PURCHASE AND SALE AGREEMENT
Between
CITYSCAPE CORP.
and
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
Dated as of February 2, 1996
TABLE OF CONTENTS
Section I. Definitions Page
1.01. "Adjusted Tranche Amount"....................................... 1
1.02. "Aggregate Adjusted Tranche Amount"............................. 1
1.03. "Available Amount".............................................. 1
1.04. "Business Day".................................................. 1
1.05. "Change of Control"............................................. 2
1.06. "Collateral".................................................... 2
1.07. "Co-Managed Amount"............................................. 2
1.08. "Custodian"..................................................... 2
1.09. "Custodial Agreement"........................................... 2
1.10. "Default Rate".................................................. 2
1.11. "Detailed Mortgage Asset Schedule".............................. 2
1.12. "Eligible Assets"............................................... 2
1.13. "Event of Termination".......................................... 2
1.14. "FHA"........................................................... 2
1.15. "FHLMC"......................................................... 2
1.16. "FNMA".......................................................... 3
1.17. "GAAP".......................................................... 3
1.18. "Greenwich Change of Control"................................... 3
1.19. "Guarantor"..................................................... 3
1.20. "Guaranty"...................................................... 3
1.21. "Home Equity Mortgage Assets"................................... 3
1.22. "Home Improvement Assets"....................................... 3
1.23. "HUD"........................................................... 3
1.24. "Independent Whole Loan Trade".................................. 3
1.25. "Initial Tranche Amount"........................................ 3
1.26. "LIBOR"......................................................... 3
1.27. "Losses"........................................................ 4
1.28. "Market Movement Allowance"..................................... 4
1.29. "Market Value Percentage"....................................... 4
1.30. "Monoline Insurance Company".................................... 4
1.31. "Mortgage"...................................................... 4
1.32. "Mortgage Assets"............................................... 4
1.33. "Mortgage Asset Schedule"....................................... 4
1.34. "Mortgage File"................................................. 5
1.35. "Mortgage Loan"................................................. 5
1.36. "Mortgage Loan Documents"....................................... 5
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1.37. "Mortgage Note"................................................. 5
1.38. "Mortgaged Property"............................................ 5
1.39. "Mortgagor"..................................................... 5
1.40. "Net Securities Amount"......................................... 5
1.41. "Pass-Through Transfer"......................................... 5
1.42. "Principal"..................................................... 6
1.43. "PUD"........................................................... 6
1.44. "Purchase"...................................................... 6
1.45. "Purchase Date"................................................. 6
1.46. "Purchase Price Percentage"..................................... 6
1.47. "Purchase Request".............................................. 6
1.48. "Reconstitution Agreement"...................................... 6
1.49. "Recourse Amount"............................................... 6
1.50. "Reference Bank"................................................ 6
1.51. "Reference Bank Rate"........................................... 6
1.52. "Repurchase Price".............................................. 7
1.53. "Required Sale Event"........................................... 7
1.54. "SEC"........................................................... 7
1.55. "Shareholders' Equity".......................................... 7
1.56. "Shortfall Payment"............................................. 7
1.57. "SM/MU Assets".................................................. 7
1.58. "Spread Deficiency Account"..................................... 7
1.59. "Spread Deficiency Amount"...................................... 7
1.60. "Spread Deficiency Factor"...................................... 7
1.61. "Spread Percentage"............................................. 8
1.62. "Subordinated Debt"............................................. 8
1.63. "Taxes"......................................................... 8
1.64. "Termination Date".............................................. 8
1.65. "Tranche"....................................................... 8
1.66. "Tranche Period"................................................ 8
1.67. "Tranche Rate".................................................. 9
1.68. "Tranche Remittance Date"....................................... 9
1.69. "Tranche Term".................................................. 9
1.70. "Underwater Assets"............................................. 9
1.71. "Unsecured Debt"................................................ 9
1.73. "Whole Loan Transfer"........................................... 9
Section II. Procedures for Purchases of Eligible Assets;
Conditions Precedent; Settlements
2.01. Purchase and Sale.............................................. 9
2.02. Delivery of Documents; Initial Purchase of
Eligible Assets ............................................... 10
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2.03. Delivery of Documents; Subsequent Purchases of
Eligible Assets................................................. 11
2.04. Purchase Requests................................................ 11
2.05. Tranche Selection................................................ 12
2.06. Survival of Representations...................................... 12
2.07. Proceeds of Eligible Assets...................................... 12
Section III. Distributions
Section IV. Transfers of Eligible Assets by Purchaser
4.01. Purchaser Sale................................................... 13
4.02. Market Value..................................................... 14
4.03. Required Sale Event.............................................. 15
4.04. Bankruptcy Event................................................. 15
4.05. Proceeds Shortfall............................................... 15
Section V. Intent of Parties; Security Interest
Section VI. Representations and Warranties
6.01. Representations and Warranties of Seller......................... 16
6.02. Representations and Warranties Regarding
Eligible Assets................................................. 18
6.03. Representations and Warranties of Purchaser...................... 27
6.04. Remedies for Breach of Representations and
Warranties; Repurchase Obligation............................... 28
Section VII. Covenants and Warranties of Seller
7.01. Affirmative Covenants............................................ 29
7.02. Negative Covenants............................................... 32
Section VIII. Removal of Eligible Assets from Inclusion
Under this Agreement Upon a Whole Loan
Transfer or a Pass-Through Transfer;
Independent Whole Loan Trades
8.01. Removal of Eligible Assets from Inclusion
Under this Agreement Upon a Whole Loan
Transfer or a Pass-Through Transfer.............................. 33
8.02 Repurchases...................................................... 37
8.03. Independent Whole Loan Trade..................................... 37
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Section IX. Seller's Servicing Obligations
Section X. Fees and Other Costs
10.01. Net Securities Amount............................................ 38
10.02. Hold Harmless.................................................... 38
10.03. Definition of Taxes.............................................. 38
10.04. After-Tax Calculation............................................ 39
10.05. Contest, Payment, Interest....................................... 39
10.06. Definition of "After-Tax Basis"; Tax Savings..................... 39
Section XI. Events of Termination
11.01. Failure to Perform............................................. 40
11.02. Failure of Representation or Warranty.......................... 41
11.03. Failure of Covenant............................................ 41
11.04. Bankruptcy Event............................................... 41
11.05. Seller Default................................................. 41
11.06. Material Adverse Change........................................ 41
11.07. Cross-Default.................................................. 41
11.08. Change of Control.............................................. 42
11.09. Pre-Existing Condition......................................... 42
Section XII. Payment
12.01. Method of Payment............................................... 42
12.02. Late Payments................................................... 42
Section XIII. Greenwich Change of Control
Section XIV. Remedies
Section XV. Termination Resulting from Competition.
Section XVI. Term
Section XVII. Exclusive Benefit of Parties; Assignment..................... 43
Section XVIII.Amendment; Waivers
Section XIX. Execution in Counterparts.................................... 43
Section XX. Effect of Invalidity of Provisions........................... 44
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Section XXI. Governing Law................................................ 44
Section XXII. Notices...................................................... 44
Section XXIII.Entire Agreement............................................. 44
Section XXIV. Indemnities.................................................. 44
Section XXV. RESPA Obligations............................................ 46
Section XXVI. Survival..................................................... 46
Section XXVII.Right of Set-off............................................. 46
Section XXVIII Consent to Service.......................................... 46
Section XXIX. Submission to Jurisdiction; Waiver of Trial by
Jury......................................................... 47
Section XXX. Construction................................................. 47
Section XXXI. Further Agreements........................................... 47
Exhibits
Exhibit A: Seller's Underwriting Guidelines for Home Equity
Loans and Home Improvement Loans
Exhibit B: Seller's Underwriting Guidelines for SM/MU Assets
Exhibit C: Receipt and Assignment
Exhibit D: Purchase Request
Exhibit E: Opinion of Counsel to Seller
Exhibit F: Mortgage Asset Schedule
Exhibit G: Guaranty of Cityscape Financial Corp.
Exhibit H: Officer's Certificate of Seller
Exhibit I: Form of Mortgage and Form of Mortgage Note
Exhibit J: Opinion of Counsel to Guarantor
Exhibit K: Whole Loan Agreement
Exhibit L: Form of Custodial Agreement
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PURCHASE AND SALE AGREEMENT ("Agreement") dated as of February 2, 1996
between GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation
("Purchaser"), and CITYSCAPE CORP., a New York corporation ("Seller").
