company and its successors and
assigns as the insured under a standard mortgagee clause, (2) are and will
continue to be in full force and effect, and (3) afford and will continue to
afford insurance against fire and such other risks as are usually insured
against in the broad form of extended coverage insurance from time to time
available, as well as insurance against flood hazards if the same is required by
FHA or VA.
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(g) Pledged Mortgages encumbering Mortgaged Property located in a
special flood hazard area designated as such by the Secretary of HUD are
and shall continue to be covered by special flood insurance under the
National Flood Insurance Program.
(h) Each FHA insured Mortgage Loan pledged hereunder meets all
material applicable governmental requirements for such insurance. Each
Mortgage Loan, against which an Advance is made on the basis of a
Purchase Commitment meets all requirements of such Purchase Commitment.
The Company shall assure that Mortgage Loans pledged pursuant to this
Agreement and intended to be used in the formation of Mortgage-backed
Securities shall comply, or prior to the formation of any such
Mortgage-backed Security, shall comply with the requirements of the
governmental instrumentality, department or agency guaranteeing such
Mortgage-backed Security in all material respects.
(i) For Pledged Mortgages which will be used to secure GNMA
Mortgage-backed Securities, the Company has received from GNMA a
Confirmation Notice or Confirmation Notices for Request Additional
Commitment Authority and for Request Pool Numbers, and there remains
available thereunder a commitment on the part of GNMA sufficient to
permit the issuance of GNMA Mortgage-backed Securities in an amount at
least equal to the amount of such Pledged Mortgages designated by the
Company as the Mortgage Loans to be used to secure such GNMA
Mortgage-backed Securities; each such Confirmation Notice is in full
force and effect; each of such Pledged Mortgages has been assigned by
the Company to one of such Pool Numbers and a portion of the available
GNMA Commitment has been allocated thereto by the Company, in an amount
at least equal to the principal amount of each Mortgage Note secured by
such Pledged Mortgages; and each such assignment and allocation has been
reflected in the books and records of the Company.
(j) Each Pledged Mortgage in excess of $250,000.00 is supported
by an appraisal that meets the appraisal requirements of FNMA or FHLMC
(in the case of residential Mortgaged Property), or the Office of Thrift
Supervision for the type of Mortgaged Property securing that Pledged
Mortgage; or, alternatively, such Pledged Mortgage is eligible for
purchase or is guaranteed or insured by a U.S. Government agency or a
U.S. Government sponsored enterprise.
5.13 RICO. The Company is not in violation of any laws, statutes or
regulations, including, without limitation, RICO, which contain provisions which
could potentially override Lender's security interest in the Collateral.
5.14 Proper Names. The Company does not operate in any jurisdiction
under a trade name, division, division name or name other than those names set
forth on EXHIBIT "I" attached hereto and all such names included on EXHIBIT "I"
are utilized by the Company only in the jurisdictions listed therein.
5.15 Direct Benefit From Loans. The Company has received, or, upon the
execution and funding thereof, will receive (a) direct benefit from the making
and execution of this Agreement and the other Loan Documents to which it is a
party, and (b) fair and independent consideration for the
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entry into, and performance of, this Agreement and the other Loan Documents to
which it is a party. Contemporaneously with the disbursements of each Advance by
the Lender to the Company, all such proceeds will be used to finance the
origination or purchase of Mortgage Loans.
5.16 Loan Documents Do Not Violate Other Documents. Neither the execution
and delivery by the Company of this Agreement or any other Loan Document to
which it is a party nor the consummation of the transactions herein and therein
contemplated, nor the performance of, or compliance with, the terms and
provisions hereof and thereof, does or will contravene, breach or conflict with
any provision of either of its articles of incorporation or by-laws, or any
applicable law, statute, rule or regulation or any judgment, decree, writ,
injunction, franchise, order or permit applicable to the Company or its assets
or properties, or does or will conflict or be inconsistent with, or does or will
result in any breach or default of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of any Lien upon any of the property or assets of the Company
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
or other instrument to which the Company is a party or by which the Company or
any of its property may be bound, the contravention, conflict, inconsistency,
breach or default of which will have a materially adverse effect on the
Company's condition, financial or otherwise, or affect its ability to perform,
promptly and fully, its obligations hereunder or under any of the other Loan
Documents.
5.17 Consents Not Required. Except for those consents that have already
been obtained and delivered to Lender or required as a condition to any Advance
hereunder, no consent of any Person and no consent, license, permit, approval,
or authorization of, exemption by, or registration or declaration with, any
Tribunal is required in connection with the execution, delivery, performance,
validity, or enforceability of this Agreement or any of the Loan Documents by
the Company.
5.18 Material Fact Representations. Neither the Loan Documents nor any
other agreement, document, certificate, or written statement furnished to the
Lender by or on behalf of the Company in connection with the transactions
contemplated in any of the Loan Documents contains any untrue statement of a
material adverse fact. There are no material adverse facts or conditions
relating to the making of the Commitment, any of the Collateral, and/or the
financial condition and business of the Company known to the Company which have
not been fully disclosed, in writing, to the Lender, it being understood that
this representation is made as of, and shall be limited to the date of this
Agreement. All writings heretofore or hereafter exhibited or delivered to the
Lender by or on behalf of the Company are and will be genuine and what they
purport to be.
5.19 Place of Business. The principal place of business of the Company is
1603 McGaw Avenue, Irvine, California 92614, and the chief executive office of
the Company and the office where it keeps its financial books and records
relating to its property and all contracts relating thereto and all accounts
arising therefrom is located at the address set forth for the Company in Section
9 hereof.
5.20 Use of Proceeds: Business Loans. The Company will use the proceeds
of the Advances made pursuant to the Commitment solely as follows, and for no
other purpose: finance the origination and purchase of Mortgage Loans. All loans
evidenced by the Note are and shall be
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"business loans", as such term is used in the Depository Institutions
Deregulation and Monetary Control Act of 1980, as amended, and such loans are
for business or commercial purposes and not primarily for personal, family,
household or agricultural use, as such terms are used or defined in Texas
Revised Civil Statutes, Texas Credit Title, Regulation Z promulgated by the
Board of Governors of the Federal Reserve System, and Titles I and V of the
Consumer Credit Protection Act. The provisions of the Texas Credit Title which
regulate revolving loans and revolving triparty accounts) shall not apply to
this Agreement.
5.21 No Undisclosed Liabilities. Other than as permitted in Section 7.15
hereof, the Company does not have any liabilities or Indebtedness, direct or
contingent, except for liabilities or Indebtedness which, in the aggregate, do
not exceed $100,000.00.
5.22 Tax Returns and Payments. All federal, state and local income,
excise, property and other tax returns required to be filed with respect to
Company's operations and those of its Subsidiaries in any jurisdiction have been
filed on or before the due date thereof (plus any applicable extensions); all
such returns are true and correct; all taxes, assessments, fees and other
governmental charges upon the Company, and Company's Subsidiaries and upon its
property, income or franchises, which are due and payable have been paid,
including, without limitation, all FICA payments and withholding taxes, if
appropriate, other than those which are being contested in good faith by
appropriate proceedings, diligently pursued and as to which the Company has
established adequate reserves determined in accordance with GAAP, consistently
applied. The amounts reserved, as a liability for income and other taxes
payable, in the financial statements described in Section 5.3 hereof are
sufficient for payment of all unpaid federal, state and local income, excise,
property and other taxes, whether or not disputed, of the Company and its
Subsidiaries, accrued for or applicable to the period and on the dates of such
financial statements and all years and periods prior thereto and for which the
Company, and Company's Subsidiaries may be liable in their own right or as
transferee of the assets of, or as successor to, any other Person.
5.23 Subsidiaries. The Company has not issued, and does not have
outstanding, any warrants, options, rights or other obligations to issue or
purchase any shares of its capital stock or other securities other than have
been disclosed in any filing with the Securities Exchange Commission. The
outstanding shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. All of Company's
Subsidiaries are listed on EXHIBIT "G", attached hereto.
5.24 Holding Company. The Company is not a "holding company" or a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
5.25 Year 2000 Issue. The Company and its Subsidiaries have reviewed the
effect of the year 2000 Issue on the computer software, hardware, and firmware
systems and equipment containing embedded microchips owned or operated by or for
the Company and its Subsidiaries or used or relied upon in the conduct of their
business (including systems and equipment supplied by others or with which such
computer systems of the Company and its Subsidiaries interface). The Company and
its Subsidiaries have reviewed and determined that the costs to the Company and
its
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Subsidiaries of any reprogramming required as a result of the Year 2000 Issue
to permit the proper functioning of such systems and equipment and the proper
processing of data, and the testing of such reprogramming, and of the reasonably
foreseeable consequences of the year 2000 Issue to the Company or any of its
Subsidiaries (including reprogramming errors and the failure of systems or
equipment supplied by others), are not reasonably expected to result in a
Default or Event of Default or to have a material adverse effect on the
business, assets, operations, prospects, or condition (financial or otherwise)
of the Company or its Subsidiaries.
6. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment
is outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or under any other Loan Document, the Company
shall:
6.1 Payment of Note. Punctually pay or cause to be paid the principal
of, interest on and all other amounts payable hereunder and under the Note in
accordance with the terms thereof.
6.2 Financial Statements and Other Reports. Deliver to the Lender:
(a) Within forty-five (45) days after the end of each calendar
quarter, statements of income and changes in stockholders' equity and
cash flow of the Company and, if applicable, Company's Subsidiaries, on
a consolidated and consolidating basis for the immediately preceding
quarter, and related balance sheet as at the end of the immediately
preceding quarter, all in reasonable detail, prepared in accordance with
GAAP applied on a consistent basis, and certified as to the fairness of
presentation by the president and chief financial officer of the
Company, subject, however, to year-end audit adjustments.
(b) Within ninety (90) days after the close of each fiscal year:
statements of income, changes in stockholders' equity and cash flows of
the Company, and, if applicable, Company's Subsidiaries, on a
consolidated and consolidating basis for such year, the related balance
sheet as at the end of such year (setting forth in comparative form the
corresponding figures for the preceding fiscal year), all in reasonable
detail, prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved, and accompanied by an opinion in form
and substance satisfactory to the Lender and prepared by an accounting
firm reasonably satisfactory to the Lender, or other independent
certified public accountants of recognized standing selected by the
Company and acceptable to the Lender, as to said financial statements
and a certificate signed by the president and chief financial officer of
the Company stating that said financial statements fairly present the
financial condition and results of operations of the Company and, if
applicable, Company's Subsidiaries as at the end of, and for, such year.
(c) Together with each delivery of financial statements required
in this Section 6.2, an Officer's Certificate in substantially the form
of EXHIBIT "F" hereto.
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(d) Reports in respect of the Pledged Mortgages and Pledged
Securities, in such detail and at such times as the Lender in its
discretion may request at any time or from time to time, including,
without limitation, a monthly pipeline report in form satisfactory to
Lender, to be delivered with the monthly financial statements required
in Section 6.2(a).
(e) Copies of all regular or periodic financial and other
reports, if any, which the Company shall file with the Securities and
Exchange Commission or any governmental agency successor thereto and
copies of any audits completed by GNMA, FHLMC, or FNMA. Copies of the
Mortgage Bankers' Financial Reporting Forms (FNMA Form 1002) which the
Company shall have filed with FNMA.
(f) From time to time, with reasonable promptness, such further
information regarding the business, operations, properties or financial
condition of the Company as the Lender may reasonably request.
6.3 Maintenance of Existence: Conduct of Business. Preserve and maintain
its corporate existence in good standing and all of its rights, privileges,
licenses and franchises necessary in the normal conduct of its business,
including, without limitation, its eligibility as lender, seller/servicer and
issuer described under Section 5.11 hereof; conduct its business in an orderly
and efficient manner; maintain a net worth of acceptable assets as required by
HUD at any and all times for maintaining the Company's status as a FHA approved
mortgagee; and make no material change in the nature or character of its
business or engage in any business outside the real estate and financial
services sector in which it was not engaged on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority, a
breach of which could materially adversely affect its business, operations,
assets, or financial condition, except where contested in good faith and by
appropriate proceedings, and with sufficient reserves established therefor.
6.5 Inspection of Properties and Books. Permit authorized
representatives of the Lender to (a) discuss the business, operations, assets
and financial condition of the Company and Company's Subsidiaries with their
officers and employees and to examine their books of account, records, reports
and other papers and make copies or extracts thereof, and (b) inspect all of the
Company's property and all related information and reports at Lender's expense,
all at such reasonable times as the Lender may request. The Company will provide
its accountants with a copy of this Agreement promptly after the execution
hereof and will instruct its accountants to answer candidly any and all
questions that the officers of the Lender or any authorized representatives of
the Lender may address to them in reference to the financial condition or
affairs of the Company and Company's Subsidiaries. The Company may have its
representatives in attendance at any meetings between the officers or other
representatives of the Lender and the Company accountants held in accordance
with this authorization.
6.6 Notice. Give prompt written notice to the Lender of (a) any action,
suit or proceeding instituted by or against the Company or any of its
Subsidiaries in any federal or state court or before any commission or other
regulatory body (federal, state or local, domestic or foreign) which action,
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suit or proceeding has at issue in excess of One Hundred Thousand Dollars
($100,000.00) (except for normal collection and foreclosure proceedings
initiated by the Company in connection with a Mortgage Loan or any other
mortgage loan), or any such proceedings threatened against the Company, or any
of Company's Subsidiaries in writing containing the details thereof, (b) the
filing, recording or assessment of any material federal, state or local tax Lien
against it, or any of its assets or any of its Subsidiaries, (c) the occurrence
of any Event of Default hereunder or the occurrence of any Default and
continuation thereof for five (5) days, (d) the suspension, revocation or
termination of the Company's eligibility, in any respect, as approved lender,
seller/servicer or issuer as described under Section 5.11 hereof, (e) the
transfer, loss or termination of any Servicing Contract to which the Company is
a party, or which is held for the benefit of the Company, and the reason for
such transfer, loss or termination, if known to the Company, and (f) any other
action, event or condition of any nature which may lead to or result in a
material adverse effect upon the business, operations, assets, or financial
condition of the Company or Company's Subsidiaries or which, with or without
notice or lapse of time or both, would constitute a default under any other
agreement instrument or indenture to which the Company is a party or to which
the Company its properties or assets may be subject.
6.7 Payment of Debt. Taxes, etc. Pay and perform all obligations and
Indebtedness of the Company, and cause to be paid and performed all obligations
and Indebtedness of its Subsidiaries in accordance with the terms thereof and
pay and discharge or cause to be paid and discharged all taxes, assessments and
governmental charges or levies imposed upon the Company or its Subsidiaries, or
upon their respective income, receipts or properties before the same shall
become past due, as well as all lawful claims for labor, materials and supplies
or otherwise which, if unpaid, might become a Lien or charge upon such
properties or any part thereof; provided, however, that the Company and its
Subsidiaries shall not be required to pay obligation, Indebtedness, taxes,
assessments or governmental charges or levies or claims for labor, materials or
supplies for which the Company or its Subsidiaries shall have obtained an
adequate bond or adequate insurance or which are being contested in good faith
and by proper proceedings which are being reasonably and diligently pursued if
such proceedings do not involve any likelihood of the sale, forfeiture or loss
of any such property or any interest therein while such proceedings are pending,
and provided further that book reserves adequate under generally accepted
accounting principles shall have been established with respect thereto and
provided further that the owing Person's title to, and its right to use, its
property is not materially adversely affected thereby.