WHEREAS, Seller desires to sell from time to time to Purchaser certain
Eligible Assets (as hereinafter defined), and Purchaser desires to purchase such
Eligible Assets, each in accordance with the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, the parties, in consideration of good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, hereby agree as follows:
I. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
1. "Adjusted Tranche Amount": As of any date of determination in respect of any
Tranche, the difference between (i) the Initial Tranche Amount with respect
thereto and (ii) all payments of principal received by Purchaser in respect of
the related Eligible Assets on or prior to such date.
2. "Aggregate Adjusted Tranche Amount": At any date, the aggregate sum of the
Adjusted Tranche Amounts for each Tranche as of such date, in respect of
Purchases as to which the related Eligible Assets have not been disposed of by
Purchaser (other than to an affiliate of Purchaser pursuant to this Agreement).
3. "Available Amount": $1,000,000,000, less the aggregate principal of Eligible
Assets sold by the Purchaser pursuant to a Whole Loan Transfer or a Pass-Through
Transfer other than the Co-Managed Amount relating to any such Pass-Through
Transfer. Notwithstanding the foregoing, if at any point in time the Aggregate
Adjusted Tranche Amount is equal to or exceeds the Available
Amount, the Purchaser shall have no obligation to purchase, and the Seller shall
have no obligation to sell, additional Eligible Assets until the point in time
at which the Aggregate Adjusted Tranche Amount is less than the Available
Amount.
4. "Business Day": A day on which banks are open for business in New York, New
York and on which dealings in United States dollars are carried on in the London
interbank market.
5. "Change of Control": means either (i) both Robert Patent and Robert Grosser
leave the employ of Seller or (ii) there occurs a change of "control" of Seller
as such term is defined in the Securities Exchange Act of 1934, as amended.
6. "Collateral": As defined in Section 5 hereof.
7. "Co-Managed Amount": As defined in Section 8.01.
8. "Custodian": Harris Trust and Savings Bank.
9. "Custodial Agreement": The Custodial Agreement, dated as of February 2,
1996, by and among the Custodian, Purchaser and Seller, a form of which is
attached hereto as Exhibit L.
11. "Default Rate": As defined in Section 12.02 hereof.
12. "Detailed Mortgage Asset Schedule": The schedule of Mortgage Assets
identifying each Mortgage Asset by the address of the Mortgaged Property and the
name of the mortgagor and setting forth as to each Mortgage Asset all of the
information set forth in Exhibit F hereof.
13. "Eligible Assets":
(i) With respect to Home Equity Mortgage Assets or Home Improvement
Assets, the type and quality usually included in a securitized pool
consisting of such assets which pool would be eligible for credit
enhancement by a Monoline Insurance Company and which would be expected to
support a security which would be rated, without the benefit of such credit
enhancement, in one of the investment grade generic rating
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categories by any nationally recognized statistical rating agency; or
(ii) With respect to SM/MU Assets, the type and quality usually
included in a securitized pool consisting of or including such assets which
pool would be eligible for credit enhancement by a Monoline Insurance
Company and which would be expected to support a security which would be
rated, without the benefit of such credit enhancement, in one of the
investment grade generic rating categories by any nationally recognized
statistical rating agency.
14. "Event of Termination": As defined in Section 11 hereof.
15. "FHA": The Federal Housing Administration or its successors in interest.
16. "FHLMC": The Federal Home Loan Mortgage Corporation or its successors in
interest.
17. "FNMA": The Federal National Mortgage Association or its successors in
interest.
18. "GAAP": means generally accepted accounting principles, consistently
applied.
19. "Greenwich Change of Control": means the sale by The Long-Term Credit Bank
of Japan, Limited of either (i) Greenwich Capital Holdings, Inc., the parent of
Greenwich Capital Financial Products, Inc. or (ii) Greenwich Capital Financial
Products, Inc.
20. "Guarantor": Cityscape Financial Corp., a Delaware corporation.
21. "Guaranty": A guaranty in substantially the form of Exhibit G hereto,
executed by Guarantor in favor of Purchaser.
22. "Home Equity Mortgage Assets": All of Seller's right, title and interest in
and to mortgage loans secured by mortgages on one- to four-family residences,
which shall bear either fixed or adjustable rates of interest and shall have
been underwritten in accordance with the underwriting guidelines attached as
Exhibit
3
A or otherwise approved by Purchaser, other than Home Improvement Assets and
SM/MU Assets.
23. "Home Improvement Assets": All of Seller's right, title and interest in and
to conventional and Title I home improvement loans secured by mortgages on one-
to four-family residences which shall have been underwritten in accordance with
the underwriting guidelines attached as Exhibit A or otherwise approved by
Purchaser.
24. "HUD": The United States Department of Housing and Urban Development.
25. "Independent Whole Loan Trade": As defined in Section 8.03.
26. "Initial Tranche Amount": With respect to any Purchase hereunder, the
purchase amount paid for the related Eligible Assets by the Purchaser on the
related Purchase Date, such purchase amount being equal to the product of (x)
the Principal of the related Eligible Assets as of such Purchase Date and (y)
the related Purchase Price Percentage.
27. "LIBOR": As of any date of determination, the 30, 60 or 90 day (consistent
with the frequency of the LIBOR Reset Date) London Interbank Offering Rate as of
such date, as indicated on the Bloomberg screen or Telerate and as determined by
the Purchaser. If the Purchaser cannot so determine LIBOR, then LIBOR shall mean
the Reference Bank Rate.
28. "Losses": Any and all out-of-pocket losses, claims, damages, liabilities or
expenses (including reasonable attorneys' fees and disbursements) directly
incurred by any person specified in this Agreement, resulting from transactions
entered into under this Agreement (other than liability for Taxes). Losses must
be accounted for and presented for reimbursement documented in reasonable detail
and within a reasonable time.
29. "Market Movement Allowance": For each Purchase, the amount of diminution in
the Market Value of the related Eligible Assets (expressed as a percentage) that
may occur before the occurrence of a Required Sale Event with respect to such
Eligible Assets, as described in Section 4.02 hereof.
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30. "Market Value Percentage": For each date of determination in respect of a
Purchase, the market value (expressed as a percentage of par) of the related
Eligible Asset as determined by Purchaser (subject to the provisions of Section
4.02 hereof) and taking into account (i) credit rating; (ii) credit worthiness
of the account debtor, lessee or other obligors (including third party credit
enhancements); (iii) realizable distress sale liquidation value; (iv)
impediments (legal or otherwise) to prompt and effective enforcement; (v)
general industry and overall economic conditions; (vi) current interest rates;
(vii) availability of purchasers; and (viii) such other considerations as
reasonably appropriate in the circumstances. Provided the initial Purchase Date
is not later than February 2, 1996, the initial Market Value Percentage shall be
103%.
31. "Monoline Insurance Company": Municipal Bond Investors Assurance
Corporation ("MBIA"), Financial Guaranty Insurance Company ("FGIC"), Capital
Markets Assurance Corporation ("CapMAC"), Financial Security Assurance Inc.
("FSA"), GE Mortgage Insurance Company ("GEMICO") or AMBAC Indemnity Corporation
("AMBAC").
32. "Mortgage": The mortgage, deed of trust or other instrument creating a
first, second or third lien on or first, second or third priority ownership
interest in an estate in fee simple in real property securing a Mortgage Note or
in a leasehold interest.
33. "Mortgage Assets": Home Equity Mortgage Assets, Home Improvement Assets and
SM/MU Assets, collectively.
34. "Mortgage Asset Schedule": Each schedule of Mortgage Assets delivered by
the Seller to the Purchaser and the Custodian, such schedule identifying each
Mortgage Asset by the address of the Mortgaged Property and the name of the
mortgagor and setting forth as to each Mortgage Asset the following information:
(i) the current principal balance, (ii) the account number, (iii) the original
principal amount with respect to any Mortgage Asset originated by the Seller and
the principal amount purchased by the Seller with respect to a Mortgage Asset
acquired by the Seller subsequent to its origination, (iv) the combined
loan-to-value ratio as of the date of the origination of the related Mortgage
5
Asset, (v) the paid through date, (vi) the mortgage interest rate, (vii) the
final maturity date under the mortgage note and (viii) the monthly payment.
35. "Mortgage File": The documents described in Section 3 of the Custodial
Agreement.
36. "Mortgage Loan": Any of the first, second or third lien mortgage loans sold
by the Seller to the Purchaser pursuant to this Agreement, as set forth on the
Detailed Eligible Asset Schedule.
37. "Mortgage Loan Documents": The documents listed in Section 1 of the
Custodial Agreement pertaining to any Mortgage Loan.
38. "Mortgage Note": The note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
39. "Mortgaged Property": The property underlying a Mortgage Asset.
40. "Mortgagor": The obligor on a Mortgage Note.