6.8 Insurance. Maintain (a) errors and omissions insurance or mortgage
impairment insurance and blanket bond coverage, with such companies and in such
amounts as satisfy prevailing FNMA and FHLMC requirements applicable to a
qualified mortgage originating institution, and (b) liability insurance and fire
and other hazard insurance on its properties, with responsible insurance
companies approved by the Lender, in such amounts and against such risks as is
customarily carried by similar businesses operating in the same vicinity; and
(c) within thirty (30) days after notice from the Lender, obtain such additional
insurance as the Lender shall reasonably require, all at the sole expense of the
Company. Copies of such policies shall be furnished to the Lender without charge
upon obtaining such coverage or any renewal of or modification to such coverage.
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6.9 Closing Instructions. THE COMPANY AGREES TO INDEMNIFY AND HOLD THE
LENDER HARMLESS FROM AND AGAINST ANY LOSS, INCLUDING REASONABLE ATTORNEYS' FEES
AND COSTS, ATTRIBUTABLE TO THE FAILURE OF A TITLE INSURANCE COMPANY, AGENT OR
ATTORNEY TO COMPLY WITH THE DISBURSEMENT OR INSTRUCTION LETTER OR LETTERS OF THE
COMPANY OR OF THE LENDER RELATING TO ANY MORTGAGE LOAN. The Lender shall have
the right to pre-approve the closing instructions of the Company to the title
insurance company, agent or attorney in any case where the Mortgage Loan to be
created at settlement is intended to be warehoused by the Company pursuant
hereto.
6.10 Other Loan Obligations. Perform all obligations under the terms of
each loan agreement, note, mortgage, security agreement or debt instrument by
which the Company is bound or to which any of its property is subject, and
promptly notify the Lender in writing of a declared default under or the
termination, cancellation, reduction or non-renewal of any of its other lines of
credit or financing agreements with any other lender. EXHIBIT "B" hereto is a
true and complete list of all such lines of credit or financing agreements as of
the date hereof.
6.11 Use of Proceeds of Advances. Use the proceeds of each Advance
solely for the purpose of financing or purchasing Pledged Mortgages, including
the issuance of Mortgage-backed Securities based thereon.
6.12 Special Affirmative Covenants Concerning Collateral.
(a) Warrant and defend the right, title and interest of the
Lender in and to the Collateral against the claims and demands of all
Persons whomsoever.
(b) Service or cause to be serviced all Pledged Mortgages in
accordance with the standard requirements of the issuers of Purchase
Commitments covering the same and all applicable FHA and VA
requirements, including without limitation taking all actions necessary
to enforce the obligations of the obligors under such Mortgage Loans.
The Company shall service or cause to be serviced all Mortgage Loans
backing Pledged Securities in accordance with applicable governmental
requirements and issuers of Purchase Commitments covering the same. The
Company shall hold all escrow funds collected in respect of Pledged
Mortgages and Mortgage Loans backing Pledged Securities in trust,
without commingling the same with non-custodial funds, and apply the
same for the purposes for which such funds were collected.
(c) Execute and deliver to the Lender such Uniform Commercial Code
financing statements with respect to the Collateral as the Lender may
request. The Company shall also execute and deliver to the Lender such
further instruments of sale, pledge or assignment or transfer, and such
powers of attorney, as required by the Lender to secure the Collateral,
and shall do and perform all matters and things necessary or desirable
to be done or observed, for the purpose of effectively creating,
maintaining and preserving the security and benefits intended to be
afforded the Lender under this Agreement. The Lender shall have all the
rights and remedies of a secured party under the Uniform Commercial Code
of Texas, or any other applicable law, in addition to all rights
provided for herein.
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(d) Notify the Lender within two (2) Business Days after receipt
of notice from an Investor of any default under, or of the termination
of, any Purchase Commitment relating to any Pledged Mortgage, Eligible
Mortgage Pool or Pledged Security.
(e) Promptly comply in all respects with the terms and
conditions of all Purchase Commitments, and all extensions, renewals and
modifications or substitutions thereof or thereto. The Company will
cause to be delivered to the Investor the Pledged Mortgages and Pledged
Securities to be sold under each Purchase Commitment not later than the
expiration thereof.
(f) Maintain, at its principal office or in a regional office
approved by the Lender, or in the office of a computer service bureau
engaged by the Company and approved by the Lender, and, upon request,
shall make available to the Lender the originals, or copies in any case
where the originals have been delivered to the Lender or to an Investor,
of its Mortgage Notes and Mortgages included in Pledged Mortgages,
Mortgage-backed Securities delivered to the Lender as Pledged
Securities, Purchase Commitments, and all related Mortgage Loan
documents and instruments, and all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records and other information and data relating to the
Collateral.
6.13 Cure of Defects in Loan Documents. The Company will promptly cure
and cause to be promptly cured any defects in the creation, issuance, execution
and delivery of this Agreement and the other Loan Documents; and upon request of
the Lender and at the Company's expense, the Company will promptly execute and
deliver, and cause to be executed and delivered, to the Lender or its designee,
all such additional documents, agreements and/or instruments in compliance with
or in accomplishment of the covenants and agreements of this Agreement and the
other Loan Documents, and/or to create, perfect, preserve, extend and/or
maintain any and all Liens created pursuant hereto or pursuant to any other Loan
Document as valid and perfected Liens (of a priority as set forth in this
Agreement) in favor of the Lender to secure the Obligations, all as reasonably
requested from time to time by the Lender.
6.14 Year 2000 Compliant. Will take all necessary and reasonable action
to complete in all material respects by July 1, 1999, the reprogramming of
computer software, hardware, and firmware systems used or relied upon in the
conduct of the Company's business (including systems and equipment supplied by
others or with which such systems of Company interface) required as a result of
the Year 2000 Issue to permit the proper functioning of such computer systems
and other equipment and testing of such systems and equipment, as so
reprogrammed. At the request of the Lender, Company shall provide to the Lender
reasonable assurance of its compliance with the preceding sentence.
7. NEGATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment is
outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or
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any other Loan Document, the Company shall not, either directly or indirectly,
without the prior written consent of the Lender:
7.1 Contingent Liabilities. Assume, incur, create, guarantee, endorse,
or otherwise become or be liable for the obligation of any Person other than the
Company except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and excluding the sale of Mortgage
Loans with recourse in the ordinary course of the company's business.
7.2 Pledge of Mortgage Loans. Except for Mortgage Loans pledged to the
lenders described in EXHIBIT "B", pledge or grant a security interest in any
existing or future Mortgage Loans acquired by the Company other than to the
Lender except as otherwise expressly permitted in this Agreement; provided,
however, that if no Default or Event of Default has occurred and is continuing,
servicing on individual Mortgage Loans may be sold concurrently with and
incidental to the sale of such Mortgage Loans (with servicing released) in the
ordinary course of the Company's business.
7.3 Loss of Eligibility. Take any action that would cause the Company to
lose all or any part of its status as an eligible lender, seller/servicer and
issuer as described under Section 5.11 hereof.
7.4 Debt to Adjusted Tangible Worth Ratio. Permit the ratio of Debt to
Adjusted Tangible Worth of the Company (and its Subsidiaries, on a consolidated
basis) to exceed 15:1 computed as of the end of each calendar quarter.
7.5 Minimum Adjusted Tangible Net Worth. Permit Adjusted Tangible Net
Worth of the Company (and its Subsidiaries, on a consolidated basis) to be less
than Twenty-Five Million Dollars ($25,000,000.00), computed as of the end of
each calendar quarter.
7.6 Limits on Corporate Distributions. Pay, make or declare or incur any
liability to pay, make or declare any dividend (excluding stock dividends) or
other distribution, direct or indirect, on or on account of any shares of its
stock or any redemption or other acquisition, direct or indirect, of any shares
of its stock or of any warrants, rights or other options to purchase any shares
of its stock nor purchase, acquire, redeem or retire any stock or ownership
interest in itself whether now or hereafter outstanding if a Default, Event of
Default or violation of Sections 7.5 and 7.6 hereof exists at such time, or
would exist immediately thereafter.
7.7 RICO. Violate any laws, statutes or regulations, whether federal or
state, for which forfeiture of its properties is a potential penalty, including,
without limitations, RICO.
7.8 No Loans or Investments Except Approved Investments. Without the
prior written notice to Lender, make or permit to remain outstanding any loans
or advances to, or investments in, any Person, except that the foregoing
restriction shall not apply to:
(a) investments in marketable obligations maturing no later than
180 days from the date of acquisition thereof by the Company and issued
and fully guaranteed, directly, by
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the full faith and credit of the Government of the United States of
America or any agency thereof; and
(b) investments in certificates of deposit maturing no later than
180 days from the date of issuance thereof and issued by commercial
banks in the United States and such banks rated by Moody's Investor
Service, Inc. and receiving a rating of Prime-2 or higher on Moody's
short term debt rating or rated by Standard & Poor's Corporation and
receiving a rating of AA-/A1+ or higher on S&P's short term debt
rating, or issued by Lender, it being acknowledged and agreed that the
foregoing requirements shall pertain to certificates of deposit issued
and/or received on a date on or after the date of this Agreement); and
(c) investments not to exceed $200,000.00 in the aggregate.
7.9 Charter Documents and Business Termination.
(a) Issue, sell or commit to issue or sell any shares of its
capital stock of any class, or other equity or investment security that
results or would result in a Change of Control,
(b) Amend or otherwise modify its corporate charter or otherwise
change its corporate structure in any manner which will have a
materially adverse effect on the Company's condition, financial or
otherwise, or which will have a material adverse effect upon the
Company's ability to perform, promptly and fully, its obligations
hereunder or under any of the other Loan Documents, or
(c) Take any action with a view toward its dissolution,
liquidation or termination, or, in fact, dissolve, liquidate or
terminate its existence.
7.10 Changes in Accounting Methods. Make any material change in its
accounting method as in effect on the date of this Agreement or change its
fiscal year ending date from June 30, unless such changes (a) are required for
or are in conformity with generally accepted accounting principles and, in such
event, the Company will give prior written notice of each such change to the
Lender or (b) or if not so required, are in conformity with generally accepted
accounting principles and have the prior written approval of the Lender which
approval shall not be unreasonably withheld.
7.11 No Sales, Leases or Dispositions of Property. Except in the
ordinary course of its business, the Company will not sell, lease, transfer or
otherwise dispose of all or any material portion or portions or integral part of
its properties or assets, whether now owned or hereafter acquired (whether in a
single transaction or in a series of transactions), or enter into any
arrangement, directly or indirectly, with any person, whereby it shall sell or
transfer all or any material portion of its properties or assets, whether now
owned or hereafter acquired, and thereafter rent or lease as lessee such
property or any part thereof which it intends to use for substantially the same
purpose or purposes as the property sold or transferred.
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7.12 Changes in Business or Assets. Make any substantial change (a) in
the nature of its business as now conducted, or (b) in the use of its property
as now used and proposed to be used.
7.13 Changes in Office or Inventory Location. Change the address and/or
location of its chief executive office or principal place of business or the
place where it keeps its books and records or its inventory to a location
outside the State of California unless, prior to any such change, the Company
shall execute and cause to be executed such additional agreements and/or lien
instruments as the Lender may reasonably request to conform with the provisions
hereof and the transactions and perfected Liens in the Collateral contemplated
under this Agreement and the other Loan Documents.
7.14 Special Negative Covenants Concerning Collateral.
(a) The Company shall not amend or modify, or waive any of the
terms and conditions of, or settle or compromise any claim in respect
of, any Pledged Mortgages or Pledged Securities.
(b) The Company shall not sell, assign, transfer or otherwise
dispose of, or grant any option with respect to, or pledge or otherwise
encumber (except pursuant to this Agreement or as permitted herein) any
of the Collateral or any interest therein.
(c) The Company shall not make any compromise, adjustment or
settlement in respect of any of the Collateral or accept other than cash
in payment or liquidation of the Collateral.
7.15 No Indebtedness. Except for the Indebtedness described in EXHIBIT
"B" hereto, without the prior written consent of Lender, the Company will not
incur, create, assume or guarantee or in any manner become or be liable or
permit to be outstanding any Indebtedness (including obligations for the payment
of rentals other than provided for herein) nor guarantee any contract or other
obligation, and will not in any way become or be responsible for obligations of
any Person, whether by agreement to purchase the Indebtedness of any other
Person or agreement for the furnishing of funds to any other Person through the
purchase of goods, supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging the
Indebtedness of any other Person or otherwise, except that the foregoing
restrictions shall not apply to:
(a) the Obligations.
(b) liabilities for taxes, assessments, governmental charges or
levies which are not yet due and payable or which are being contested in
good faith by appropriate proceedings diligently conducted if reserves
adequate under generally accepted accounting principles have been
established therefor.
(c) endorsements of negotiable instruments for collection in the
ordinary course of business.
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(d) Indebtedness incurred in the ordinary course of business in
connection with normal trade or business obligations which are payable
within 90 days of the occurrence thereof, provided, however, that no
Indebtedness shall be incurred by the Company to any Affiliate other
than in the ordinary course of business and upon substantially the same
or better terms as it could obtain in an arm's length transaction with a
Person who is not an Affiliate.
(e) Indebtedness of less than $200,000.00, in the aggregate,
incurred in the ordinary course of business.