41. "Net Securities Amount": With respect to any Tranche Period which has
terminated, the amount produced for the related Tranche corresponding to such
Tranche Period by application of the following:
TR x TA x AD
360
Where
TR = the Tranche Rate applicable to such Tranche
TA = the Adjusted Tranche Amount with respect to such Tranche
AD = the actual number of days elapsed during such Tranche Period (assuming
twelve 30-day months).
42. "Pass-Through Transfer": The sale or transfer of some or all of the
Eligible Assets to a trust to be formed as part of a
6
publicly or privately traded pass-through transaction, which transaction may
contain certain requirements of and be rated by one or more statistical credit
rating agencies, pursuant to a Reconstitution Agreement retaining the Seller as
servicer thereunder.
43. "Principal": With respect to any Eligible Asset as of any date of
determination, the unamortized principal balance of such Eligible Asset as of
such date.
44. "PUD": A planned unit development.
45. "Purchase": Any purchase of Eligible Assets by Purchaser from Seller
pursuant to the terms hereof and of the applicable Purchase Request.
46. "Purchase Date": With respect to any Purchase, the date on which Purchaser
purchases the related Eligible Assets from Seller.
47. "Purchase Price Percentage": With respect to any Purchase, the Market Value
Percentage of the Principal paid by Purchaser for the related Eligible Assets,
expressed as a percentage of par, as set forth in the related Purchase Request.
48. "Purchase Request": A request for the purchase of Eligible Assets in the
form of Exhibit D hereto.
49. "Reconstitution Agreement": The agreement or agreements entered into by the
Seller and the Purchaser and/or certain third parties with respect to any or all
of the Eligible Assets purchased hereunder, in connection with a Whole Loan
Transfer or a Pass-Through Transfer as set forth in Section VIII, including, but
not limited to, a Pooling Agreement or such other form of agreement that shall
have been entered into between the Purchaser (or an affiliate of the Purchaser)
and the Seller following the initial Purchase Date. Such agreement or agreements
shall prescribe the rights and obligations of the Seller in servicing the
related Eligible Assets.
50. "Recourse Amount": As of any date of determination, 10 percent of the
Aggregate Adjusted Tranche Amount as of such date; provided, however, in each
case, that the Recourse Amount shall be fixed upon the earlier of (i) the first
date on which a Required
7
Sale Event has occurred and (ii) the first date on which an Event of Termination
has occurred.
51. "Reference Bank": Three major banks that are engaged in the London
interbank market, as selected by the Purchaser.
52. "Reference Bank Rate": The arithmetic mean (rounded upwards, if necessary,
to the nearest one sixteenth of a percent) of the offered rates for United
States dollar deposits for one month which are offered by the Reference Banks as
of 11:00 a.m., London time, on the second Business Day prior to the date of
determination to prime banks in the London interbank market for a period of one
month.
53. "Repurchase Price": The product of (x) the Principal of the related
Eligible Assets as of the related Repurchase Date and (y) the related Purchase
Price Percentage for the related Eligible Assets as specified on the Purchase
Request related to each such Eligible Asset plus the applicable Net Securities
Amount less any payments of principal already received by the Purchaser.
54. "Required Sale Event": As described in Section 4.02.
55. "SEC": The Securities and Exchange Commission and any successor thereto.
56. "Shareholders' Equity": The sum of (i) the aggregate "assets" of Seller
less the aggregate "liabilities" of Seller, with the term "asset" having the
meaning ascribed to such term by GAAP and the term "liabilities" being those
obligations or liabilities of Cityscape which, in accordance with GAAP, would be
included on the liability side of Cityscape's balance sheet plus (ii) the
Subordinated Debt of Seller, in accordance with GAAP.
57. "Shortfall Payment": As defined in Section 10.07.
58. "SM/MU Assets": All of Seller's right, title and interest in and to small
residential multi-family residences and mixed-use mortgage loans which bear
fixed rates of interest and which were underwritten in accordance with the
underwriting guidelines attached as Exhibit B or otherwise approved by
Purchaser, and none of which shall exceed $1,000,000 in principal amount, unless
otherwise agreed to by Purchaser and Seller.
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60. "Spread Deficiency Account": A nonsegregated memorandum account maintained
by the Purchaser to which shall be credited the Spread Deficiency Amounts.
61. "Spread Deficiency Amount" means, on any date of determination, the amount
by which (A) the product, expressed in dollars, of (i) the Spread Deficiency
Factor with respect to such Eligible Assets and (ii) the Principal of such
Eligible Assets on their respective Purchase Date or Dates exceeds (B) the sum
of (i) the dollar value (over zero) of any hedges or other interest rate
protection instruments with respect to Underwater Assets (I) to which Seller is
a party, (II) the value of which Seller has assigned to Purchaser and (III)
under which Purchaser would be entitled on the date of determination to receive
such dollar value and (ii) the dollar amount of any deposits made by Seller to,
and retained by Purchaser on the date of determination in, the Spread Deficiency
Account with respect to previous Spread Deficiency calculations.
62. "Spread Deficiency Factor" means, on any date of determination, the amount,
expressed as a percentage, by which (A) exceeds ((B) minus (C))
where (A) equals the Spread Percentage
(B) equals the weighted average interest rate of the Eligible
Assets (i) sold to and retained by Purchaser under
this Agreement, and (ii) included on a Purchase
Request to be sold on the related Purchase Date,
if any; and
(C) equals the yield, expressed as a percentage, of Four Year
Treasury Securities.
62. "Spread Percentage" means, on any date of determination, the sum, expressed
as a percentage, of (A) plus ((B) minus (C))
where (A) equals 4.00%
(B) equals the pricing spread on pass-through certificates
issued in the private
9
placement market for pools of mortgages with
characteristics similar to the Eligible Assets
either sold to and retained by Purchaser under
this Agreement, or included on a Purchase Request
to be sold on the related Purchase Date, as the
case may be, as reasonably determined solely by
Purchaser based upon market considerations; and
(C) equals the lesser of (i) "(B)", and (ii) 1.45%.
63. Subordinated Debt": Indebtedness of the Seller which (a) is subordinated to
other indebtedness and liabilities of the Seller, (b) has a maturity of at least
three years and (c) as a percentage of total Shareholder's Equity does not
exceed 50%.
64. "Taxes": As defined in Section 10.03 hereof.
65. Termination Date": The earlier to occur of the second anniversary of the
date hereof and the date on which the Available Amount is reduced to zero.
66. "Tranche": The Eligible Assets specified on any particular Purchase
Request.
67. "Tranche Period": The period commencing on the day Purchaser receives a
distribution of principal or interest with respect to the Eligible Assets in the
related Tranche in accordance with Section III and ending on (and including) the
day preceding the day on which the next such distribution is received. For
purposes of the initial Tranche Period, Purchaser shall be deemed to have
received such a distribution with respect to the Eligible Assets in the related
Tranche on the related Purchase Date. The date upon which Purchaser disposes of
an Eligible Asset shall also end the Tranche Period with respect thereto.
68. "Tranche Rate": The Tranche Rate shall equal LIBOR plus 175 basis points.
The Tranche Rate shall reset on the first day of each Tranche Period.
69. "Tranche Remittance Date": With respect to any Tranche, the monthly
calendar date specified in the related Purchase
10
Request for the remittance of collections on the related Eligible Assets to the
Purchaser in accordance with Section III hereof.
70. "Tranche Term": With respect to a Tranche, a period of one, two or three
months, or such other period as may be mutually agreeable to the parties hereto,
commencing on a Business Day selected by Seller and Purchaser pursuant to this
Agreement.
71. "Underwater Assets": Means the aggregate of those Eligible Assets which,
taken individually, would yield a Spread Deficiency Amount.
72. "Unsecured Debt": As of any date of determination, the dollar amount of all
obligations and liabilities of Seller which, (i) in accordance with GAAP, would
be included in determining total liabilities as shown on the liability side of
Seller's balance sheet and (ii) are not secured by the grant of a lien upon or
security interest in, any collateral.
73. "Unsecured Debt to Equity Ratio": The ratio of total Unsecured Debt of
Seller to its Shareholders' Equity.
74. "Whole Loan Transfer": The sale or transfer to a third party of some or
all of the Eligible Assets in a whole loan format or a certificated
participation format pursuant to a Reconstitution Agreement retaining the Seller
as servicer thereunder.
II. Procedures for Purchases of Eligible Assets; Conditions Precedent;
Settlements.