(f) Indebtedness incurred in the ordinary course of business for
the purpose of leasing office space or equipment to be used in the
conduct of the business of the Company.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the following conditions
or events shall be an event of default ("Event of Default"):
(a) Failure to pay the principal of any Advance when due, whether
at stated maturity, by acceleration, or otherwise; or failure to pay any
installment of interest on any Advance or any other amount due under
this Agreement within ten (10) days after the due date; or failure to
pay, beyond any applicable grace period, the principal or interest on
any other indebtedness due the Lender; or
(b) Failure of the Company or any of its Subsidiaries to pay, or
any default in the payment of any principal or interest on, any other
Indebtedness or in the payment of any contingent obligation beyond any
period of grace provided; or breach or default with respect to any other
material term of any other Indebtedness of any loan agreement, mortgage,
indenture or other agreement relating thereto, if the effect of such
failure, default or breach is to cause, or to permit the holder or
holders thereof (or a trustee on behalf of such holder or holders) to
cause, Indebtedness of the Company or its Subsidiaries in the aggregate
amount of Two Hundred Thousand Dollars ($200,000.00) or more to become
or be declared due prior to its stated maturity (upon the giving or
receiving of notice, lapse of time, both, or otherwise); or
(c) Any of the Company's representations or warranties made or
deemed made herein or in any other Loan Document, or in any statement or
certificate at any time given by the Company in writing pursuant hereto
or thereto shall be inaccurate or incomplete in any materially adverse
respect on the date as of which made or deemed made; or
(d) The Company shall default in the performance of or compliance
with any term or covenant contained in this Agreement and such default
shall not have been remedied or waived within thirty (30) days after
receipt of notice from the Lender of such default other than those
referred to above in Subsections 8.1(a), 8.1(b), or 8.1(c); or
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(e) (1) A court having jurisdiction shall enter a decree or order for
relief in respect of the Company or any of Company's Subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect in respect of the Company or any of Company's
Subsidiaries, which decree or order is not stayed; or a filing of an involuntary
case under any applicable bankruptcy, insolvency or other similar law in respect
of the Company or any of Company's Subsidiaries has occurred; or (2) any other
similar relief shall be granted under any applicable federal or state law; or a
decree or order of a court having jurisdiction for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over the Company or any of Company's Subsidiaries, or over all or
a substantial part of their respective property, shall have been entered; or the
involuntary appointment of an interim receiver, trustee or other custodian of
the Company or any of Company's Subsidiaries, for all or a substantial part of
their respective property; or the issuance of a warrant of attachment, execution
or similar process against any substantial part of the property of the Company
or any of Company's Subsidiaries, and the continuance of any such events in
Subsections (1) and (2) above for sixty (60) days unless dismissed or
discharged; or
(f) The Company or any of Company's Subsidiaries shall have an order for
relief entered with respect to it or commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion to an involuntary case, under any such law, or shall
consent to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property; the making by the
Company or any of Company's Subsidiaries of any assignment for the benefit of
creditors; or the failure of the Company or any of Company's Subsidiaries, or
the admission by any of them of its inability, to pay its debts as such debts
become due; or
(g) Any money judgment, writ or warrant of attachment, or similar
process involving in any case an amount in excess of Two Hundred Thousand
Dollars ($200,000.00) shall be entered or filed against the Company or any of
its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days
or in any event no later than five (5) days prior to the date of any proposed
sale thereunder; or
(h) Any order, judgment or decree shall be entered against the Company
decreeing the dissolution or split up of the Company and such order shall remain
undischarged or unstayed for a period in excess of twenty (20) days; or
(i) Any Plan maintained by the Company or any of Company's Subsidiaries
shall be terminated within the meaning of Title IV of ERISA or a trustee shall
be appointed by an appropriate United States district court to administer any
Plan, or the Pension Benefit Guaranty Corporation (or any successor thereto)
shall institute proceedings to terminate any Plan or to appoint a trustee to
administer any Plan if as of the date thereof the Company's or any Subsidiary's
liability (after giving effect to the tax consequences thereof) to the Pension
Benefit Guaranty Corporation (or any successor thereto) for unfunded guaranteed
vested
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benefits under the Plan exceeds the then current value of assets accumulated in
such Plan by more than Fifty Thousand Dollars ($50,000.00) (or in the case of a
termination involving the Company or any of Company's Subsidiaries as a
"substantial employer" (as defined in Section 4001 (a)(2) of ERISA) the
withdrawing employer's proportionate share of such excess shall exceed such
amount); or
(j) The Company or any of Company's Subsidiaries as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from such
Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have
notified such withdrawing employer that such employer has incurred a withdrawal
liability in an annual amount exceeding Two Hundred Thousand Dollars
($200,000.00); or
(k) The Company shall purport to disavow its obligations hereunder or
shall contest the validity or enforceability hereof, or the Lender's security
interest on any portion of the Collateral shall become unenforceable or
otherwise impaired; provided that, subject to the Lender's approval, no Event of
Default shall occur as a result of such impairment if all Advances made against
any such Collateral shall be paid in full within ten (10) days of the date of
such impairment; or
(l) The Company dissolves or terminates its existence, or discontinues
its usual business; or
(m) Any court shall find or rule, or the Company shall assert or claim,
(i) that the Lender does not have a valid, perfected, enforceable Lien and
security interest in the Collateral of the priority as represented in this
Agreement or in any other Loan Document, or (ii) that this Agreement or any of
the Loan Documents does not or will not constitute the legal, valid, binding and
enforceable obligations of the party or parties (as applicable) thereto, or
(iii) that any Person has a conflicting or adverse Lien, claim or right in, or
with respect to, the Collateral and the Company is unable within 10 days to have
such finding or ruling reversed or to have such adverse Lien, claim or right
removed; or
(n) The Company shall have concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder, delay or
defraud its creditors or any of them, or made or suffered a transfer of any of
its property which may be fraudulent under any bankruptcy, fraudulent conveyance
or similar law; or shall have made any transfer of its property to or for the
benefit of a creditor at a time when other creditors similarly situated have not
been paid; or shall have suffered or permitted, while insolvent, any creditor to
obtain a Lien upon any of its property through legal proceedings or distraint or
other process which is not vacated within 60 days from the date thereof; or
(o) There shall be a material adverse change in the financial condition
or operations of the Company; or
(p) A Change of Control occurs.
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8.2 Remedies.
(a) Upon the occurrence of any Event of Default described in Sections
8.1(e) or 8.1(f), the Commitment shall be terminated and all Obligations of the
Company shall automatically become due and payable, without presentment for
payment, demand, notice of non-payment, protest, notice of protest, notice of
intent to accelerate, notice of acceleration, maturity, or any other notices or
requirements of any kind of Lender to the Company or any other Person liable
thereon or with respect thereto, all of which are hereby expressly waived by the
Company.
(b) Upon the occurrence of any Event of Default, other than those
described in Sections 8.1(e) or 8.1(f), the Lender may, by written notice to
the Company, terminate the Commitment and/or declare all Obligations of the
Company to be immediately due and payable, whereupon the same shall forthwith
become due and payable, together with all accrued and unpaid interest thereon,
and the obligation of the Lender to make any Advances shall thereupon terminate.
(c) Upon the occurrence of any Event of Default, the Lender may also do
any of the following:
(1) Foreclose upon or otherwise enforce its security interest in
and Lien on the Collateral to secure all payments and performance of
Obligations of the Company in any manner permitted by law or provided
for hereunder.
(2) Notify all obligors in respect of the Collateral that the
Collateral has been assigned to the Lender and that all payments thereon
are to be made directly to the Lender or such other party as may be
designated by the Lender; settle, compromise, or release, in whole or in
part, any amounts owing on the Collateral, any such obligor or any
Investor or any portion of the Collateral, on terms acceptable to the
Lender; enforce payment and prosecute any action or proceeding with
respect to any and all Collateral; and where any such Collateral is in
default, foreclose on and enforce security interests in, such Collateral
by any available judicial procedure or without judicial process and sell
property acquired as a result of any such foreclosure.
(3) Act, or contract with a third party to act, as servicer or
subservicer of each item of Collateral requiring servicing and perform
all obligations required in connection with Purchase Commitments, such
third party's fees to be paid by the Company.
(4) Require the Company to assemble the Collateral and/or books
and records relating thereto and make such available to the Lender at a
place to be designated by the Lender.
(5) Enter onto property where any Collateral or books and records
relating thereto are located and take possession thereof with or without
judicial process.
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(6) Prior to the disposition of the Collateral, prepare it for
disposition in any manner and to the extent the Lender deems
appropriate.
(7) Exercise all rights and remedies of a secured creditor under
the Uniform Commercial Code of Texas or other applicable law, including,
but not limited to, selling or otherwise disposing of the Collateral, or
any part thereof, at one or more public or private sales, whether or not
such Collateral is present at the place of sale, for cash or credit or
future delivery, on such terms and in such manner as the Lender may
determine, including, without limitation, sale pursuant to any
applicable Purchase Commitment. If notice is required under such
applicable law, the Lender will give the Company not less than ten (10)
days' notice of any such public sale or of the date after which private
sale may be held. The Company agrees that ten (10) days' notice shall
be reasonable notice. The Lender may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned
from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same
may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may
be retained by the Lender until the selling price is paid by the
purchaser thereof, but the Lender shall not incur any liability in case
of the failure of such purchaser to take up and pay for the Collateral
so sold and, in case of any such failure, such Collateral may again be
sold upon like notice. The Lender may, however, instead of exercising
the power of sale herein conferred upon it, proceed by a suit or suits
at law or in equity to collect all amounts due upon the Collateral or to
foreclose the pledge and sell the Collateral or any portion thereof
under a judgment or decree of a court or courts of competent
jurisdiction, or both.
(8) Proceed against the Company on the Note.
(d) The Lender shall incur no liability as a result of the sale or other
disposition of the Collateral, or any part thereof, at any public or private
sale or disposition. The Company hereby waives (to the extent permitted by law)
any claims it may have against the Lender arising by reason of the fact that the
price at which the Collateral may have been sold at such private sale was less
than the price which might have been obtained at a public sale or was less than
the aggregate amount of the outstanding Advances and the unpaid interest accrued
thereon, even if the Lender accepts the first offer received and does not offer
the Collateral to more than one offeree and none of the actions described herein
shall render Lender's disposition of the Collateral in such a manner as
commercially unreasonable.
(e) The Company specifically waives (to the extent permitted by law) any
equity or right of redemption, all rights of redemption, stay or appraisal which
the Company has or may have under any rule of law or statute now existing or
hereafter adopted, and any right to require the Lender to (1) proceed against
any Person, (2) proceed against or exhaust any of the Collateral or pursue its
rights and remedies as against the Collateral in any particular order, or (3)
pursue any other remedy in its power. The Lender shall not be required to take
any steps necessary to preserve any rights of the Company against holders of
mortgages prior
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in lien to the Lien of any Mortgage included in the Collateral or to
preserve rights against prior parties.
(f) The Lender may, but shall not be obligated to, advance any
sums or do any act or thing necessary to uphold and enforce the Lien and
priority of, or the security intended to be afforded by, any Mortgage
included in the Collateral, including, without limitation, payment of
delinquent taxes or assessments and insurance premiums. All advances,
charges, costs and expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Lender in exercising any right,
power or remedy conferred by this Agreement, or in the enforcement
hereof, together with interest thereon, at the Default Rate, from the
time of payment until repaid, shall become a part of the principal
balance outstanding hereunder and under the Note.
(g) No failure on the part of the Lender to exercise, and no
delay in exercising, any right, power or remedy provided hereunder, at
law or in equity shall operate as a waiver thereof; nor shall any single
or partial exercise by the Lender of any right, power or remedy provided
hereunder, at law or in equity preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. Without
intending to limit the foregoing, all defenses based on the statute of
limitations are hereby waived by the Company to the extent permitted by
law. The remedies herein provided are cumulative and are not exclusive
of any remedies provided at law or in equity.
8.3 Application of Proceeds. The proceeds of any sale, disposition or
other enforcement of the Lender's security interest in all or any part of the
Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses of such sale or
enforcement, including reasonable compensation to the Lender's agents
and counsel, and all expenses, liabilities and advances made or incurred
by or on behalf of the Lender in connection therewith;
Second, to the payment of any other amounts due (other than
principal and interest) under the Note or this Agreement;
Third, to the payment of interest accrued and unpaid on the
Note;
Fourth, to the payment of the outstanding principal balance of
the Note; and
Finally, to the payment to the Company, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
If the proceeds of any such sale, disposition or other enforcement are
insufficient to cover the costs and expenses of such sale, as aforesaid, and the
payment in full of all Obligations of the Company, the Company shall remain
liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby appointed
the attorney-in-fact of the Company, with full power of substitution, for the
purpose of carrying out the
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provisions hereof and taking any action and executing any instruments which the
Lender may deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Lender shall have the
right and power to give notices of its security interest in the Collateral to
any Person, either in the name of the Company or in its own name, to endorse all
Pledged Mortgages or Pledged Securities payable to the order of the Company, to
change or cause to be changed the book-entry registration or name of subscriber
or Investor on any Pledged Security, or to receive, endorse and collect all
checks made payable to the order of the Company representing any payment on
account of the principal of or interest on, or the proceeds of sale of, any of
the Pledged Mortgages or Pledged Securities and to give full discharge for the
same.
8.5 Right of Set-Off. If the Company shall default in the payment of the
Note, any interest accrued thereon, or any other sums which may become payable
hereunder when due, or in the performance of any of its other Obligations under
this Agreement, the Lender, shall have the right, at any time and from time to
time, without notice, to set-off and to appropriate or apply any and all
property or indebtedness of any kind at any time held or owing by the Lender to
or for the credit of the account of the Company (excluding any monies held by
the Company in trust for third parties) against and on account of the
Obligations, irrespective of whether or not the Lender shall have made any
demand hereunder and whether or not said Obligations shall have matured;
provided, however, that the Lender shall not be allowed to set-off against funds
in accounts with respect to which (i) the Company is a trustee or an escrow
agent in respect of bona fide third parties other than Affiliates, and (ii) such
trust or escrow arrangement was so denominated at the time of the creation of
such account.
9. NOTICES.
All notices, demands, consents, requests and other communications
required or permitted to be given or made hereunder (collectively, "Notices")
shall, except as otherwise expressly provided hereunder, be in writing and shall
be delivered in person or mailed, first class, return receipt requested, postage
prepaid, or delivered by overnight courier, addressed to the respective parties
hereto at their respective addresses hereinafter set forth or, as to any such
party, at such other address as may be designated by it in a Notice to the
other. All Notices shall be conclusively deemed to have been properly given or
made when duly delivered, in person or by overnight courier, or if mailed on the
third Business Day after being deposited in the mails, addressed as follows:
If to the Company: BNC Mortgage, Inc.
Attn: Kelly Monahan, President
1603 McGaw Avenue
Irvine, California 92614
Fax No.: (949) 260-6078
If to the Lender: Bank United
Attn: Ms. Michele Perrin, Vice President
Mortgage Banker Financing
10352 Cowan Heights
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Santa Ana, California 92705
Fax No.: (714) 544-5695
with a copy to: Bank United
Attn: Frank Hattemer
Managing Director, Mortgage Banker
Financing
3200 Southwest Freeway, Suite 1300
Houston, Texas 77027
Fax No.: (713) 543-6022
and: Bank United
Attn: Jonathon K. Heffron
General Counsel
3200 Southwest Freeway, Suite 1300
Houston, Texas 77027
Fax No.: (713) 543-6469
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Company shall: (a) pay all out-of-pocket costs and expenses of the
Lender, including, without limitation, reasonable attorneys' fees, in connection
with the preparation, negotiation, documentation, enforcement and administration
of this Agreement, the Note, and other Loan Documents and the making and
repayment of the Advances and the payment of interest thereon; provided, however
costs and expenses of Lender for attorneys fees in connection with the
preparation, negotiation and documentation of the lending transaction evidenced
by this Agreement shall not exceed $5,000.00 plus the reasonable expenses of
Lender's counsel; (b) pay, and hold the Lender and any holder of the Note
harmless from and against, any and all present and future stamp, documentary and
other similar taxes with respect to the foregoing matters and save the Lender
and the holder or holders of the Note harmless from and against any and all
liabilities with respect to or resulting from any delay or omission to pay such
taxes; (c) INDEMNIFY, PAY AND HOLD HARMLESS THE LENDER AND ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES OR AGENTS AND ANY SUBSEQUENT HOLDER OF THE NOTE FROM AND
AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER (THE
"INDEMNIFIED LIABILITIES") (INCLUDING, WITHOUT LIMITATION, INDEMNIFIED
LIABILITIES RESULTING, IN WHOLE OR IN PART, FROM LENDER'S OWN NEGLIGENCE OR
STRICT LIABILITY) WHICH MAY BE IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST THE
LENDER OR SUCH HOLDER IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT,
THE NOTE, OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY TO THE EXTENT THAT ANY SUCH INDEMNIFIED LIABILITIES RESULT
(DIRECTLY OR INDIRECTLY) FROM ANY CLAIMS MADE, OR ANY ACTIONS, SUITS OR
PROCEEDINGS COMMENCED OR THREATENED, BY OR ON BEHALF OF ANY CREDITOR (EXCLUDING
THE LENDER AND THE
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HOLDER, OR HOLDERS OF THE NOTE), SECURITY HOLDER, SHAREHOLDER, CUSTOMER
(INCLUDING, WITHOUT LIMITATION, ANY PERSON HAVING ANY DEALINGS OF ANY KIND WITH
THE COMPANY), TRUSTEE, DIRECTOR, OFFICER, EMPLOYEE AND/OR AGENT OF THE COMPANY
ACTING IN SUCH CAPACITY, THE COMPANY OR ANY GOVERNMENTAL REGULATORY BODY OR
AUTHORITY. THE FOREGOING INDEMNITY SHALL NOT APPLY TO THE EXTENT THE INDEMNIFIED
LIABILITIES RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER
OR LENDER'S OWN VIOLATIONS OF REGULATIONS APPLICABLE TO IT. THE AGREEMENT OF THE
COMPANY CONTAINED IN THIS SUBSECTION (C) SHALL SURVIVE THE EXPIRATION OR
TERMINATION OF THIS AGREEMENT AND THE PAYMENT IN FULL OF THE NOTE. ATTORNEYS'
FEES AND DISBURSEMENTS INCURRED IN ENFORCING, OR ON APPEAL FROM, A JUDGMENT
PURSUANT HERETO SHALL BE RECOVERABLE SEPARATELY FROM AND IN ADDITION TO ANY
OTHER AMOUNT INCLUDED IN SUCH JUDGMENT, AND THIS CLAUSE IS INTENDED TO BE
SEVERABLE FROM THE OTHER PROVISIONS OF THIS AGREEMENT AND TO SURVIVE AND NOT BE
MERGED INTO SUCH JUDGMENT.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the Lender hereunder
shall be prepared in accordance with GAAP, applied on a basis consistent with
that applied in preparing the financial statements as at, and for the period
ended, the Statement Date (except to the extent otherwise required to conform to
good accounting practice).