2. Purchase and Sale. From time to time pursuant to the terms of this
Agreement, Seller shall deliver and at the request of Seller, Purchaser shall
purchase Eligible Assets in an aggregate unpaid principal amount up to the
Available Amount. Each such purchase shall be initiated by Seller pursuant to
the delivery to Purchaser of a Purchase Request in the manner set forth in
Section 2.04; provided, however, that each Initial Tranche Amount with respect
to Home Equity Mortgage Assets shall be at least $5,000,000 and with respect to
Home Improvement Assets shall be at least $500,000; and provided, further, that
no Spread Deficiency Amount shall exist with respect to Eligible Assets
previously sold to and still retained by Purchaser; and provided, further,
however, that
11
Purchaser shall only purchase Eligible Assets if, immediately, following such
purchase, (i) the Available Amount would not be less than zero; (ii) the Amount
of Eligible Assets sold to and still retained by Purchaser which consist of Home
Equity Loans or Home Improvement Assets would not exceed $200,000,000; and (iii)
the amount of Eligible Assets which consist of SM/MU Assets sold to and still
retained by Purchaser hereunder would not exceed $15,000,000.
3. Delivery of Documents; Initial Purchase of Eligible Assets. Prior to the
initial Purchase of Eligible Assets:
(a) Seller shall have delivered to the Custodian the "Mortgage Loan
File" (as defined in the Custodial Agreement) for each of the Eligible
Assets.
(b) Purchaser shall have received a Mortgage Asset Schedule pertaining
to the related Eligible Assets.
(c) Purchaser shall have received copies of the resolutions of the
Board of Directors of each of Seller and Guarantor, certified by its
respective Secretary, approving this Agreement and the Guaranty Agreement,
respectively.
(d) Purchaser shall have received the Articles of Incorporation of
Seller certified by the Secretary of State of the State of New York and the
Articles of Incorporation of Guarantor, certified by the Secretary of State
of the State of Delaware.
(e) Purchaser shall have received certificates of each of the
Secretary or Assistant Secretary of Seller and Guarantor, as set forth in
Exhibit H hereto, certifying (i) the names and signatures of the officers
authorized on its behalf to execute this Agreement, and any other documents
to be delivered by it hereunder (on which Purchaser may conclusively rely
until such time as Purchaser shall receive from Seller a revised
certificate meeting the requirements of this item (e)) and (ii) a copy of
Seller's By-laws.
(f) Purchaser shall have received a certificate from the Custodian
certifying that it has reviewed the mortgage notes relating to the Eligible
Assets and has found no
12
discrepancies between the information listed on the related Mortgage Asset
Schedule and the information set forth in such mortgage notes.
(g) Purchaser shall have received an opinion of counsel to Seller, in
substantially the form of Exhibit E hereto and an opinion of counsel to
Guarantor, in substantially the form of Exhibit J hereto.
(h) Seller shall have instructed the applicable trustee, paying agent,
authenticating agent, transfer agent, registrar, predecessor in interest,
owner (if the Eligible Assets are in the form of a security agreement), or
servicer, if any, in respect of the related Eligible Assets to reflect on
their books and records the transfer of such Eligible Assets to Purchaser,
as owner or secured party (if the Eligible Assets are in the form of a
security agreement).
(i) Purchaser shall have received the most recent available standard
servicing or like reports in summary form, if any, with respect to all of
the mortgages in Seller's portfolio similar to the Eligible Assets.
(j) The bond power or transfer instrument for the related Eligible
Asset have been executed by appropriate officers of the Seller.
(k) The Purchaser shall be permitted to perform its standard loan
review of each Eligible Asset to be purchased.
4. Delivery of Documents; Subsequent Purchases of Eligible Assets. Prior to any
Purchase of Eligible Assets after the initial Purchase of Eligible Assets, the
actions, conditions and deliveries specified in subsections 2.02(a), (b), (f),
(h), (i), (j) and (k) shall have been taken or made, as the case may be.
5. Purchase Requests. Seller shall deliver to Purchaser a Purchase Request at
least three Business Days prior to the proposed Purchase Date for any Purchase
(unless otherwise agreed by the parties). Purchaser shall indicate its
acceptance or declination of each Purchase Request by completing the appropriate
section of the Purchase Request and returning the copy thereof to Seller;
provided, however, that Purchaser hereby agrees to accept
13
each Purchase Request if such acceptance would not cause the aggregate of the
Initial Tranche Amounts to exceed the Available Amount and if all of the
conditions to such Purchase provided for in this Agreement (including, without
limitation, Section 2.02 hereof) have been satisfied. Unless otherwise agreed to
by Purchaser, no single Purchase Request shall include both (i) Home Equity
Mortgage Assets and Home Improvement Assets and (ii) SM/MU Assets.
With respect to all Purchase Requests, if Purchaser does not send a copy of
a completed Purchase Request to Seller within at least three Business Days prior
to the proposed Purchase Date (five Business Days, if the related Purchase
Request was received by Purchaser at least two calendar weeks prior to the
proposed Purchase Date), Purchaser shall be deemed to have accepted such
Purchase Request. Each Purchase Request accepted by Purchaser shall be
irrevocable and binding on Purchaser and Seller. Seller shall indemnify
Purchaser and hold it harmless against any Losses incurred by Purchaser as a
result of any failure by Seller to timely deliver the Eligible Assets subject to
such Purchase. Each Purchase shall cover the Eligible Assets identified in a
Mortgage Asset Schedule attached to the related Purchase Request. Each Purchase
Request shall specify the type of Eligible Asset, the Purchase Price Percentage,
the Performance Deposit Amount, Tranche Remittance Date, Purchase Date, the
Initial Tranche Amount, together with the Tranche Term and Tranche Rate
requested by Seller with respect thereto in accordance with Section 2.05 hereof,
the Market Movement Allowance, Recourse Amount and such other matters as may be
specified on the form of the Purchase Request attached hereto as Exhibit D or as
may be reasonably requested by Purchaser from time to time in accordance with
the terms hereof. On the applicable Purchase Date, the Purchaser shall either
(i) pay or (ii) cause the Custodian, pursuant to the terms of the Custodial
Agreement, to pay to Seller the Initial Tranche Amount for the related Eligible
Assets against receipt of the documents required to be delivered by Seller
pursuant to either Section 2.02 or 2.03, as the case may be.
6. Tranche Selection. Seller shall, at least three Business Days prior to the
expiration of any Tranche Term, provide Purchaser with a notice requesting a new
Tranche Term for application to the related Tranche (a "Tranche Selection
Notice"). The Tranche Selection Notice may be oral, promptly confirmed by Seller
14
in writing, and shall be deemed to be an irrevocable offer by Seller to
Purchaser to apply the requested Tranche Term to the related Tranche. Failure to
provide written confirmation of an oral Tranche Selection Notice shall not
affect the irrevocability of any such Notice. Notwithstanding the foregoing
provisions of this Section, Purchaser, in its reasonable discretion, may select
a new Tranche Term if (i) Seller fails to provide a Tranche Selection Notice on
a timely basis or (ii) Purchaser determines in its reasonable discretion that
any Tranche Term requested by Seller is unavailable or would not yield efficient
execution to Purchaser.
7. Survival of Representations. The terms and conditions of the purchase of
each Eligible Asset shall be as set forth in this Agreement. Seller will be
deemed on each Purchase Date to have made to Purchaser the representations and
warranties set forth in Section 6 hereof and such representations and warranties
of Seller shall be true and correct on and as of such Purchase Date and
throughout the term of this Agreement for as long as Eligible Assets are held by
Purchaser. Each Purchase Request made by Seller shall be deemed to be a
restatement of each of the covenants of Seller made pursuant to Section 7 of
this Agreement. In addition, Seller shall reaffirm the representations and
warranties contained in Section 6 on the date of disposition of the Eligible
Assets by the Purchaser (either through a securitization or a whole loan sale of
such assets).
8. Proceeds of Eligible Assets. The transfer and sale hereby of all of the
Seller's right, title and interest in and to each Eligible Asset shall include
all proceeds, products and profits derived therefrom, including, without
limitation, all scheduled payments of principal of and interest on such Eligible
Assets and other amounts due or payable or to become due or payable in respect
thereof and proceeds thereof including, without limitation, all moneys, goods
and other tangible or intangible property received upon the liquidation or sale
thereof. Seller shall retain all rights with respect to any interest accrued and
unpaid with respect to any Eligible Assets to, but not including, the related
Purchase Date.
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III. Distributions.
With respect to each Tranche, Seller shall instruct the applicable paying
agent, servicer or other appropriate party with respect to each Eligible Asset
Purchased hereunder to remit to Purchaser by wire transfer in immediately
available funds, all distributions thereon or with respect thereto in accordance
with Purchaser's payment instructions on the related Tranche Remittance Date.