12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors; Survival of Representations. The
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. All
representations, warranties; covenants and agreements herein contained on the
part of the Company shall survive the making of any Advance and the execution of
the Note, and shall be effective so long as the Commitment is outstanding
hereunder or there remain any Obligations of the Company hereunder or under the
Note to be paid or performed.
12.2 Assignment. This Agreement may not be assigned by the Company. The
Lender may assign, at any time, in whole or in part, its rights and delegate its
obligations under this Agreement and the other Loan Documents, along with the
Lender's security interest in any or all of the Collateral, and any assignee
thereof may enforce this Agreement and the other Loan Documents, and such
security interest.
12.3 Amendments. Except as otherwise provided in this Agreement, this
Agreement may not be amended, modified or supplemented unless such amendment,
modification or supplement is set forth in a writing signed by the parties
hereto.
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12.4 Governing Law. This Agreement and the other Loan Documents shall be
governed by the laws of the State of Texas, without reference to its principles
of conflicts of laws.
12.5 Participations. The Lender may at any time sell, assign or grant
participations in, or otherwise transfer to any other Person (a "Participant"),
all or part of the Obligations of the Company under this Agreement. Without
limitation of the exclusive right of the Lender to collect and enforce such
Obligations, the Company agrees that each disposition will give rise to a
debtor-creditor relationship of the Company to the Participant, and the Company
authorizes each Participant, upon the occurrence of an Event of Default, to
proceed directly by right of setoff, banker's lien, or otherwise, against any
assets of the Company which may be in the hands of such Participant. The Company
authorizes the Lender to disclose to any prospective Participant and any
Participant any and all information in the Lender's possession concerning the
Company, this Agreement and the Collateral.
12.6 Relationship of the Parties. This Agreement provides for the making
of Advances by the Lender, in its capacity as a lender, to the Company, in its
capacity as a borrower, and for the payment of interest, repayment of principal
by the Company to the Lender, and for the payment of certain fees by the Company
to the Lender. The relationship between the Lender and the Company is limited to
that of creditor/secured party, on the one hand, and debtor, on the other hand.
The provisions herein for compliance with financial covenants and delivery of
financial statements are intended solely for the benefit of the Lender to
protect its interests as lender in assuring payments of interest and repayment
of principal and payment of certain fees, and nothing contained in this
Agreement shall be construed as permitting or obligating the Lender to act as a
financial or business advisor or consultant to the Company, as permitting or
obligating the Lender to control the Company or to conduct the Company's
operations, as creating any fiduciary obligation on the part of the Lender to
the Company, or as creating any joint venture, agency, or other relationship
between the parties hereto other than as explicitly and specifically stated in
this Agreement. The Company acknowledges that it has had the opportunity to
obtain the advice of experienced counsel of its own choosing in connection with
the negotiation and execution of this Agreement and to obtain the advice of such
counsel with respect to all matters contained herein, including, without
limitation, the provision for waiver of trial by jury. The Company further
acknowledges that it is experienced with respect to financial and credit matters
and has made its own independent decisions to apply to the Lender for credit and
to execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be declared
to be illegal or unenforceable in any respect, such illegal or unenforceable
provision shall be and become absolutely null and void and of no force and
effect as though such provision were not in fact set forth herein, but all other
covenants, terms, conditions and provisions hereof shall nevertheless continue
to be valid and enforceable.
12.8 Usury. It is the intent of Lender and the Company in the execution
and performance of this Agreement and the Note or any Loan Document to remain in
strict compliance with Applicable Law from time to time in effect. In
furtherance thereof, Lender and the Company stipulate and agree that none of the
terms and provisions contained in the Note, this Agreement or any Loan Document
shall ever be construed to create a contract to pay for the use, forbearance or
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detention of money with interest at a rate or in an amount in excess of the
Maximum Rate or amount of interest permitted to be charged under Applicable Law.
For purposes of this Agreement, the Note and any other Loan Document, "interest"
shall include the aggregate of all charges which constitute interest under
Applicable Law that are contracted for, taken, charged, reserved, or received
under this Agreement, the Note or any other Loan Document. The Company shall
never be required to pay unearned interest or interest at a rate or in an amount
in excess of the Maximum Rate or amount of interest that may be lawfully charged
under Applicable Law, and the provisions of this paragraph shall control over
all other provisions of this Agreement and the Note or any Loan Document, which
may be in actual or apparent conflict herewith. If the Note is prepaid, or if
the maturity of the Note is accelerated for any reason, or if under any other
contingency the effective rate or amount of interest which would otherwise be
payable under the Note would exceed the Maximum Rate or amount of interest
Lender or any other holder of the Note is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event Lender or any holder of
the Note shall charge, contract for, take, reserve or receive monies that are
deemed to constitute interest which would, in the absence of this provision,
increase the effective rate or amount of interest payable under the Note to a
rate or amount in excess of that permitted to be charged, contracted for, taken,
reserved or received under Applicable Law then in effect, then the principal
amount of the Note or the amount of interest which would otherwise be payable
under the Note or both shall be reduced to the amount allowed under Applicable
Law as now or hereinafter construed by the courts having jurisdiction, and all
such moneys so charged, contracted for, taken, reserved or received that are
deemed to constitute interest in excess of the Maximum Rate or amount of
interest permitted by Applicable Law shall immediately be returned to or
credited to the account of the Company upon such determination. Lender and the
Company further stipulate and agree that, without limitation of the foregoing,
all calculations of the rate or amount of interest contracted for, charged,
taken, reserved or received under the Note which are made for the purpose of
determining whether such rate or amount exceeds the Maximum Rate, shall be made
to the extent not prohibited by Applicable Law, by amortizing, prorating,
allocating and spreading during the period of the full stated term of the Note,
all interest at any time contracted for, charged, taken, reserved or received
from the Company or otherwise by Lender or any other holder of the Note.
12.9 CONSENT TO JURISDICTION. SUBJECT TO THE PROVISIONS OF SECTION 12.9
OF THIS AGREEMENT, THE COMPANY HEREBY AGREES THAT ANY ACTION OR PROCEEDING UNDER
THIS AGREEMENT, THE NOTE OR ANY DOCUMENT DELIVERED PURSUANT HERETO MAY BE
COMMENCED AGAINST IT IN ANY COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF
TEXAS, BY SERVICE OF PROCESS UPON THE COMPANY BY FIRST CLASS REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE COMPANY AT ITS
ADDRESS LAST KNOWN TO THE LENDER. THE COMPANY AGREES THAT ANY SUCH SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER SUCH
DOCUMENT MAY BE INSTITUTED IN HARRIS COUNTY, STATE DISTRICT COURT OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF TEXAS AT THE OPTION OF THE
LENDER; AND THE COMPANY HEREBY WAIVES ANY OBJECTION TO THE VENUE, OR ANY CLAIM
AS TO INCONVENIENT FORUM, OF ANY SUCH SUIT, ACTION OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE LENDER TO ACCOMPLISH SERVICE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION OR COURT.
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12.10 Arbitration. To the maximum extent not prohibited by law, any
controversy, dispute or claim arising out of, in connection with, or relating to
the Commitment or the Loan Documents or any transaction provided for therein,
including but not limited to any claim based on or arising from an alleged tort
or an alleged breach of any agreement contained in any of the Loan Documents,
shall, at the request of any party to the Loan Documents (either before or after
the commencement of judicial proceedings), be settled by arbitration pursuant to
Title 9 of the United States Code, which the parties hereto acknowledge and
agree applies to the transaction involved herein, and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). If Title 9 of the United States Code is inapplicable to any such claim,
dispute or controversy for any reason, such arbitration shall be conducted
pursuant to the Texas General Arbitration Act and in accordance with the
Commercial Arbitration Rules of the AAA. In any such arbitration proceeding: (i)
all statutes of limitations which would otherwise be applicable shall apply; and
(ii) the proceeding shall be conducted in Houston, Texas, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a
panel of three arbitrators if the amount in controversy is over $1,000,000.00.
All arbitrators shall be selected by the process of appointment from a panel
pursuant to Section 13 of the AAA Commercial Arbitration Rules and each
arbitrator shall be either an active attorney, a mortgage banker or retired
judge with an AAA acknowledged expertise in the subject matter of the
controversy, dispute or claim. Any award rendered in any such arbitration
proceeding shall be final and binding, and judgment upon any such award may be
entered in any court having jurisdiction.
If any party to any Loan Document files a proceeding in any court to
resolve any such controversy, dispute or claim, such action shall not constitute
a waiver of the right of such party or a bar to the right of any other party to
seek arbitration under the provisions of this Section of that or any other
claim, dispute or controversy, and the court shall, upon motion of any party to
the proceeding, direct that such controversy, dispute or claim be arbitrated in
accordance with this Section.
Notwithstanding any of the foregoing, the parties hereto agree that no
arbitrator or panel of arbitrators shall possess or have the power to (i) assess
punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator
may construe ambiguous terms) any Loan Document, (iii) enter judgment on the
debt, (iv) exercise equitable powers or issue or enter any equitable remedies
with respect to matters submitted to arbitration, or (v) allow discovery of
attorney/client privileged information. The Commercial Arbitration Rules of the
AAA are hereby modified to this extent for the purpose of arbitration of any
dispute, controversy or claim arising out of, in connection with, or relating to
the Loan or any Loan Document. The parties hereby further agree to waive, each
to the other, any claims for punitive damages and agree neither an arbitrator
nor any court shall have the power to assess such damages.
No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to any Loan Document before, during or
after any arbitration proceeding to: (i) exercise self-help remedies such as
setoff or repossession; (ii) foreclose (judicially or otherwise) any Lien on or
security interest in any real or personal Collateral; or (iii) obtain emergency
relief from a court of competent jurisdiction to prevent the dissipation,
damage, destruction, transfer, hypothecation, pledging or concealment of assets
or of Collateral securing any Indebtedness, obligation or guaranty
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referenced in any Loan Document. Such emergency relief may be in the nature of,
but is not limited to: pre-judgment attachments, garnishments, sequestrations,
appointments of receivers, or other emergency injunctive relief to preserve the
status quo.
12.11 ADDITIONAL INDEMNITY. IN ADDITION TO THE INDEMNITY PROVIDED IN
SECTION 10, THE COMPANY SHALL INDEMNIFY AND HOLD THE LENDER, ITS SUCCESSORS,
ASSIGNS, AGENTS, AND EMPLOYEES, HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES, FINES, PENALTIES, AND
LIABILITIES, INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS, ARISING
OUT OF, CONNECTED WITH, OR RESULTING FROM (A) THE OPERATION OF THE COMPANY'S
BUSINESSES, (B) THE LENDER'S PRESERVATION OR ATTEMPTED PRESERVATION OF
COLLATERAL, AND (C) ANY FAILURE OF THE SECURITY INTERESTS AND LIENS IN THE
COLLATERAL GRANTED TO THE LENDER PURSUANT TO THIS AGREEMENT TO BE OR TO REMAIN
PERFECTED OR TO HAVE THE PRIORITY AS CONTEMPLATED THEREIN REGARDLESS OF WHETHER
THE CLAIM IS CAUSED BY OR ARISES OUT OF, IN WHOLE OR IN PART, THE NEGLIGENCE OF
THE LENDER OR MAY BE BASED ON THE STRICT LIABILITY OF THE LENDER. THIS INDEMNITY
SHALL NOT APPLY TO THE EXTENT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR
ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. AT THE
LENDER'S REQUEST, THE COMPANY SHALL, AT ITS OWN COST AND EXPENSE, DEFEND OR
CAUSE TO BE DEFENDED ANY AND ALL SUCH ACTIONS OR SUITS THAT MAY BE BROUGHT
AGAINST THE LENDER AND, IN ANY EVENT, SHALL SATISFY, PAY, AND DISCHARGE ANY AND
ALL JUDGMENTS, AWARDS, PENALTIES, COSTS, AND FINES THAT MAY BE RECOVERED AGAINST
THE LENDER IN ANY SUCH ACTION, PLUS ALL ATTORNEYS' FEES AND COSTS RELATED
THERETO TO THE EXTENT PERMITTED BY APPLICABLE LAW; PROVIDED, HOWEVER, THAT THE
LENDER SHALL GIVE THE COMPANY (TO THE EXTENT THE LENDER SEEKS INDEMNIFICATION
THEREFOR FROM THE COMPANY UNDER THIS SECTION 12.10) WRITTEN NOTICE OF ANY SUCH
CLAIM, DEMAND, OR SUIT AFTER THE LENDER HAS RECEIVED WRITTEN NOTICE THEREOF, AND
THE LENDER SHALL NOT SETTLE ANY SUCH CLAIM, DEMAND, OR SUIT, IF THE LENDER SEEKS
INDEMNIFICATION THEREFOR FROM THE COMPANY, WITHOUT FIRST GIVING NOTICE TO THE
COMPANY OF THE LENDER'S DESIRE TO SETTLE AND OBTAINING THE CONSENT OF THE
COMPANY TO THE SAME, WHICH CONSENT THE COMPANY HEREBY AGREES NOT TO UNREASONABLY
WITHHOLD. ALL OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 12.10 SHALL SURVIVE
THE PAYMENT OF THE NOTE AND THE OBLIGATIONS.
12.12 No Waivers Except in Writing. No failure or delay on the part of
the Lender in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
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thereof or the exercise of any other right or power. No notice to or demand on
the Company or any other Person in any case shall entitle the Company or such
other Person to any other or further notice or demand in similar or other
circumstances.
12.13 Waiver of Jury Trial. Company hereby expressly waives any right to
a trial by jury in any action or legal proceeding arising out of or relating to
this Agreement or any other Loan Document for the transactions contemplated
hereby or thereby.
12.14 Multiple Counterparts. This Agreement may be executed in any
number of counterparts, all of which, taken together, shall constitute one and
the same instrument.
12.15 No Third Party Beneficiaries. This Agreement is for the sole and
exclusive benefit of the Company and Lender. This Agreement does not create, and
is not intended to create, any rights in favor of or enforceable by any other
Person. This Agreement may be amended or modified by the agreement of the
Company and Lender, without any requirement or necessity for notice to, or the
consent of or approval of any other Person.
12.16 RELEASE OF LENDER LIABILITY. TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW FROM TIME TO TIME IN EFFECT, THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY (AND AFTER IT HAS CONSULTED WITH ITS OWN ATTORNEY) IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT NO CLAIM MAY BE MADE BY THE COMPANY AGAINST THE
LENDER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS,
AGENTS OR INSURERS, OR ANY OF ITS OR THEIR SUCCESSORS AND ASSIGNS, FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY BREACH OR
WRONGFUL CONDUCT (WHETHER THE CLAIM IS BASED ON CONTRACT OR TORT OR DUTY IMPOSED
BY LAW) ARISING OUT OF, OR RELATED TO, THE TRANSACTIONS CONTEMPLATED BY ANY OF
THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION, OR
EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH. IN FURTHERANCE OF THE
FOREGOING, THE COMPANY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY
CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR
SUSPECTED TO EXIST IN ITS FAVOR.