Upon receipt by Purchaser of any payment of principal with respect to any
Eligible Asset, Purchaser shall apply such principal payment so received to
reduce the Adjusted Tranche Amount of the applicable Tranche.
Upon receipt by Purchaser of any payment of principal or interest with
respect to any Eligible Assets, the prior Tranche Period shall terminate and a
new Tranche Period shall begin, and the Purchaser shall compute and either remit
to Seller or, at Seller's option, deposit in an account maintained by Purchaser
on behalf of Seller the amount by which the aggregate amount of any interest
payment received by Purchaser exceeds the Net Securities Amount with respect to
the Tranche Period then ending.
Notwithstanding the foregoing provisions of this Section III, Purchaser
hereby grants a waiver with respect to Seller's obligation to remit all payments
in respect of (i) interest in excess of the Net Securities Amount, (ii)
scheduled payments of principal and (iii) any amounts advanced or expended by
Seller in its capacity as servicer for which it is entitled to be reimbursed in
accordance with the terms hereof in its capacity as servicer of any Eligible
Asset (the "Forbearance Waiver"). Any payment so held by Seller shall be paid to
Purchaser immediately upon the termination of the Forbearance Waiver. The
Forbearance Waiver shall terminate upon the earlier to occur of (i) the
occurrence of any default by Seller hereunder and (ii) Purchaser's delivery of a
written notice to Seller terminating such Forbearance Waiver.
IV. Transfers of Eligible Assets by Purchaser.
16
2. Purchaser Sale. Purchaser may, at its election, and without the consent of
Seller, at any time during this Agreement sell, transfer, convey, pledge or
assign any or all of its right, title and interest in, to or under, or grant a
security interest in, any Eligible Assets purchased by Purchaser hereunder.
Prior to effecting any sale or other disposition (other than a pledge or a
transfer pursuant to a repurchase agreement) of its right, title and interest in
any Eligible Asset, Purchaser shall offer to Seller between the hours of 8:00
a.m. and 6:00 p.m. on any Business Day (by oral notice to such effect, promptly
confirmed in writing), the right to purchase the offered Eligible Assets in
whole from it at the Repurchase Price (which has not been theretofore paid
pursuant to Section 8.01) on the related Eligible Assets. Within the time
periods specified below, Seller shall notify Purchaser of its intent to so
purchase the offered Eligible Assets:
17
If Purchaser makes Seller shall notify
offer to sell to Purchaser of intent
Seller to Purchase
- ---------------------- ---------------------
Between 8:00 a.m. and Before noon on the
10:00 a.m on any next succeeding
Business Day Business Day
Between 10:00 a.m. and 6:00 p.m. on any Before noon on the
Business Day second succeeding
Business Day
If Seller fails to notify Purchaser of its intention to purchase the related
Eligible Assets within the time periods set forth above, then Seller shall be
deemed to have declined Purchaser's offer to purchase the related Eligible
Assets. If Seller determines to effect such a purchase, Seller shall, on the
fifth Business Day next succeeding the Business Day on which Seller accepted the
offer to purchase the related Eligible Assets from Purchaser pursuant to this
Section, pay to Purchaser the applicable Repurchase Price for the related
Eligible Assets required to be paid pursuant to Section 8.01 hereof. If
Purchaser disposes of any Eligible Assets which Seller declines to purchase, and
Purchaser later reacquires such Eligible Assets for any reason, then prior to
any subsequent sale of such Eligible Assets, Purchaser shall afford Seller the
right to purchase such Eligible Assets pursuant to this Section 4.01 at the
Purchaser's reacquisition price plus applicable costs and expenses. This right
to purchase the Eligible Assets reacquired by Purchaser shall be extinguished
upon Seller's second refusal to purchase any Eligible Asset(s).
3. Market Value. On a weekly basis, Purchaser, in respect of each Purchase,
shall determine the Market Value of each Eligible Asset which has been purchased
by the Purchaser and not disposed of, and shall notify Seller thereof. If Seller
shall in good faith disagree with the Market Value of any such Eligible Asset as
so determined by Purchaser, Seller shall notify Purchaser and Purchaser and
Seller shall endeavor in good faith to reach an agreement on the Market Value of
such Eligible Assets. If Purchaser and Seller cannot agree on the Market Value,
a Required Sale Event will be deemed to have occurred. If, in respect of any
Purchase, the Market Value of the Eligible Assets at any time has declined from
the Market Value of the Eligible Assets as of the
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relevant Purchase Date by an amount exceeding the applicable Market Movement
Allowance, a Required Sale Event shall be deemed to have occurred.
4. Required Sale Event. Upon the occurrence of a Required Sale Event, Purchaser
shall in a commercially reasonable manner sell the Eligible Assets, subject to
Seller's obligation to indemnify Purchaser against any resulting Losses from
such sale up to the then-applicable Recourse Amount. Prior to effecting any such
sale, Purchaser shall offer to Seller the right to purchase such Eligible Assets
from it at the Adjusted Tranche Amount, plus any Net Securities Amount payable
pursuant to Section 8.01 hereof. If Seller fails to exercise its right of
purchase within the time set forth in Section 4.01 and Purchaser sells the
Eligible Assets (through private or public sale) to a third party, Purchaser
shall promptly provide a notification to Seller of such event, setting forth the
net sales proceeds inclusive of accrued interest received (after giving effect
to all selling and related expenses, including the fees and expenses of any
consultants, brokers or attorneys) and shall notify Seller of all Losses
incurred and invoice Seller (with supporting detail) for the amount due to
Purchaser, up to the amount of the Recourse Amount. Upon receipt of such
invoice, Seller shall pay to Purchaser the Recourse Amount to the extent
necessary to indemnify Purchaser against the Losses sustained. If, as a result
of the sale of the Eligible Assets, the net realized sales proceeds, inclusive
of accrued interest, if any, on the related Eligible Assets exceed the
applicable Adjusted Tranche Amount plus the applicable Net Securities Amount
plus the fee payable upon a Whole Loan Transfer, then Purchaser shall pay any
such excess to Seller.
5. Bankruptcy Event . With respect to Seller's right of purchase set forth in
Section 4.01 and Section 4.03, if a bankruptcy event occurs, as described in
Section 11.04 below, involving Seller, during the period after which Seller has
notified Purchaser of its intention to purchase the offered Eligible Assets but
before the expiration of the five Business Day period in which Seller has to
effect such purchase, Purchaser shall be released from its obligation to sell
such Eligible Assets to Seller and any other obligations set forth in Section
4.01 and may sell such Eligible Assets (through private or public sale) to any
third party.
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6. Proceeds Shortfall. If Purchaser sells Eligible Assets to any third party
for an amount less than the applicable Adjusted Tranche Amount plus the
applicable Net Securities Amount, then Seller shall pay to Purchaser any such
shortfall (the "Proceeds Shortfall"). Until the Proceeds Shortfall is repaid,
Purchaser shall be entitled to deduct from the proceeds owed to Seller as a
result of any subsequent sales of Eligible Assets (to Seller or to any third
party), the amount, up to the Proceeds Shortfall, by which the proceeds of any
such subsequent sale exceeds the Adjusted Tranche Amount plus the Net Securities
Amount, in each case applicable to such subsequent sale.
V. Intent of Parties; Security Interest.
Purchaser and Seller confirm that the transactions contemplated herein are
intended as purchases and sales rather than as loan transactions. In the event,
for any reason, and solely in such event, any transaction hereunder is construed
by any court or regulatory authority as a loan or other than a purchase and sale
of the related Eligible Assets, Seller shall be deemed to have hereby pledged to
Purchaser as security for the performance by Seller of all of its obligations
from time to time arising hereunder and under any and all Purchases effected
pursuant thereto, and shall be deemed to have granted to Purchaser a security
interest in, the related Eligible Assets and all distributions in respect
thereof, and the proceeds of any and all of the foregoing (collectively, the
"Collateral"). Seller shall, with respect to each Purchase, execute a Receipt
and Assignment substantially in the form of Exhibit C hereto, as applicable,
pursuant to which Seller shall reconfirm its grant to Purchaser of a first
priority security interest in, and lien upon, the Collateral. In furtherance of
the foregoing, (i) this Agreement shall constitute a security agreement, (ii)
Purchaser shall have all of the rights of a secured party with respect to the
Collateral pursuant to applicable law and (iii) Seller shall execute all
documents, including but not limited to financing statements under the Uniform
Commercial Code as in effect in any applicable jurisdictions, as the Purchaser
may reasonably require to effectively perfect and evidence Purchaser's first
priority security interest in the Collateral. Seller also covenants not to
pledge, assign or grant any security interest to any other party in any Eligible
Asset sold to Purchaser.
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VI. Representations and Warranties.
1. Representations and Warranties of Seller. The Seller represents, warrants
and covenants to the Purchaser as of the Initial Purchase Date and each
subsequent Purchase Date that:
(i) the Seller is duly organized, validly existing and in good
standing under the laws of the State of New York and is duly authorized and
qualified to transact any and all business contemplated by this Agreement
to be conducted by the Seller in any state in which a Mortgaged Property is
located to the extent necessary to ensure the enforceability of each
Eligible Asset and the servicing of the Eligible Asset in accordance with
the terms of this Agreement;
(ii) the Seller has the full corporate power and authority to service
each Eligible Asset, and to execute, deliver and perform, and to enter into
and consummate the transactions contemplated by this Agreement and the
execution, delivery and performance of this Agreement by the Seller has
been duly authorized by all necessary corporate action on the part of the
Seller; and this Agreement, assuming the due authorization, execution and
delivery thereof by the Purchaser, constitutes a legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with
its respective terms, except to the extent that (a) the enforceability
thereof may be limited by federal or state bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors'
rights generally and (b) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought;
(iii) the execution and delivery of this Agreement by the Seller, the
servicing of the Eligible Assets by the Seller hereunder, the consummation
by the Seller of the transactions herein contemplated, and the fulfillment
by the Seller of or compliance by the Seller with the terms hereof will not
(A) result in a breach of any term or provision of the charter or by-laws
of the Seller or (B) conflict with, result in a breach, violation or
acceleration of, or result
21
in a default under, the terms of any other material agreement or instrument
to which the Seller is a party or by which it may be bound, or any statute,
order or regulation applicable to the Seller of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the
Seller, which breach, violation, default or non-compliance would have a
material adverse effect on (a) the business, operations, financial
condition, properties or assets of the Seller taken as a whole or (b) the
ability of the Seller to perform its obligations under this Agreement; and
the Seller is not a party to, bound by, or in breach or violation of any
material indenture or other material agreement or instrument, or subject to
or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having
jurisdiction over it, which materially and adversely affects or, to the
Seller's knowledge, would in the future reasonably be expected to
materially and adversely affect, (x) the ability of the Seller to perform
its obligations under this Agreement or (y) the business, operations,
financial condition, properties or assets of the Seller taken as a whole;
(iv) the Seller is, and currently intends to remain, in good standing
and qualified to do business in each jurisdiction where failure to be so
qualified or licensed would have a material adverse effect on (a) the
business, operations, financial condition, properties or assets of the
Seller taken as a whole or (b) the enforceability of any Eligible Asset or
the servicing of the Eligible Assets in accordance with the terms of this
Agreement;
(v) there is no litigation pending or, to the Seller's actual
knowledge, overtly threatened against the Seller that would materially and
adversely affect the execution, delivery or enforceability of this
Agreement or the ability of the Seller to service the Eligible Assets or
for the Seller to perform any of its other obligations hereunder in
accordance with the terms hereof;
(vi) no consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of, or compliance by the Seller with, this
Agreement or the
22
consummation of the transactions contemplated hereby (except for such
consents, approvals, authorizations, or orders to be obtained following
each Purchase Date with respect to future transactions to be consummated
hereunder), or if any such consent, approval, authorization or order not
relating to a future transaction is required, the Seller has obtained the
same; and
(vii) the Seller has caused to be performed any and all acts required
to preserve the rights and remedies of the Purchaser in any insurance
policies of the Seller or a Mortgagee applicable to the Eligible Assets
sold by the Seller.
2. Representations and Warranties Regarding Eligible Assets. (a) With respect to
the Eligible Assets subject to any Purchase Request, Seller represents and
warrants to Purchaser as of the related Purchase Date with respect to each such
Eligible Asset as follows:
(i) The information set forth on the Detailed Mortgage Asset Schedule
with respect to such Eligible Asset is true and correct as of the Purchase
Date in all material respects;
(ii) All payments due prior to the related Purchase Date have been
made and none of such Eligible Assets will have been contractually
delinquent for 60 or more days more than once in the twelve months
preceding the related Purchase Date;
(iii) Each related Mortgage is a valid and enforceable first, second
or third lien on the Mortgaged Property subject only to (a) the lien of
nondelinquent current real property taxes and assessments, (b) covenants,
conditions and restrictions, rights of way, easements and other matters of
public record as of the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection
with the origination of such Eligible Asset, and (c) other matters to which
like properties are commonly subject which do not materially interfere with
the benefits of the security intended to be provided by such Mortgage;
23
(iv) As of the Purchase related to each Eligible Asset, the Seller had
good title to, and was the sole owner of, each Eligible Asset free and
clear of any pledge, lien, encumbrance or security interest and had full
right and authority, subject to no interest or participation of, or
agreement with, any other party, to sell and assign the same;
(v) To the best of the Seller's knowledge, there was no delinquent tax
or assessment lien against any related Mortgaged Property;
(vi) To the best of the Seller's knowledge, there is no valid offset,
defense or counterclaim to any related Mortgage Note or Mortgage, including
the obligation of the Mortgagor to pay the unpaid principal of or interest
on such Mortgage Note;
(vii) To the best of the Seller's knowledge, there are no mechanics'
liens or claims for work, labor or material affecting any related Mortgaged
Property which are or may be a lien prior to, or equal with, the lien of
such Mortgage, except those which are insured against by the title
insurance policy referred to in (11) below;
(viii) To the best of the Seller's knowledge, each related Mortgaged
Property is free of material damage and is in good repair;
(ix) The origination of such Eligible Asset complied in all material
respects with applicable state and federal laws, including, without
limitation, usury, equal credit opportunity, real estate settlement
procedures, truth-in-lending and disclosure laws, relating to the
origination of mortgage loans and consummation by the Seller of the
transactions contemplated hereby will not involve the violation of any such
laws;
(xi) Neither the Seller nor any prior holder of any related Mortgage
has modified such Mortgage in any material respect (except that such an
Eligible Asset may have been modified by a written instrument which has
been recorded, if necessary, to protect the interests of the Purchaser and
which has been delivered
24
to the Custodian); satisfied, cancelled or subordinated such Mortgage in
whole or in part; released the related Mortgaged Property in whole or in
part from the lien of such Mortgage; or executed any instrument of release,
cancellation, modification or satisfaction with respect thereto except as
has been disclosed to Purchaser prior to Purchase Date, in which case a
copy of such modification agreement will have been delivered to the Seller
and the Custodian;
(xii) A lender's policy of title insurance together with a condominium
endorsement, if applicable, and extended coverage endorsement and, if
applicable, an adjustable rate mortgage endorsement in an amount at least
equal to the principal balance as of the related Purchase Date of each such
Eligible Asset or a commitment (binder) to issue the same was effective on
the date of the origination of such Eligible Asset, each such policy is
valid and remains in full force and effect, and each such policy was issued
by a title insurer qualified to do business in the jurisdiction where the
related Mortgaged Property is located and acceptable to FNMA or FHLMC and
in a form acceptable to FNMA or FHLMC, which policy insures the Seller and
successor owners of indebtedness secured by the insured related Mortgage,
as to the first or second priority lien of such Mortgage; to the best of
the Seller's knowledge, no claims have been made under such mortgage title
insurance policy and no prior holder of such Mortgage, including the
Seller, has done, by act or omission, anything which would impair the
coverage of such mortgage title insurance policy;
(xiii) Such Eligible Asset was originated by the Seller or, if not
originated by the Seller, was purchased by the Seller subject to materially
the same standards and procedures used by the Seller in originating
mortgage loans directly;
(xiv) To the best of the Seller's knowledge, all of the improvements
which were included for the purpose of determining the Appraised Value of
the related Mortgaged Property lie wholly within the boundaries and
building restriction lines of such property, and no improvements on
adjoining properties encroach upon such Mortgaged Property unless the
25
applicable title insurance policy for such Mortgaged Property affirmatively
insures against loss or damage by reason of any encroachment that is
disclosed or would have been disclosed by an accurate survey;
(xv) To the best of the Seller's knowledge, no improvement located on
or being part of related Mortgaged Property is in violation of any
applicable zoning law or regulation. To the best of the Seller's knowledge,
all inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of such Mortgaged Property and, with
respect to the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, have been
made or obtained from the appropriate authorities and to the best of the
Seller's knowledge, such Mortgaged Property was lawfully occupied under
applicable law at origination and is lawfully occupied under applicable law
as of the Purchase Date;
(xvi) All parties which have had any interest in any related Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the laws
of the state wherein the related Mortgaged Property is located, and (2)(A)
organized under the laws of such state, (B) qualified to do business in
such state, (C) federal savings and loan associations or national banks
having principal offices in such state, or (D) not doing business in such
state;
(xvii) The related Mortgage Note and the related Mortgage are genuine,
and each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms and with applicable laws except to
the extent that the enforceability thereof may be limited by (a) federal or
state bankruptcy, insolvency, moratorium and other similar laws relating to
creditors' rights generally and (b) the availability of the remedy of
specific performance and injunctive and other forms of equitable relief and
by the discretion of the court before which any proceeding therefor may be
brought; provided, however, that none of the foregoing will affect the
ultimate realization of the benefits of the lien of the related Mortgage on
the related Mortgaged Property.