12.17 Entire Agreement; Amendment. This Agreement, the Note, and the
other Loan Documents referred to herein embody the final, entire Agreement among
the parties hereto and supersede any and all prior commitments, agreements,
representations, and understandings, whether written or oral, relating to the
subject matter hereof. The provisions of this Agreement and the other Loan
Documents to which the Company is a party may be amended or waived only by an
instrument in writing signed by the parties hereto.
12.18 NO ORAL AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR
Page 52
58
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BNC MORTGAGE, INC.
a Delaware corporation
By: /s/ KELLY MONAHAN
-----------------------------
KELLY MONAHAN, President
BANK UNITED
By:
-----------------------------
MICHELE PERRIN
Vice President,
Mortgage Banker Financing
EXHIBITS:
---------
A - Advance Request
B - Existing Company Indebtedness
C - Warehousing Procedures and Documentation
D - Shipping Instructions
E - Trust Receipt
F - Officer's Certificate
G - Subsidiaries
H - Litigation
I - Trade Names
J - Secretary's Certificate
K - Bailee Letter
L - Investors
M - Legal Opinion
N - Note
Page 53
59
EXHIBIT "A"
REQUEST FOR ADVANCE SINGLE-FAMILY MORTGAGE LOANS
Mortgage Company: BNC MORTGAGE, INC. Loan Number:
Mortgagor:______________________ Prepared By:______________________________
Address:________________________ Warehouse Date:___________________________
Social Security No.:____________ Loan Type (check all that apply):
Advance Type (check all that apply):
Jumbo__ Conventional__
Wet Settlement Advance__ VA__ FHA__
Dry Settlement Advance__ First__ Second__
Subprime: A-__, B_, C__
Note Amount: ___________________ Interest Rate:____________
Note Date: _____________________ Requested Warehouse
Amount:____________
Credit Rating:__________________ Investor Expiration Date:_________________
Investor:_______________________
Investor Takeout Price:_________
Purchase Commitment No.:________
METHOD OF ADVANCE
( ) Wire Transfer (see attached instructions) Amount of Wire/Check:$
( ) Check No. Date of Wire/Check:
EXHIBIT "A" Page 54
60
REQUIRED DOCUMENTATION
(in addition to this Advance Request)
Attached please find the following documents in connection with the above
request:
Wet Settlement Advance
- - Copy of check funding the Single-family Mortgage Loan, if not funded by
wire transfer.
- - Copy of closing instructions to title company or closing agent, noting
Lender's security interest in the Single-family Mortgage Loan.
- - Copy of specific Purchase Commitment. (excluding Subprime Mortgage
Loans)
Dry Settlement Advance
- - Copy of check funding the Single-family Mortgage Loan, if not funded by
wire transfer.
- - Original Mortgage Note, endorsed in blank.
- - Certified copy of Mortgage.
- - Recordable Assignment of Mortgage (in blank).
- - Certified copies of all interim Assignments (if applicable).
- - Copy of specific Purchase Commitment. (excluding Subprime Mortgage
Loans)
BAILEE PLEDGE
The Company creates and grants in favor and for the benefit of the Lender
a security interest in and to the Single-family Mortgage Loans listed above and
all instruments and documents described as Required Documentation above.
The Company has given to ______________________________________________
("Closing Agent") who has possession of such instruments and documents, notice
of the foregoing described security interest in favor of the Lender.
The Company further agrees to deliver the documents described above to
Lender, immediately upon the request of the Lender (whether written or oral),
but in any event, on or before seven (7) Business Days from the date hereof.
The Company further agrees that this Agreement shall be binding upon and
inure to the benefit of the legal representatives, successors or assigns of the
Lender.
EXHIBIT "A" Page 55
61
The Company further agrees that all rights, interests, duties and
liabilities arising hereunder shall be determined according to the laws of the
State of Texas.
Executed as of the_________________ day of_________________ 199__.
BNC MORTGAGE, INC., a Delaware corporation
By:_______________________________
Name:_____________________________
Title:____________________________
EXHIBIT "A" Page 56
62
EXHIBIT "B"
LIST OF EXISTING INDEBTEDNESS OF COMPANY
===================================================================================
LENDER TYPE OF COMMITMENT COLLATERAL AVERAGE
FINANCING AMOUNT BALANCE
OUTSTANDING
AS OF _____,
1999
===================================================================================
{See Attached)
EXHIBIT "B" Page 57
63
- -----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT "B"
LIST OF EXISTING INDEBTEDNESS OF COMPANY
- -----------------------------------------------------------------------------------------------------------------------------------
LENDER TYPE OF COMMITMENT COLLATERAL BALANCE OUTSTANDING AS
FINANCING AMOUNT OF DECEMBER 31, 1998
(AVERAGE)
- -----------------------------------------------------------------------------------------------------------------------------------
BNC MORTGAGE, INC.
- -----------------------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Capital Inc. Warehouse Loan $150 million Loans held for sale $76,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL FACILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
(1) RFC Warehouse Line $50 million Loans held for sale $0
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Paine Webber Warehouse Line $50 million Loans held for sale $0
- -----------------------------------------------------------------------------------------------------------------------------------
(2) Paine Webber Warehouse Line $20 million Loans held for sale $
- -----------------------------------------------------------------------------------------------------------------------------------
(2) Prudential Warehouse Line $25 million Loans held for sale $
- -----------------------------------------------------------------------------------------------------------------------------------
(2) Greenwhich Warehouse Line $20 million tbd Loans held for sale $
- -----------------------------------------------------------------------------------------------------------------------------------
(1)= new warehouse line applied for BNC Mortgage, Inc.
(2)= warehouse lines to be extended to Mortgage Logic.com, Inc. (America's Lender, Inc.)
- -----------------------------------------------------------------------------------------------------------------------------------
S:\MORTGAGE.COM/EXHIBITS/BANKUNIT.EXH
EXHIBIT "B"
PAGE 1 OF 1
64
EXHIBIT "C"
PROCEDURES AND DOCUMENTATION FOR WAREHOUSING
SINGLE-FAMILY MORTGAGE LOANS
The following procedures and documentation requirements must be observed
in all respects by the Company. All documents must be satisfactory to Lender in
its sole discretion. Terms used below, which are not otherwise defined, shall
have the meanings given them in the Warehousing Credit and Security Agreement,
as amended, modified or renewed from time to time. The HUD, FNMA and FHLMC form
numbers referred to herein are for convenience only and the Company shall use
the equivalent forms required at the time of delivery of the Mortgage Loans or
Mortgage-backed Securities.
I. Prior to making an Advance that is not a Wet Settlement Advance, the
Lender must receive the following:
(1) Copy of settlement or funding check issued to, or signed wire
transfer request directing funds to escrow/title company or closing
agent.
(2) If not an Electronic Request, Original Request for Advance against
Single-Family Mortgage Loans (EXHIBIT "A").
(3) Original signed Mortgage Note, endorsed by the Company in blank
with corresponding interim endorsements, if applicable.
(4) Copy of the Mortgage certified true by the escrow/title company or
closing agent.
(5) Certified true copies of all interim assignments (recorded or sent
for recordation) of the Mortgage.
(6) An Assignment of the Mortgage to the Lender in recordable form but
unrecorded.
(7) Copy of specific Purchase Commitment (except for Subprime Mortgage
Loans).
II. Prior to making a Wet Settlement Advance, the Lender must receive the
following:
(1) Copy of settlement or funding check issued to, or signed wire
transfer request directing funds to escrow/title company or closing
agent.
(2) If not an Electronic Request, Original Request for Advance against
Single-Family Mortgage Loans (EXHIBIT "A").
(3) Copy of specific Purchase Commitment (except for Subprime Mortgage
Loans).
EXHIBIT "C" Page 58
65
(4) A copy of the Company's final closing instructions to the title
company or closing agent, noting Lender's security interest in the
loan, as provided below:
"You are hereby notified that Bank United, a federal savings bank
(the "Lender") has a security interest in the promissory note, the
deed of trust or mortgage, and all other supporting documents for
the above referenced loan. Unless the Lender otherwise instructs
you, all loan documents are to be returned to the undersigned
company within twenty-four (24) hours after settlement."
The Mortgage Note and other supporting documents described in Section I
must be received by the Lender within seven (7) Business Days of the date
of the Wet Settlement Advance.
III. The Lender exclusively shall deliver Pledged Mortgages or Pledged
Securities and all related loan documents and/or pool documents to
Investor or Approved Custodian unless otherwise agreed in writing.
A. The following procedures are to be followed for deliveries of
Pledged Mortgages to Investors:
No later than 2:00 p.m. Houston, Texas time one (1) Business Day prior to
the expiration date of the Purchase Commitment, the Lender must receive the
following:
(1) Signed or electronic shipping instructions for the delivery of the
Pledged Mortgages including the following:
(a) Name and address of the office of the Investor to which the
loan documents are to be shipped and the preferred method of
delivery;
(b) Instructions for endorsement of the Mortgage Note;
(c) Names of Mortgagor and Mortgage Note Amounts of Pledged
Mortgages to be shipped; and
(d) Number and expiration date of the Purchase Commitment.
(2) All loan documents related to the Pledged Mortgages required for
delivery to the Investor.
(3) For deliveries of Pledged Mortgages to FNMA for cash purchase, the
following additional documents are required:
a) Original Loan Schedule (FNMA Form 1068 or 1069) showing the
Lender's designated FNMA payee code as recipient of the loan
purchase proceeds.
EXHIBIT "C" Page 59
66
(4) For deliveries of Pledged Mortgages to FHLMC for cash purchase, the
following additional documents are required:
a) Original completed Warehouse Lender Release of Security Interest
(FHLMC Form 996) to be executed by the Lender.
b) Original Wire Transfer Authorization for a Cash Warehouse
Delivery (FHLMC Form 987), designating the Lender as the
Warehouse Lender and showing the cash collateral account
designated by the Lender as the receiving account for loan
purchase proceeds.
B. The following procedures are to be followed for deliveries of Pledged
Mortgages to Approved Custodians:
No later than one (1) Business Day prior to required delivery date to the
Approved Custodian, the Lender must receive the following:
1. Signed or electronic shipping instructions for the delivery of the
Pledged Mortgages to the Approved Custodian including the following:
a) Name and address of the office of the Approved Custodian to
which the loan documents are to be shipped and the preferred
method of delivery;
b) Instructions for endorsement of the Mortgage Note; and
c) Names of Mortgagor and Mortgage Note Amounts of Pledged
Mortgages to be shipped.
d) Commitment number and expiration date of the Purchase Commitment
for the Pledged Securities.
2. All loan documents related to the Pledged Mortgages required for the
issuance of the Mortgage-backed Securities.
3. For FNMA Mortgage-backed Securities issuance, the following additional
documents are required:
a) Original Schedule of Mortgages (FNMA Form 2005 or 2025).
b) Original executed Security Release Certification (FNMA Form 2004)
to be executed by the Lender.
c) Original Delivery Schedule (FNMA Form 2014), instructing FNMA to
issue the Mortgage-backed Securities in the name of the Company
with the Lender as pledgee and to deliver the Mortgage-backed
Securities to the Lender's
EXHIBIT "C" Page 60
67
custody account at Banker's Trust (Account No. 92798) and
bearing the following instructions: These instructions may not
be changed without the prior written consent of Bank United.
4. For FHLMC Mortgage-backed Securities issuance, the following additional
documents are required:
a) Original Settlement Information and Delivery Authorization
(FHLMC Form 939), designating the Lender as the Warehouse Lender
and instructing FHLMC to deliver the Mortgage-backed Securities
to the Lender's custody account at Banker's Trust, Account No.
92798.
5. For GNMA Mortgage-backed Securities issuance, the following additional
documents are required:
a) Signed original Schedule of Mortgages (HUD Form 11706).
b) Signed original Schedule of Subscribers (HUD Form 11705)
instructing GNMA to issue the Mortgage-backed Securities in the
name of the Company and designating Bankers Trust as Agent for
the Lender as the subscriber, using the following language:
BANKERS TRUST AS AGENT FOR BANK UNITED and deliver the
Mortgage-backed Securities to the Lender's custody Account No.
92798 at Bankers Trust. The following instructions must also be
included on the form: "These instructions may not be changed
without the prior written consent of Bank United."
c) Completed original Release of Security Interest
(HUD Form 11711A) to be executed by the Lender.
Upon instruction by the Company, the Lender will complete the endorsement of the
Mortgage Note and make arrangements for the delivery of the complete loan
package with the appropriate Bailee Letter to the Investor or Approved
Custodian. Upon receipt of Mortgage-backed Securities, the Lender will cause
such Mortgage-backed Securities to be delivered to the Investor which issued the
Purchase Commitment. Mortgage-backed Securities will be released to the Investor
only upon payment of the purchase proceeds to the Lender. Cash proceeds of sales
of Pledged Mortgages and Pledged Securities shall be applied to related Advances
outstanding under the Commitment. Provided no Default exists, the Lender shall
return any excess proceeds of the sale of Mortgage Loans or Mortgage-backed
Securities to the Company, unless otherwise instructed in writing.
EXHIBIT "C" Page 61
68
EXHIBIT "D"
FORM OF SHIPPING REQUEST AND AUTHORIZATION
[Company Letterhead]
Date:
BANK UNITED
[Address]
Attention: Re: Commitment No.
This letter is to serve as authorization for you to endorse and ship Loan
Documents for the following loans:
LOAN NUMBER BORROWER NAME NOTE AMOUNT
to the following address:
NAME:
ADDRESS:
ATTENTION:
Please endorse the notes as follows:
Please ship the Loan Documents either by_______________________________________
or by such other courier service we have specifically approved in writing. You
are not responsible for any delays in shipment or any other actions or inactions
of the courier. However, because the commitment expires on _____________, 19___,
we ask that you deliver the Loan Documents to the courier no later than
_____________, 19__.
Please have the courier bill us by using our account no. ___________. If you
should have any questions, or should feel the need for additional documentation,
Please do not hesitate to call __________.
BNC MORTGAGE, INC., a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
EXHIBIT "D" Page 62
69
EXHIBIT "E"
TRUST RECEIPT
Trust Receipt No._______________ _____________________, 19__
The undersigned, BNC MORTGAGE, INC., a Delaware corporation (the
"Company"), acknowledges receipt from Bank United, a federal savings bank
("Lender"), pursuant to that certain Warehousing Credit and Security Agreement
(Single-Family Mortgage Loans) dated effective as of February 2, 1999, by and
between the Company and Lender (the "Agreement"), of the following described
property (the "Trust Property"), possession of which is herewith entrusted to
the Company for the purposes set forth below:
Mortgage Loan No. Note Amount:
Obligor:
Purpose: [Specify nature of clerical or other documentation problem to be
corrected.]
The Company hereby acknowledges that a security interest in the Trust
Property and in the proceeds of the Trust Property has been granted to the
Lender pursuant to the Agreement.
In consideration of the delivery of the Trust Property by the Lender to
the Company, the Company hereby agrees to hold the Trust Property in trust for
the Lender as provided under and in accordance with all provisions of the
Agreement and to return the Trust Property to the Lender no later than the close
of business on the tenth day following the date hereof or, if such day is not a
Business Day, on the following Business Day. The Company further agrees that the
aggregate Collateral Value of Single-family Mortgage Loans with respect to which
notes or other documentation has been released under trust receipts, does not
exceed $500,000.00.
BNC MORTGAGE, INC., a Delaware corporation
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Delivery to Company Acknowledged
BANK UNITED
By:_____________________
Name:___________________
Title:__________________
EXHIBIT "E" Page 63
70
The undersigned, acknowledges that the above-mentioned Trust Property has
been returned to the Lender on ________________, 19____.
BANK UNITED
By:_______________________________________
Name:_____________________________________
Title:____________________________________
EXHIBIT "E" Page 64
71
EXHIBIT "F"
OFFICER'S CERTIFICATE
COMPANY: BNC MORTGAGE, INC., a Delaware corporation
LENDER: BANK UNITED
DATE:
REPORTING PERIOD: DECEMBER 31 ended , 1998
This certificate is delivered to Lender under the Warehousing Credit and
Security Agreement dated effective as of February 2, 1999, between Company and
Lender (the "Agreement"), all the defined terms of which have the same meanings
when used herein.