26
All parties to the related Mortgage Note and the related Mortgage had legal
capacity to execute such Mortgage Note and such Mortgage and such Mortgage
Note and such Mortgage have been duly and properly executed by such
parties;
(xviii) The proceeds of such Eligible Asset have been fully disbursed,
except in certain circumstances relating to SM/MU Assets where Seller has
held back amounts until improvements to property have been made, such
amounts so withheld will in no case be in excess of $10,000, there is no
requirement for future advances thereunder and any and all requirements as
to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making, closing or recording such
Eligible Assets were paid;
(xix) The related Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof
adequate for the realization against the related Mortgaged Property of the
benefits of the security, including, (i) if such Mortgage is designated as
a deed of trust, by trustee's sale and (ii) otherwise by judicial
foreclosure. No homestead or other exemption available to the related
Mortgagor will materially interfere with the right to sell such Mortgaged
Property at a trustee's sale or the right to foreclose such Mortgage;
(xx) With respect to any related Mortgage constituting a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves and is named in such
Mortgage, and no fees or expenses are or will become payable by the
Purchaser to the trustee under the deed of trust, except in connection with
a trustee's sale after default by the related Mortgagor;
(xxi) The related Mortgage Note and the related Mortgage is in
substantially the form attached as Exhibit I hereto with such revisions as
are necessary to comply with applicable state law. The related Mortgaged
Property is suitable for year-round occupancy for its geographic location;
27
(xxii) There exist no deficiencies with respect to escrow deposits and
payments, if such are required by the related Mortgage or Mortgage Note,
for which customary arrangements for repayment thereof have not been made,
and no escrow deposits or payments of other charges or payments due the
Seller have been capitalized under the related Mortgage or the related
Mortgage Note;
(xxiii) The origination, underwriting and collection practices used by
the Seller with respect to such Eligible Asset have been in all respects
legal, proper, prudent and customary in the mortgage lending and servicing
business with respect to mortgage loans similar to such Eligible Asset;
(xxiv) The related Mortgage Note is not secured by any collateral,
pledged account or other security except for the lien of the related
Mortgage or a third party guaranty. In addition, certain financing
statements may have been filed with respect to the fixtures or furniture
contained in the property securing an SM/MU Asset;
(xxv) Such Eligible Asset does not have a shared appreciation feature,
or other contingent interest feature;
(xxvi) Such Eligible Asset contains a "due-on-sale" clause unless
prohibited by applicable law;
(xxvii) The improvements upon the related Mortgaged Property are
covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire extended coverage and such other
hazards as are customary in the area where the Mortgaged Property is
located representing coverage not less than the lesser of (i) the minimum
amount required to compensate for damage or loss on a replacement cost
basis, (ii) the outstanding principal balance of the related Eligible Asset
or (iii) the maximum allowed. All individual insurance policies and flood
policies referred to in clause (27) below contain a standard mortgagee
clause naming the Seller or the original mortgagee, and its successors in
interest, as mortgagee, and the Seller has received no notice that any
premiums due and payable thereon have not been paid; the related Mortgage
obligates the related Mortgagor thereunder to maintain all such
28
insurance, including flood insurance, at the Mortgagor's cost and expense,
and upon the Mortgagor's failure to do so, authorizes the holder of the
Mortgage to obtain and maintain such insurance at the Mortgagor's cost and
expense and to seek reimbursement therefor from the Mortgagor;
(xxviii) If the related Mortgaged Property is in a Federal Flood
Hazard Zone, a flood insurance policy in a form meeting the requirements of
the current guidelines of the Flood Insurance Administration is in effect
with respect to such Mortgaged Property with a generally acceptable carrier
in an amount representing coverage not less than the least of (A) the
original outstanding principal balance of the Eligible Asset, (B) the
minimum amount required to compensate for damage or loss on a replacement
cost basis or (C) the maximum amount of insurance that is available under
the Flood Disaster Protection Act of 1973;
(xxix) To the best of the Seller's knowledge, there is no proceeding
pending or threatened for the total or partial condemnation of the related
Mortgaged Property, nor is such a proceeding currently occurring, and such
property is undamaged by waste, fire, earthquake or earth movement;
(xxx) To the best of Seller's knowledge, there is no default, breach,
violation or event of acceleration existing under the related Mortgage or
the related Mortgage Note; and the Seller has not waived any default,
breach, violation or event of acceleration;
(xxxi) The related Mortgaged Property is improved by either (i) a one-
to four-family residential dwelling, including condominium units, dwelling
units in PUDs and manufactured housing, which, to the best of the Seller's
knowledge, does not include cooperatives and does not constitute other than
real property under state law or (ii) a small residential multi-family
residence and mixed-use structure;
(xxxii) Unless otherwise specified in the related Purchase Request,
each Eligible Asset is being serviced by the Seller;
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(xxxiii) There is no obligation on the part of the Seller or any other
party under the terms of the related Mortgage or related Mortgage Note to
make payments in addition to those made by the related Mortgagor;
(xxxiv) Any future advances made prior to the related Purchase Date
have been consolidated with the outstanding principal amount secured by the
related Mortgage, and the secured principal amount, as consolidated, bears
a single interest rate and single repayment term reflected on the Detailed
Mortgage Asset Schedule. The consolidated principal amount does not exceed
the original principal amount of such Eligible Asset. The related Mortgage
Note does not permit or obligate the Seller to make future advances to the
related Mortgagor at the option of the Mortgagor;
(xxxv) To the best of the Seller's knowledge, there are no defaults in
complying with the terms of the Mortgage, and all taxes, governmental
assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents which previously became due and owing
have been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid. The Seller has
not advanced funds, or induced, solicited or knowingly received any advance
of funds by a party other than the related Mortgagor, directly or
indirectly, for the payment of any amount required by the related Mortgage
except for (A) payments in the nature of escrow payments, including without
limitation, taxes and insurance payments, and (B) interest accruing from
the date of the related Mortgage Note or date of disbursement of the
related Mortgage proceeds, whichever is later, to the day which precedes by
one month the Due Date of the first installment of principal and interest;
(xxxvi) All amounts received with respect to such Eligible Assets to
which the Purchaser is entitled have been transferred to the Purchaser;
(xxxvii) Such Eligible Asset was underwritten in accordance with the
Seller's underwriting guidelines;
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(xxxviii) The related Mortgage File contains an appraisal of the
related Mortgaged Property signed by an appraiser which meets the minimum
FNMA or FHLMC requisite qualifications for appraisers, duly appointed by
the originator, who had no interest, direct or indirect in the related
Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of such
Eligible Asset; the appraisal is in a form acceptable to FNMA and FHLMC,
with such riders as are acceptable to FNMA or FHLMC, as the case may be,
and satisfies the requirements of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989;
(xxxix) Unless otherwise specified in the related Purchase Request,
such Eligible Asset is not a graduated payment mortgage loan or a growing
equity mortgage loan, nor is such Eligible Asset subject to a temporary
buydown or similar arrangement. If the Eligible Asset has an adjustable
rate, it is not convertible at the option of the related Mortgagor to a
fixed rate mortgage loan;
(xl) With respect to such Eligible Asset, no loan junior in lien
priority to such Eligible Asset and secured by the related Mortgaged
Property was originated by the Seller at the time of origination of such
Eligible Asset unless specifically set forth on the Purchase Request and
expressly approved by the Purchaser;
(xli) At origination either (i) the related Mortgaged Property was not
located within a 1 mile radius of any site with environmental or hazardous
waste of which the Seller had actual knowledge, or (ii) as to any related
Mortgaged Property located within a 1 mile radius of any site as to which
the Seller has actual knowledge of environmental or hazardous waste, the
related Eligible Asset was reviewed in accordance with the Seller's
established environmental review procedures;
(xlii) The characteristics of the related Eligible Asset are as set
forth in the form of Exhibit F delivered in respect of the related Purchase
Date; and
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(xliii) To the best of the Seller's knowledge, no error, omission,
misrepresentation, negligence, fraud or similar action occurred on the part
of any person in connection with the origination of any Eligible Asset.