I hereby certify that: (a) I am, and at all times mentioned herein have
been, the duly elected, qualified, and acting officer of Company designated
below; (b) to the best of my knowledge, the Financial Statements of Company for
the period shown above (the "Reporting Period") and which accompany this
certificate were prepared in accordance with GAAP and present fairly the
financial condition of Company as of the end of the Reporting Period and the
results of its operations for the Reporting Period; (c) a review of the
Agreement and of the activities of the Company during the Reporting Period has
been made under my supervision with a view to determining Company's compliance
with the covenants, requirements, terms, and conditions of the Agreement, and
such review has not disclosed the existence during or at the end of the
Reporting Period (and I have no knowledge of the existence as of the date
hereof) of any Event of Default or Default, except as disclosed on ANNEX "A"
hereto (which specifies the nature and period of existence of each Event of
Default or Default, if any, and what action Company has taken, is taking, and
proposes to take with respect to each); (d) the calculations described on the
attached ANNEX "A" evidence that the Company is in compliance with the
requirements of Sections 7.5 and 7.6 of the Agreement at the end of the
Reporting Period (or if Company is not in compliance, showing the extent of
non-compliance and specifying the period of non-compliance and what actions the
Company proposes to take with respect thereto; (e) the Company was, as of the
end of the Reporting Period, in compliance and good standing with applicable
FNMA, GNMA, FHLMC, and HUD net worth requirements.
BNC MORTGAGE, INC., a Delaware corporation
By: /s/ PETER R. EVANS
--------------------------------------
Name: Peter R. Evans
------------------------------------
Title: Vice President and CFO
-----------------------------------
EXHIBIT "F" Page 65
72
ANNEX "A"
COMPANY NAME: BNC MORTGAGE, INC., a California corporation
REPORTING PERIOD:
All financial calculations set forth herein are as of the Reporting Period.
(a) TANGIBLE NET WORTH
The Tangible Net Worth of the Company is:
GAAP Net Worth: $ 32,556,645
------------
Minus: Intangible Assets, including Capitalized Servicing Rights: $ --
------------
Minus: Advances or loans to shareholders, officers or Affiliates $ 100,000
------------
Minus: Investments in Affiliates: $ --
------------
Minus: Assets pledged to secure liabilities not included in Debt: $ --
------------
Minus: Any other HUD nonacceptable assets: $ --
------------
TANGIBLE NET WORTH $ 32,456,645
------------
(b) ADJUSTED TANGIBLE NET WORTH
The Adjusted Tangible Net Worth of the Company is:
Tangible Net Worth (from above): $ 32,456,645
------------
Plus: Subordinated Debt $ --
------------
Plus: 1% of Servicing Rights $ --
------------
ADJUSTED TANGIBLE NET WORTH: $ 32,456,645
------------
MINIMUM ADJUSTED TANGIBLE NET WORTH IS $25,000,000.00#
Covenant Satisfied: XXX Covenant Not Satisfied:
-------------------- ------------
Annex "A" Page 66
73
(c) DEBT OF THE COMPANY
Total Liabilities: $83,428,066
DEBT: $76,000,332
(d) DEBT TO ADJUSTED TANGIBLE, NET WORTH
The ratio of Debt to Adjusted Tangible Net Worth is: 2 to 1.
MAXIMUM DEBT TO ADJUSTED TANGIBLE NET WORTH RATIO IS 15:1
Covenant Satisfied: XXX Covenant Not Satisfied:
------ ------ --------------
(e) DEFAULTS OR EVENTS OF DEFAULT (DISCLOSE NATURE AND PERIOD OF EXISTENCE
AND ACTION BEING TAKEN IN CONNECTION THEREWITH; IF NONE, STATE NONE)
NONE
Page 67
ANNEX "A"
74
ANNEX "A"
COMPANY NAME: BNC MORTGAGE, INC., a Delaware corporation
REPORTING PERIOD:
All financial calculations set forth herein are as of the Reporting Period.
(a) TANGIBLE NET WORTH
The Tangible Net Worth of the Company is:
GAAP Net Worth: $________
Minus: Intangible Assets, including Capitalized Servicing Rights: $________
Minus: Advances or loans to shareholders, officers or Affiliates $________
Minus: Investments in Affiliates: $________
Minus: Assets pledged to secure liabilities not included in Debt: $________
Minus: Any other HUD nonacceptable assets: $________
TANGIBLE NET WORTH: $________
(b) ADJUSTED TANGIBLE NET WORTH
The Adjusted Tangible Net Worth of the Company is:
Tangible Net Worth (from above): $________
Plus: Subordinated Debt $________
Plus: 1% of Servicing Rights $________
ADJUSTED TANGIBLE NET WORTH: $________
MINIMUM ADJUSTED TANGIBLE NET WORTH IS $25,000,000.00
Covenant Satisfied:_________________ Covenant Not Satisfied:____________
ANNEX "A" Page 68
75
(c) DEBT OF THE COMPANY
Total Liabilities: $_______________
DEBT: $_______________
(d) DEBT TO ADJUSTED TANGIBLE NET WORTH
The ratio of Debt to Adjusted Tangible Net Worth is: ______ to 1.
MAXIMUM DEBT TO ADJUSTED TANGIBLE NET WORTH RATIO IS 15:1.
Covenant Satisfied:______________ Covenant Not Satisfied:________________
(e) DEFAULTS OR EVENTS OF DEFAULT (DISCLOSE NATURE AND PERIOD OF EXISTENCE
AND ACTION BEING TAKEN IN CONNECTION THEREWITH; IF NONE, STATE NONE)
ANNEX "A" Page 69
76
EXHIBIT "G"
LIST OF SUBSIDIARIES
NAME ADDRESS OF STATE OF WHERE COMPANY'S
PRINCIPAL INCORPORATION QUALIFIED PERCENTAGE
OFFICE FOREIGN CORP. OWNERSHIP
(See Attached)
EXHIBIT "G" Page 70
77
- --------------------------------------------------------------------------------
EXHIBIT "G"
LIST OF SUBSIDIARIES
- --------------------------------------------------------------------------------
COMPANY'S
ADDRESS OF STATE OF WHERE PERCENTAGE
NAME PRINCIPAL INCORPORATION QUALIFIED OWNERSHIP
- --------------------------------------------------------------------------------------------------------------------------
BNC MORTGAGE, INC. 1063 McGaw Avenue Delaware See attached Publicly held corporation
Irvine, CA 92614-5532 Exhibit "A" Evan Buckley holds 27%
("Corporate Address")
- --------------------------------------------------------------------------------------------------------------------------
BNC TRUSTEE SERVICES, INC. Corporate Address and Missouri Missouri Active, wholly owned
Registered Agent: subsidiary of BNC
One Metropolitan Square
Suite 3000
St. Louis, Missouri 63102
- --------------------------------------------------------------------------------------------------------------------------
BNC EQUITY INVESTORS, LLC. Corporate Address California California In process of dissolution,
wholly owned subsidiary of
BNC
- --------------------------------------------------------------------------------------------------------------------------
CALGARY MORTGAGE CAPITAL, INC. Corporate Address California California Currently inactive, wholly
owned subsidiary of BNC
- --------------------------------------------------------------------------------------------------------------------------
HERITAGE NATIONAL MORTGAGE, Corporate Address California California Active, wholly owned
INC. subsidiary of BNC
- --------------------------------------------------------------------------------------------------------------------------
SENTINEL CAPITAL LENDING, INC. Corporate Address California California Currently inactive, wholly
owned subsidiary of BNC
- --------------------------------------------------------------------------------------------------------------------------
MBS ACCEPTANCE COMPANY, LLC Corporate Address California California Currently inactive, wholly
owned subsidiary of BNC
- --------------------------------------------------------------------------------------------------------------------------
EQUITY CREDIT CORPORATION Corporate Address California See attached Active, wholly owned
Exhibit "B" subsidiary of BNC
- --------------------------------------------------------------------------------------------------------------------------
SIMPLE MORTGAGE USA, INC. Corporate Address California See attached Active, wholly owned
Exhibit "C" subsidiary of BNC
- --------------------------------------------------------------------------------------------------------------------------
MORTGAGE LOGIC.COM, INC. 2 Venture Plaza, #100 California California Active, wholly owned
Irvine, CA 92618 subsidiary of BNC
- --------------------------------------------------------------------------------------------------------------------------
Exhibit "G"
Page 1 of 1
78
EXHIBIT "H"
DISCLOSURE OF PENDING LITIGATION
(Include the caption of the case, including styling, cause number, and court in
which it is pending, date filed, status of the proceedings, and description of
claims, counterclaims and damages asserted.)
{See Attached)
EXHIBIT "H" Page 71
79
GARCIA (BNC BORROWER), BNC, ADV. FIRST UNION MORTGAGE CORPORATION -
FLORIDA CIRCUIT COURT CASE NO. 98-01621C
Attorney Representation: BNC Counsel Catherine Hanan monitoring Title
Company Appointed Counsel in Florida
Type of Matter: Foreclosure of Senior Lien - BNC not true party in
interest.
Matter initiated in March of 1998 to foreclose a senior lien in the
amount of $700.00 not fully paid off when BNC closed its loan. That amount was
the short fall to a lender which should have been paid by the title
company/escrow at the BNC loan closing on this refinance.
Summary of Response: Title company is defending the matter on behalf of
BNC at no cost BNC. In the event Plaintiff is successful, the title company
would have to pay off the senior lien amount to avoid foreclosure of the BNC
originated loan per the terms of the title policy. Title company counsel
successfully defeated a summary judgment motion brought against BNC and as of
August 20, 1998 and advised that settlement discussions were underway with
Plaintiff. Apparently, the amount in question which the title company is
negotiating about, has increased dramatically from the $700.00 shortfall,
because of foreclosure costs, attorney fees and other claims. The matter has not
yet settled because the Plaintiff's claim is now inflated to somewhere around
$9,500.00 which the title company feels is unconscionable. In any event,
resolution of the matter and dismissal of BNC as a defendant seems likely in the
near future.
IBARRA (BORROWER), BNC AND OTHERS ADV. UNITED STATES RE 1001 CABANA
STREET, U.S. DISTRICT COURT CASE NO. 98-0279 LSP, SOUTHERN DISTRICT OF
CALIFORNIA (SAN DIEGO)
Attorney Representation: BNC Counsel Catherine Hanan and In House
Attorney for First American Title Company in San Diego.
Type of Matter: Forfeiture action by government against borrower on the
basis of criminal, drug related activity in which government seeks to foreclose
on forfeiture lien and has named BNC's $98,600.00 first lien as a lien which
would be junior to the forfeiture action. BNC has tendered a defense of the
matter to First American which has agreed to act solely to obtain documentation
from the government to the effect that the lien originated by BNC Mortgage, Inc.
is valid and superior to the government foreclosure action and any foreclosure
is subject to the BNC loan. BNC has requested dismissal as a named party
inasmuch as it no longer is the true party in interest under the loan and has
notified the investor of the matter. BNC is awaiting paperwork to be provided
through the title company.
BNC MORTGAGE INC. V. FLEET MORTGAGE CORP. AND MARCHETTI, SUPERIOR COURT
OF RHODE ISLAND
ATTORNEY REPRESENTATION: TITLE COMPANY APPOINTED COUNSEL FOR BNC
PATRICIA A. BUCKLEY IN PROVIDENCE RHODE ISLAND AND CATHERINE HANAN MONITORING
TYPE OF MATTER: Title Claim for Missed Senior Lien. BNC received notice
that Fleet Mortgage Corporation was foreclosing a lien which was claimed to be
superior to the BNC originated lien.
SUMMARY OF RESPONSE: The title company engaged counsel to file suit to
quiet title regarding the BNC mortgage and to enjoin the foreclosure sale. The
temporary restraining order against Fleet stopping the foreclosure granted on
October 27, 1998 will remain in effective at least until January 22, 1999 which
is the continued hearing date on the permanent injunction. In the event of an
adverse determination as to BNC's lien, the title company will be forced to
compensate BNC or its investor in connection with damages ultimately caused by
the senior lien and its foreclosure.
EXHIBIT "H"
PAGE I OF 6
80
PENDING CASES: BOLD PRINTING SUMMARIZES CHANGES IN STATUS
ROY DOWNS V. BARBARA DOWNS THOMPSON, BNC, et, al. - SUPERIOR COURT OF
THE DISTRICT OF COLUMBIA - CASE NO. 98-01621CA25
Attorney Representation: BNC Counsel Catherine Hanan monitors Outside
Counsel Appointed By Title Insurer
Type of Matter: Complaint to Quiet Title on Real Property and for Fraud
regarding BNC Loan Plaintiff Downs filed suit in May of 1998 contending that his
daughter and third parties conspired to obtain the $172,900.00 BNC loan without
his knowledge, using forged loan documents are forgeries such that the BNC loan
is fraudulent and therefore void.
Summary of Response: BNC tendered defense of the litigation to the title
company which also served as the escrow. The title company is defending the case
at no cost to BNC, AND HAS PROVIDED TARDY NOTICE THAT THE DEFENSE IS PROVIDED
UNDER A RESERVATION OF RIGHTS LEST EVIDENCE BE UNCOVERED THAT BNC KNOWINGLY
PARTICIPATED IN THE FORGERY AND FRAUD. NO SUCH EVIDENCE HAS BEEN UNCOVERED, AND
ALL SIGNS POINT TO THE FATHER AND DAUGHTER CONCOCTING THE STORY TO AVOID PAYING
THE MORTGAGE. Discovery is continuing and the title company has agreed to
provide a courtesy defense to BNC's interim servicer, Option One Mortgage
Corporation. In the event Plaintiff is successful, the title company would have
the obligation to pay the policy limits in connection with the loan, which sums
would be tendered to BNC's investor. PLAINTIFF SUCCESS IS UNLIKELY IN VIEW OF
HANDWRITING EXPERT TESTIMONY THAT ALL DOCUMENTS WERE EXECUTED BY PLAINTIFF.
PLAINTIFF'S ATTORNEY IS ATTEMPTING TO WITHDRAW FROM THE CASE, THE DAUGHTER IS
ALREADY IN PRO PER AND A TRIAL DATE SHOULD BE SET IN THE FUTURE.
FOSTER, KEVIN (BNC BORROWER), BNC, IMC ADV. LARRY A. COWLES - IDAHO
STATE COURT
Attorney Representation: BNC Counsel Catherine Hanan tenders matter to
title company and title attorney Michael K. Ferrin per tender of defense by BNC
Type of Matter: Complaint to Quiet Title and Enjoin a Pending
Foreclosure and for Damages for Unjust Enrichment
Summary of Response: IMC foreclosed on November 12th. First American as
well as a third party bid at the sale such that IMC's loan obligation was
satisfied and paid. The third party was the higher bidder. THE TITLE COMPANY HAD
EARLIER CONFIRMED THAT IT HAD REQUESTED DISMISSAL OF 1MC AND BNC FROM THE
LITIGATION INASMUCH AS THEY HAVE NO FURTHER INTEREST IN THE PROPERTY. THE
PLAINTIFF HAS NOT DISMISSED. THE TITLE COMPANY HAS ALREADY CONFIRMED THAT IT
WOULD DEFEND BNC AND IMC IN THE EVENT THE LITIGATION CONTINUED AND THIS OFFICE
HAS REMINDED THE TITLE COMPANY OF THAT OBLIGATION DUE TO A RECENT NOTICED
HEARING ON DEFAULT OF UNNAMED PARTY DEFENDANTS. WE WILL CONTINUE TO MONITOR THE
LITIGATION TO INSURE THAT NO MONETARY JUDGMENT IS ENTERED AGAINST BNC OR ITS
INVESTOR NOW THAT THE INVESTOR HAS BEEN PAID OFF THROUGH THE FORECLOSURE
PROCEEDINGS.
EXHIBIT "H"
PAGE 2 OF 6
81
BNC MORTGAGE INC. V. FLEET MORTGAGE CORP. AND MARCHETTI. SUPERIOR COURT OF RHODE
ISLAND
CONTINUED
FLEET FILED PLEADINGS IN WHICH IT MAINTAINS THAT IT HOLDS A VALID SENIOR
LIEN-AND THAT BNC's LIEN IS INVALID DUE TO THE TITLE INSURANCE COMPANY BEING
AWARE OF THE SENIOR LIEN PRIOR TO THE BNC LOAN TRANSACTION, AND SUCH AWARENESS
BEING IMPUTED TO ITS INSURED BECAUSE THE TITLE COMPANY AGREED TO ISSUE TITLE
INSURANCE WITHOUT ACKNOWLEDGING THE LIEN. IF SUCCESSFUL FLEET'S LIEN WOULD BE
INVALIDATED OR VOID BECAUSE BNC WOULD NO LONGER BE A BONIFIED LENDER. THE
BORROWER IS EXPECTED TO BECOME MORE INVOLVED IN THE LITIGATION AS WELL IN THE
NEAR FUTURE. SUBPOENAS HAVE BEEN ISSUED BY OUR ATTORNEY IN ORDER TO DETERMINE
WHAT, IF ANY DOCUMENTATION, FLEET HAS TO SUPPORT ITS POSITION. BUT IT APPEARS
THAT AT SOME POINT PRIOR TO THE BNC LOAN, THE TITLE COMPANY DID ATTEMPT TO BUY
THE FLEET LOAN. THERE WOULD ONLY BE ONE REASON FOR THE TITLE COMPANY TO DO THIS,
BECAUSE IT HAD A PRIOR CLAIM AND SOMEHOW KNEW THAT THE FLEET LIEN WAS VALID.
THEREFORE, FLEET'S CASE MAY BE VALID AND IT MAY HAVE A PROPER SENIOR LIEN.
FLEET HAS PROPOSED A PARTIAL SETTLEMENT OF THE MATTER WHEREBY BNC'S LIEN
IS RECOGNIZED AS A VALID FIRST LIEN. BNC IS PUSHING FOR A GLOBAL RESOLUTION,
INCLUDING RECOGNITION OF ITS RIGHT TO A FIRST LIEN AND LITIGATION MAY BE
SUSPENDED WHILE THESE SETTLEMENT ALTERNATIVES ARE EXPLORED.
O'CONNOR V. BNC MORTGAGE - HAWAII SUPERIOR COURT
Attorney Representation: BNC Counsel Neil O'Hanlon of Troop, Meisenger,
et al. and Local Hawaii Counsel Steven Chung of Oshima, Chun, Fong & Chung.
Type of Matter: Complaint alleges BNC Violations of the Truth in Lending
Act at Loan Origination.
Summary of Response: Matter commenced in early 1998 with discovery now
underway. Plaintiff's offer to settle was rejected by BNC which has filed a
motion for summary judgment which may dispose of the matter in favor of BNC in
the near future.
SCHMIDT V. BNC MORTGAGE, INC. - HAWAII SUPERIOR COURT
Attorney Representation: BNC Counsel Catherine Hanan monitors Local
Hawaii Counsel Steven Chung of Oshima, Chun, Fong & Chung
Type of Matter: Third Party Cross-Claim brought by borrower in April of
1998 against BNC to delay a judicial foreclosure being pursued by BNC's investor
against borrower for his failure to pay mortgage. Borrower alleges loan should
not have closed due to forgery and fraud and that lien which investor seeks to
foreclose is void.
Summary of Response: Local Hawaii counsel is defending BNC against the
allegations and investigating whether title company has improperly refused to
defend. Preliminary investigation suggests that title company was instructed by
borrower not to close loan, but closed the loan anyway and title company may
have misapplied or misappropriated the loan proceeds.
Schmidt, BNC and BNC's investor as the foreclosing lender are in
settlement discussions which include early dismissal of BNC as a defendant from
the proceedings. At present, and while settlement discussions continue, Schmidt
has agreed to suspend BNC's need to respond to the claims or otherwise defend in
the litigation.
EXHIBIT "H"
PAGE 3 of 6
82
MILDRED MILLER V. JOHN G. SWAHN, SWAN FINANCIAL, BNC MORTGAGE, INC.,
BENEFICIAL MANAGEMENT CORP., AND DOES I THROUGH 30 - Superior Court, County of
San Mateo, Case No. 406751
Attorney Representation: BNC Counsel, Neil O'Hanlon, Troop, Steuber,
Pasich, et al.
Type of Matter: The amended complaint alleges: fraud or deceit;
constructive fraud; undue influence; breach of covenant of good faith and fair
dealing; breach of fiduciary duty; breach of contract; unlawful business
practices; and negligent misrepresentation. Plaintiff seeks, in part,
restitution, injunctive relief for damages suffered and punitive damages.
Summary of Response: Amended Complaint recently served upon BNC, counsel
retained and reviewing the matter. By way of background, in August of 1996, BNC
responded in writing to correspondence from Plaintiff's counsel advising that
after a review of all loan documentation, the loan was properly made, however
BNC was willing to further discuss the matter given the borrower's
dissatisfaction. No further contact or correspondence was received from the
borrower's counsel until service of the cross-complaint in January 1999.
EXHIBIT "H."
PAGE 4 OF 6
83
MARILYN SCHIPULL V. BNC MORTGAGE, INC., ET AL. - SUPERIOR COURT OF LOS
ANGELES, CENTRAL DISTRICT - CASE NO. BC203559
Attorney Representation: BNC Counsel, Glenn Lerman of Lerman & Brown
Type of Matter: Plaintiff, an at will employee of BNC, was terminated
after three (3) months. Her response to the termination was to file suit
alleging that she was terminated for refusing to illegally solicit loans in the
state of Nevada. The Complaint alleges that BNC is liable for the commission of
a Public Policy Tort Termination; Intentional Infliction of Emotional Distress;
Labor Code Violations; Breach of Contract; Fraud and Concealment; Trade Slander;
violation of Business and Professions Codes 17,200, 17500 et seq. The Complaint
was served in January of 1999, and names BNC, as well as three individual
employees, including Evan Buckley.
Summary of Response: BNC's counsel will remove the matter to Federal
Court after which BNC will vigorously defend the complaint. BNC has already
obtained an opinion letter from the Nevada State Commissioner of Financial
Institutions outlining that the lending activities (wholesale) in which BNC
participated in the state of Nevada, are permitted.
EXHIBIT "H"
PAGE 5 OF 6
84
CITY OF CHICAGO V. LA??? VIEW CULTURAL CENTER, MARGARET CROSS, BNC
MORTGAGE. INC.
Attorney Representation: BNC Counsel Catherine Hanan with Possibility of
Local Counsel in Chicago to be Appointed
Type of Matter: City of Chicago Quasi-Criminal Proceeding to Force
Rehabilitation of Dilapidated Property and/or Demolition of such Property
Summary of Response: BNC's original investor did not record the
assignment provided at the loan sale such that BNC was served with all required
statutory notices by the prosecutors office relating to abandonment of the
property, required rehabilitation and/or demolition for the safety of the
public. BNC provided the prosecutor with information regarding the true party
investor as well as notifying its investor of the litigation AND THE PROSECUTOR
ADDED IMC TO THE SERVICE LIST SUCH THAT DIRECT NOTICE OF ALL PROCEEDINGS IS
BEING GIVEN TO BNC'S INVESTOR AS WELL AS BNC. BNC need not continue to monitor
the matter inasmuch no basis exists upon which a money judgment can be imposed
upon BNC which has no interest in the property. THE MATTER WILL BE MONITORED BUT
DELETED FROM THE LITIGATION LOG.
EXHIBIT "H"
PAGE 6 of 6
85
EXHIBIT "I"
TRADE NAMES OF COMPANY
TRADE NAME JURISDICTION USED
NONE.
EXHIBIT "I" PAGE 70
86
EXHIBIT "J"
CERTIFICATE OF CORPORATE RESOLUTIONS
AND INCUMBENCY OF OFFICERS
(BORROWING AUTHORITY)
(See Attached)
EXHIBIT "J" Page 71
87
CERTIFICATE OF WRITTEN CONSENT
OF CORPORATE RESOLUTIONS
AND INCUMBENCY OF OFFICERS
(BORROWING AUTHORITY)
OF THE BOARD OF DIRECTORS OF
BNC MORTGAGE, INC.
The undersigned, Board of Directors of BNC Mortgage, Inc., a Delaware
corporation (the "Corporation"), acting by unanimous written consent without a
meeting, pursuant to Section 141(f) of the Delaware General Corporation Law and
Section 3.11 of the Bylaws of this corporation, do hereby approve and adopt the
following resolutions:
I, the undersigned, hereby certify that I am the Secretary of BNC
Mortgage, Inc., a corporation duly organized and existing under the laws of the
State of Delaware (the "Corporation").
I further certify that true and correct copies of the Articles of
Incorporation and Bylaws of the Corporation together with all amendments thereto
are attached as Exhibits "A" and "B", respectively, and that such articles and
bylaws remain unaltered and in full force and effect.
I further certify that the following resolutions were duly adopted by
unanimous written consent of the Board of Directors of the Corporation and that
such resolutions are now in full force and effect and have not been amended,
modified or revoked:
"RESOLVED, that each of the following officers of this Corporation:
Evan Buckley
Kelly Monahan
Al Lapena
Peter Evans
acting alone without joinder of any other officer, is hereby authorized
in the name and on behalf of this Corporation (i) to borrow from and to
otherwise incur liabilities to BANK UNITED ("Lender") from time to time,
in such amounts, for such periods of time, at such rates of interest and
payable in such manner as such officers may deem necessary or proper,
and (ii) as evidence of such indebtedness so incurred, to execute and
deliver to Lender such promissory notes, loan agreements and other
instruments, documents and agreements and other instruments, documents
and agreements, containing such terms and provisions as may be
acceptable or agreeable to any one of such officers, such acceptance and
agreement to be conclusively evidenced by the execution and delivery
thereof by any one of such officers;
FURTHER RESOLVED, that this Corporation grant to Lender a lien
and/or security interest upon such assets of this Corporation as may be
agreed upon between any one of the above named officers and Lender, as
security for all present and future indebtedness, obligations and
liabilities of this Corporation to Lender and that each of said
officers, acting alone without the joinder of any other officer, is
hereby authorized in the name and on behalf of this Corporation to
execute and deliver such authorized in the name and on behalf of this
Corporation
EXHIBIT "J"
PAGE 1 of 4
88
to execute and deliver such security agreements, deeds of trust and other
instruments, documents and agreements as may be required by Lender in connection
with each such grant of a lien and/or security interest and containing such
terms and provisions as may be acceptable or agreeable to any one of such
officers, such acceptance and agreement to be conclusively evidenced by the
execution and delivery thereof by any one of such officers;
FURTHER RESOLVED, that any one of the above named officers, acting alone
without the joinder of any other officer, is hereby authorized in the name and
on behalf of this Corporation to take such further action and to do all things
that any one of such officers deems necessary in connection with any (i)
increases, renewals, extensions, rearrangements, retirements or compromises of
any indebtedness, obligations and liabilities owing to Lender from time to time
by this Corporation, either directly or by assignment, and (ii) amendments to
any of the provisions contained in any instruments, documents or agreements
evidencing, securing, governing and/or pertaining to any indebtedness,
obligations and liabilities owing to Lender by this Corporation from time to
time;
FURTHER RESOLVED, that any one of the above named officers, or any one
of the following representatives of this Corporation:
Don D'Ambrosio
Jamie Langford
acting alone without the joinder of any other officer or representative, is
hereby authorized in the name and on behalf of this Corporation (i) make
requests for advances under any credit facility that this Corporation may have
with Lender from time to time, and (ii) do or cause to be done all such acts or
things and to sign and deliver, or cause to be signed and delivered, all such
instruments, documents or agreements executed on behalf of this Corporation in
connection with these resolutions), as any and all of such officers or
representatives may deem necessary, advisable or appropriate to effectuate and
carry out the purposes and intent of the foregoing resolutions and to perform
the obligations of this Corporation in connection with any indebtedness,
obligations or liabilities incurred by this Corporation to Lender from time to
time;
FURTHER RESOLVED, that all acts, transactions or agreements with Lender
undertaken prior to the adoption of the foregoing resolutions by any one or more
of the officers and/or representatives of this Corporation in its name and on
its behalf in connection with the foregoing matters hereby ratified, confirmed
and adopted by this Corporation; and
FURTHER RESOLVED, that each of the officers of this Corporation is
hereby authorized and directed to certify these resolutions to Lender;
FURTHER RESOLVED, the foregoing resolutions shall continue in full force
and effect, and the Lender is authorized to rely upon the foregoing resolutions
unless and until (i) countermanded by resolution of the Board of Directors of
this Corporation, and (ii) a copy of such resolution, properly certified by an
officer of this
EXHIBIT "J"
PAGE 2 OF 4
89
Corporation, has actually been received by Lender."
I further certify that the foregoing resolutions do not conflict with
the Articles of Incorporation or Bylaws of the Corporation, or any amendments
thereto.
I further certify that neither the seal of the Corporation, nor the
attestation by the Secretary, or any other officer of the Corporation, is
necessary to make any instruments, documents or agreements executed by the
officers or representatives of this Corporation, unless such seal is affixed to,
or such attestation is provided on, such instruments, documents or agreements.
I further certify that the officers of the Corporation set forth below
have been duly elected and qualified and as of the date hereof hold the
specified offices with the Corporation, that the signature set forth beside each
officers name is the true signature of such officer, and that the signature set
forth beside the name of each of the representatives specified in the foregoing
resolutions is the true signature of such representatives:
TITLE TYPED NAME SIGNATURE
----- ---------- ---------
Chairman and CEO
and Secretary Evan R. Buckley /s/ EVAN R. BUCKLEY
-----------------------
President Kelly W. Monahan /s/ KELLY W. MONAHAN
-----------------------
Vice President Al Lapena /s/ AL LAPENA
-----------------------
Vice President and CFO Peter R. Evans /s/ PETER R. EVANS
-----------------------
V.P., Controller Don D'Ambrosio /s/ DON D'AMBROSIO
-----------------------
Director of Funding Jamie Langford /s/ JAMIE LANGFORD
-----------------------
IN WITNESS WHEREOF, I hereunto subscribe my name this 27th day of
January, 1999.
By: /s/ EVAN R. BUCKLEY
-----------------------
Evan R. Buckley
Secretary
EXHIBIT "J"
PAGE 3 OF 4
90
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California )
) SS.
County of Orange )
--------------------------
On Jan. 27, 1999 , before me, Martin W. Cheng, Notary Public
----------------- ----------------------------------------
Date Name and Title of Officer (e.g. Jane Doe, Notary Public)
personally appeared /s/ EVAN R. BUCKLEY ,
-----------------------------------------------------------
Name(s) of Signer(s)
[ X ] personally known to me
[ ] proved to me on the basis of satisfactory
evidence
to be the person(s) whose name(s) is/are
[SEAL] subscribed to the within instrument and
acknowledged to me that he/she/they executed
MARTINA W. CHENG the same in his/her/their authorized
Commission # 1204662 capacity(ies), and that by his/her/their
Notary Public - California signature(s) on the instrument the person(s), or
Orange County the entity upon behalf of which the person(s)
My Comm. Expires Dec. 12, acted, executed the instrument.
2002
WITNESS my hand and official seal.
/s/ MARTIN W. CHENG
-------------------------------------------------
Place Notary Seal Above Signature of Notary Public
- ----------------------------------- OPTIONAL -----------------------------------
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document.
DESCRIPTION OF ATTACHED DOCUMENT
Title or Type of Document:
-----------------------------------------------------
Document Date: Number of Pages:
------------------------------- ----------------
Signer(s) Other Than Named Above:
-----------------------------------------------
CAPACITY(IES) CLAIMED BY SIGNER
Signee's Name: RIGHT THUMBPRINT
---------------------------------------------- OF SIGNER
[ ] Individual
[ ] Corporate Officer--Title(s): Top of thumb here
-------------------------
[ ] Partner-- [ ] Limited [ ] General
[ ] Attorney in Fact
[ ] Trustee
[ ] Guardian or Conservator
[ ] Other:
-----------------------------------------------
Signer Is Representing:
------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT "J"
PAGE 4 OF 4
91
EXHIBIT "K"
BAILEE LETTER
(Investor Name and Address)
Re: Purchase of Mortgage Loans from BNC MORTGAGE, INC., a Delaware
corporation
Ladies and Gentlemen:
Attached please find those Mortgage Loans listed separately on the
attached schedule, which Mortgage Loans are owned by BNC MORTGAGE, INC., a
Delaware corporation (the "Company") and are being delivered to you for
purchase.
The Mortgage Loans comprise a portion of the Collateral under (and as
the term "Collateral" and capitalized terms not otherwise defined hereunder are
defined in) that certain Warehousing Credit and Security Agreement
(Single-family Mortgage Loans) ("Warehouse Agreement") dated effective as of
February 2, 1999, by and between the Company and BANK UNITED, a federal savings
bank ("Lender"). Each of the Mortgage Loans is subject to a security interest in
favor of Lender, which security interest shall be automatically released upon
our receipt of the full amount due to the Lender under the Warehouse Agreement
in connection with such Mortgage Loans (as set forth on the schedule attached
hereto) by wire transfer to the following account:
Bank United
Houston, Texas
ABA #313071904
Credit:
Account:
Until payment therefor is received, the aforesaid security interest
therein will remain in full force and effect, and you shall hold possession of
such Collateral and the documentation evidencing same as custodian, agent and
bailee for and on behalf of Lender. In the event any Mortgage Loan is
unacceptable for purchase, return the reject item directly to the undersigned at
the address set forth below. In no event shall any Mortgage Loan be returned or
sales proceeds remitted in full no later than thirty (30) days from the date
hereof. If you are unable to comply with the above instructions, please so
advise the undersigned immediately.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS LETTER,
YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR LENDER ON THE TERMS
DESCRIBED IN THIS LETTER. THE UNDERSIGNED REQUESTS THAT
EXHIBIT "K" Page 72
92
YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND THIS LETTER BY
SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE UNDERSIGNED AT THE
FOLLOWING ADDRESS: 3200 Southwest Freeway, Suite 2025, Houston, Texas 77027.
HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT.
Sincerely,
BANK UNITED
By:___________________________________
Name:_________________________________
Title:________________________________
IRREVOCABLY ACKNOWLEDGED
AND AGREED TO:
[INVESTOR]
By:_______________________
Name:_____________________
Title:____________________
EXHIBIT "K" Page 73
93
EXHIBIT "L"
LIST OF INVESTORS
INVESTOR CONTACT PERSON PHONE NUMBER
- --------------------------------------------------------------------------------
(See Attached)
EXHIBIT "L" Page 74
94
EXHIBIT L
LIST OF INVESTORS
INVESTOR/
REFERENCES CONTACT TELEPHONE
----------- ------- -----------
BNC MORTGAGE, INC.
------------------
AAMES Mark Costello (213) 351-7535
Advanta Conduit Services (800) 321-0033
AgFirst Farm Credit Larry Shoffner (800) 874-7737
Amresco Capital Ken Harper (909) 605-2364
BancOne Oscar Marquez (888) 665-5591
Chase Financial Corp. Wholesale Division (216) 479-2500
Countrywide Tony Checa (800) 669-6680
Crestar Patrick Peck (804) 291-0273
DLJ Mortgage Capital Robin Beck (212) 892-8071
Fidelity Federal Bank Cassandra Fraulino (949) 588-5124
First Alliance Amy Smith (949) 224-8546
GE Capital Tonya Murphy (800) 231-1416
IMC Teri Ross (949) 752-8365
Indy Mac Chris Louie (800) 669-2300 ext. 2233
Lehman Capital Leslee Gelber (212) 526-5861
Paine Webber George Mangiaracina (212) 713-6267
PinnFund USA Dominick Gonzales (760) 918-1478
PNC Mortgage, Inc. Bonnie Aldrick (800) 829-9110
RFC/GMAC Mortgage Michael Weaver (612) 979-2552
Saxon Tracey Evans (804) 967-7400
Tripoint P. Todd Zeras (714) 718-1800
EXHIBIT "L"
PAGE 1 OF 2
95
EXHIBIT L
LIST OF INVESTORS
INVESTOR/
REFERENCES CONTACT TELEPHONE
---------- ------- ---------
MORTGAGE LOGIC.COM, INC.
(AMERICA'S LENDER, INC.)
Chase Manhattan Karen Kerr (619) 677-4268
Citicorp Dixie Martin (800) 967-2205
Countrywide Charleen Koepper (602) 345-1960
Dime Mortgage Lucinda Baxter (800) 639-5655
FHLMC Susan Moreau (703) 903-3682
First Nationwide Rebecca Sommer (916) 966-5783
Fleet Mortgage Kathryn Skelton (414) 359-8340
FNMA David Dietrick (626) 396-5232
GE Capital Victoria Clement (949) 955-7394
Headlands Mark Garaventa (800) 748-4331
HUD Joe Ellen Plummer (202) 708-3976
IndyMac Chris Louie (626) 584-2223
Norwest Ed Fernandez (714) 438-4331
PNC Mortgage Scott Vereeg (503) 524-7255
Residential Funding Renee Poplotek (949) 347-7979
EXHIBIT "L"
PAGE 2 OF 2
96
EXHIBIT "M"
OPINION LETTER
February 2, 1999
Bank United
3200 Southwest Freeway
Suite 1300
Houston, Texas 77027
Re: Warehousing Credit and Security Agreement (Single-Family
Mortgage Loans) Gentlemen:
We have acted as special counsel for BNC MORTGAGE, INC., a Delaware
corporation (the "Company"), in connection with the negotiation and execution of
the following documents (collectively, the "Credit Documents"):
1. the Warehousing Credit and Security Agreement (Single-Family
Mortgage Loans) dated effective as of February 2, 1999 (the
"Loan Agreement"), between the Company and Bank United (the
"Lender"); and
2. the Note dated effective as of February 2, 1999 (the "Note"),
executed and delivered by the Company.
Unless otherwise provided herein, terms used herein which are defined in
the Credit Documents (including schedules and exhibits thereto) and not defined
herein shall have the meanings attributed thereto in the Credit Documents.
1. BASIS OF OPINION.
As the basis for the conclusions expressed in this opinion letter, we have
examined, considered and relied upon the following:
(1) A copy of each of the Credit Documents executed by the
Company;
(2) A Recent Certificate of Domestic Status of the Company issued
by the Secretary of State of Delaware;
(3) A copy of the Articles of Incorporation and amendments
thereto, and a copy of the Bylaws of the Company, in each case as certified to
us by the Company Certificate;
(4) Such other documents and records as we have deemed relevant,
necessary or appropriate in connection with or as a basis for the opinions
hereafter set forth; and
EXHIBIT "M" Page 75
97
(5) Such matters of law as we have considered necessary or
appropriate for the expression of the opinions contained herein.
For the purposes of this opinion letter, the documents and information
referred to in this Section A are herein collectively referred to as the
"Documents".
2. OPINIONS.
Based upon our examination and consideration of the foregoing Documents,
and subject to the comments, assumptions, exceptions, qualifications and
limitations set forth in Section C below, we are of the opinion that:
(1) The Company (i) is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware (ii) has
the full legal power and authority and all necessary licenses, permits,
franchises, and other authorizations to own and operate its property and assets
and to transact the business in which it is engaged, and (iii) is duly qualified
to transact business as a foreign corporation in each jurisdiction where the
nature of the business it transacts or the property it owns requires such
qualification or licensing except in such jurisdictions where the failure to be
in good standing or be licensed (as the case may be) would have no material
adverse effect on the Company.
(2) The Company has the requisite corporate power to execute,
deliver, and perform the terms and provisions of each of the Credit Documents
and has taken all necessary corporate action to authorize the execution,
delivery, and performance by it of each such Credit Document. The Company has
duly executed each of the Credit Documents, and each such Credit Document
constitutes its legal, valid, and binding obligation enforceable in accordance
with its terms, except as the enforceability of the rights and remedies of the
Lender under each of the Credit Documents may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(regardless of whether the issue of enforceability is considered in a proceeding
in equity or at law) including requirements of reasonableness and good faith in
the exercise of rights and remedies under the Credit Documents.
(3) Neither the execution, delivery, or performance by the
Company of the Credit Documents, nor compliance by it with the terms and
provisions thereof, (i) will contravene any law, statute, rule, or regulation;
(ii) to the best of our knowledge, will contravene any order, writ, injunction,
or decree of any court or governmental instrumentality; (iii) to the best of our
knowledge, will conflict or be inconsistent with or result in any breach of any
of the material terms, covenants, conditions, or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any lien upon any of the property or assets of the Company
pursuant to the terms of any agreement of the Company; (iv) will violate any
provision of the Articles of Incorporation or Bylaws of the Company.
(4) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, (i) the execution,
EXHIBIT "M" Page 76
98
delivery and performance of any Credit Document, or (ii) the legality, validity,
binding effect or enforceability of any such Credit Document.
(5) To the best of our knowledge, there are no actions, suits, or
proceedings pending or threatened (i) with respect to any Credit Document or
(ii) that could materially and adversely affect the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Company.
(6) The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(7) The Company is not a "holding company" or a "subsidiary company" of
a "holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(8) The execution and delivery of the Loan Agreement by the Borrower is
effective to create a valid and enforceable security interest in favor of the
Lender in the Collateral and the proceeds thereof.
(9) The Lender will have a valid and duly perfected security interest,
without further requirements for perfection, in (a) the Pledged Mortgages and
Pledged Securities upon the delivery thereof to the Lender and (b) the other
Collateral described in the Financing Statements to the extent that a security
interest therein may be perfected under Article 9 of the UCC solely by filing a
financing statement with the Secretary of State of California, which lien shall
be superior to any other interests therein.
3. COMMENTS, ASSUMPTIONS, LIMITATION, QUALIFICATIONS AND EXCEPTIONS.
The opinions expressed in Section B above are based upon, and subject
to, the further comments, assumptions, limitations, qualifications and
exceptions set forth below:
Respectfully submitted,
EXHIBIT "M" Page 77
99
EXHIBIT "N"
PROMISSORY NOTE
$50,000,000.00 Houston, Texas February 2, 1999
FOR VALUE RECEIVED, the undersigned, BNC MORTGAGE, INC., a Delaware
corporation (herein called the "Borrower"), hereby promises to pay to the order
of BANK UNITED, a federal savings bank (the "Lender" or, together with its
successors and assigns, the "Holder") whose principal place of business is 3200
Southwest Freeway, Suite 1300, Houston, Texas 77027, or at such other place as
the Holder may designate from time to time, the principal sum of FIFTY MILLION
AND NO/100 DOLLARS ($50,000,000.00) or so much thereof as may be outstanding
from time to time pursuant to the Warehousing Credit and Security Agreement (the
"Agreement") dated the date hereof between the Borrower and the Lender, as the
same may be amended or supplemented from time to time, and to pay interest on
said principal sum or such part thereof as shall remain unpaid from time to
time, from the date of each Advance until repaid in full, and all other fees and
charges due under the Agreement, at the rate and at the times set forth in the
Agreement. All payments hereunder shall be made in lawful money of the United
States and in immediately available funds.
This Note is given to evidence an actual warehouse line of credit in the
above amount and is the Note referred to in the Agreement, and is entitled to
the benefits thereof. Reference is hereby made to the Agreement (which is
incorporated herein by reference as fully and with the same effect as if set
forth herein at length) for a description of the Collateral, a statement of the
covenants and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms used
herein, unless otherwise defined herein, shall have the meanings given them in
the Agreement.
The entire unpaid principal balance of this Note plus all accrued and
unpaid interest shall be due and payable in full on February 1, 2000.
This Note may be prepaid in whole or in part at any time without premium
or penalty.
Should this Note be placed in the hands of attorneys for collection, the
Borrower agrees to pay, in addition to principal and interest, fees and charges
due under the Agreement, and all costs of collecting this Note, including
reasonable attorneys' fees and expenses.
This Note shall be construed and enforced in accordance with the laws of
the State of Texas, without reference to its principles of conflicts of law, and
applicable federal laws of the United States of America.
This Note is secured by all security agreements, collateral assignments,
deeds of trust and lien instruments executed by the Borrower in favor of Lender,
or executed by any other Person as security for this Note, including any
executed prior to, simultaneously with, or after the date of this Note.
The Borrower and any and each co-maker, guarantor, accommodation party,
endorser or other Person liable for the payment or collection of this Note
expressly waives notice, presentment,
EXHIBIT "N" Page 78
100
The Borrower and any and each co-maker, guarantor, accommodation party,
endorser or other Person liable for the payment or collection of this Note
expressly waives notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, bringing of suit, and diligence in
taking any action to collect amounts called for hereunder and in the handling of
Collateral at any time existing as security in connection herewith, and shall be
directly and primarily liable for the payment of all sums owing and to be owing
hereon, regardless of and without any notice, diligence, act or omission as or
with respect to the collection of any amount called for hereunder or in
connection with any Lien at any time had or existing as security for any amount
called for hereunder.
It is the intention of the parties hereto to conform strictly to usury
laws applicable to the Lender. Accordingly, if the transactions contemplated
hereby would be usurious under applicable law (including the laws of the United
States of America and the State of Texas), then, in that event, notwithstanding
anything to the contrary herein or in the Agreement or in any other Loan
Document or agreement entered into in connection with or as security for this
Note, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under law applicable to the Lender that is contracted for,
taken, reserved, charged, or received herein or under the Agreement or under any
of the other aforesaid Loan Documents or agreements or otherwise in connection
herewith shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be credited by the Lender on the principal
amount of the Obligations (or, if the principal amount of the Obligations shall
have been paid in full, refunded by the Lender to the Borrower, as required);
and (ii) in the event that the maturity of this Note is accelerated by reason of
an election of the Lender resulting from any Event of Default under the
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to the
Lender may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in the Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by the Lender on the
principal amount of the Obligations (or, if the principal amount of the
Obligations shall have been paid in full, refunded by the Lender to the
Borrower, as required). Without limiting the foregoing, all calculations of the
rate of interest taken, reserved, contracted for, charged, received or provided
for under this Note or any of the Loan Documents which are made for the purpose
of determining whether the interest rate exceeds the Maximum Rate shall be made,
to the extent allowed by law, by amortizing, prorating, allocating and spreading
in equal parts during the period of the full stated term of the loan evidenced
hereby, all interest at any time taken, reserved, contracted for, charged,
received, or provided for under this Note of any of the Loan Documents. To the
extent that the Texas Credit Title is relevant for purposes of determining the
Maximum Rate, the Lender hereby elects to determine the applicable rate ceiling
under such statute by the weekly rate ceiling from time to time in effect,
subject to the Lender's right subsequently to change such method in accordance
with applicable law.
BNC MORTGAGE, INC.,
a Delaware corporation
By:
--------------------------------------
KELLY MONAHAN, President
EXHIBIT "N" Page 79