(b) Seller represents and warrants to Purchaser with respect to each Home
Equity Mortgage Asset or Home Improvement Asset consisting of an interest in a
residential property in a pool of Eligible Assets that each such Eligible Asset
shall have been originated in conformity with and meets, as of the Purchase
Date, underwriting guidelines no less stringent than those specified in Exhibit
A attached hereto.
(c) Seller represents and warrants to Purchaser with respect to each SM/MU
Asset consisting of a small multi-family residence/mixed-use property in a pool
of Eligible Assets that each such SM/MU Asset shall have been originated in
conformity with and meets, as of the date of Purchase, underwriting guidelines
no less stringent than those specified in Exhibit B attached hereto; provided,
however, that from time to time, based on market conditions, Purchaser or Seller
shall propose and the other shall accept, reasonable changes to such
underwriting guidelines as a further condition to purchases of SM/MU Assets.
(d) (A) Seller represents and warrants to Purchaser with respect to each
Home Improvement Asset which is insured by FHA:
(i) The Seller is approved by FHA and is in good standing to service
mortgages and has not been suspended as a mortgagee or servicer by the FHA.
(ii) With respect to Home Improvement Assets which are Title I Home
Improvement Assets, the Seller has complied and shall comply with the
applicable provisions of the National Housing Act, as amended and
supplemented, all rules and regulations issued thereunder, and all
administrative publications published pursuant thereto including all FHA
requirements for FHA Title I loans.
(iii) The amount and the original term to maturity of each Home
Improvement Asset comply with the FHA Regulations at the time of
origination unless the requirements with
32
respect to such Home Improvement Asset are specifically waived by HUD with
respect to such Home Improvement Asset;
(iv) Each Home Improvement Asset was originated or acquired and
underwritten by the Seller in accordance with the underwriting criteria
established by the Seller, the FHA and HUD for FHA Title I loans:
(v) Each Home Improvement Asset (i) is an FHA Title 1 property
improvement loan (as defined in 24 CFR Section 201.2(aa)) underwritten by
the Seller or an entity which at the time of origination was a lender
approved by the FHA for participation in the programs under Title I of the
National Housing Act, in accordance with the FHA requirements for the Title
I loan program as set forth in 24 CFR Parts 201 and 202, and is the subject
of FHA insurance, (ii) was originated and underwritten in accordance with
applicable FHA requirements, and (iii) was made to provide financing for
eligible home improvements for a residential dwelling;
(vi) The related Mortgage Note and, if applicable, the related
Mortgage are on forms acceptable to FHA;
(vii) The Home Improvement Asset was originated and has been serviced
in a manner such that the Loan will be eligible for the maximum amount of
insurance made available by the FHA pursuant to Title I of the National
Housing Act (subject to the aggregate limitation on the amount of FHA
insurance available for the Seller), without any right of offset,
counterclaim or any other defense by the FHA. The Seller has reported the
origination of the Loan to the FHA and has obtained or shall obtain a case
number for the Loan from the FHA;
(viii) With respect to each Home Improvement Asset originated by a
dealer or contractor, the Seller is in possession of the completion
certificate for the related improvement as required by FHA for the Home
Improvement Asset;
(ix) Seller has or will cause an amount of FHA Insurance Reserves with
respect to the Home Improvement Assets equal to 10% of the outstanding
principal balance of
33
such Loans as of the related Purchase Date to be transferred or approved
for transfer on or prior to the related Purchase Date to the Purchaser's
account maintained by the FHA; and
(x) No FHA insurance premiums are due and unpaid, and all such
premiums for subsequent periods shall be timely paid.
(B) Seller represents and warrants to Purchaser with respect to each Home
Improvement Asset which is not insured by FHA:
(i) Each Home Improvement Asset was originated or acquired and
underwritten by the Seller in accordance with the underwriting criteria
established by the Seller for its Home Improvement Assets which are not
insured by FHA;
(ii) The related Mortgage Note and, if applicable, the related
Mortgage are on forms acceptable to the Seller; and
(iii) With respect to each Home Improvement Asset originated by a
dealer or contractor, the Seller is in possession of the completion
certificate for the related improvement for the Home Improvement Asset;
3. Representations and Warranties of Purchaser. Purchaser hereby makes the
following representations and warranties, each of which representations and
warranties (i) is material and being relied upon by Seller and (ii) is true in
all respects as of the date of this Agreement:
(1) Purchaser has been duly organized and is validly existing as a
corporation under the laws of the State of Delaware.
(2) Purchaser has the requisite power and authority and legal right to
execute and deliver, engage in the transactions contemplated by, and
perform and observe the terms and conditions of, this Agreement to be
performed by it.
(3) This Agreement has been duly authorized and executed by Purchaser,
is valid, binding and enforceable against Purchaser in accordance with its
terms, and the
34
execution, delivery and performance by Purchaser of this Agreement does not
conflict with any material term or provision of any other agreement to
which Purchaser is a party or any term or provision of the Charter or
By-laws of Purchaser, or any law, rule, regulation, order, judgment, writ,
injunction or decree applicable to Purchaser of any court, regulatory body,
administrative agency or governmental body having jurisdiction over
Purchaser.
(4) No consent, approval, authorization or order of, registration or
filing with, or notice to any governmental authority or court is required
under applicable law in connection with the execution and delivery by
Purchaser of this Agreement.
(5) There is no action, proceeding or investigation pending or to the
best knowledge of Purchaser, threatened against Purchaser before any court,
administrative agency or other tribunal (i) asserting the invalidity of
this Agreement, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, or (iii) which is likely to
materially and adversely affect the performance by Purchaser of its
obligations under, or the validity or enforceability of, this Agreement.
4. Remedies for Breach of Representations and Warranties; Repurchase Obligation.
(a) It is understood and agreed that the representations and warranties set
forth in Subsections 6.01 and 6.02 shall survive each sale of Eligible Assets to
the Purchaser and shall inure to the benefit of the Purchaser and subsequent
transferees (unless the Seller has entered into a Reconstitution Agreement
pursuant to which the Seller has restated such representations and warranties as
of the date of such Agreement, in which case such Agreement shall govern)
notwithstanding any restrictive or qualified endorsement on any Mortgage Note or
Assignment of Mortgage or the examination or failure to examine any Mortgage
File. With respect to the representations and warranties contained in
Subsections 6.01 and 6.02 which are made to the best of the Seller's knowledge
or to the actual knowledge of the Seller, if it is discovered by either the
Seller or the Purchaser that the substance of such representation and warranty
is inaccurate and such inaccuracy materially and adversely affects the value of
the related Eligible Asset or the Purchaser's
35
interest therein, then notwithstanding the Seller's lack of knowledge with
respect to the inaccuracy at the time the representation or warranty was made,
the Seller shall repurchase the related Eligible Asset in accordance with this
Subsection 6.04 as if the applicable representation or warranty was breached.
Upon discovery by either the Seller or the Purchaser of a breach of any of the
foregoing representations and warranties which materially and adversely affects
the value of the Eligible Assets or the interest of the Purchaser (or which
materially and adversely affects the interests of the Purchaser in the related
Eligible Asset in the case of a representation and warranty relating to a
particular Eligible Asset), the party discovering such breach shall give prompt
written notice to the others.
Within 60 days of the earlier of either discovery by or notice to the
Seller of any breach of a representation or warranty which materially and
adversely affects the value of any Eligible Asset or the Purchaser's interest
therein, the Seller shall use its best efforts promptly to cure such breach in
all material respects and, if such breach cannot be cured or is not cured or is
not being diligently pursued in a manner acceptable to the Purchaser, as
evidenced by the Purchaser's agreement thereto, at the end of such 60-day
period, the Seller shall, at the Purchaser's option, repurchase such Eligible
Asset at the Repurchase Price.
At the time of repurchase, the Purchaser and the Seller shall arrange for
the assignment of such Eligible Asset to the Seller and the delivery to the
Seller of any documents held by the Custodian relating thereto. In the event of
a repurchase, the Seller shall, simultaneously with such assignment, give
written notice to the Purchaser that such repurchase has taken place, and amend
the Detailed Mortgage Asset Schedule to reflect the withdrawal of such Eligible
Asset from this Agreement.
In addition to such cure and repurchase obligation, the Seller shall
indemnify the Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
the representations and warranties contained in this Section VI (notwithstanding
any limitation in such representation and
36
warranty as to the Seller's knowledge). It is understood and agreed that the
obligations of the Seller set forth in this Subsection 6.04(a) to cure or
repurchase a defective Eligible Asset and to indemnify the Purchaser as provided
in this Subsection 6.04(a) constitute the sole remedies of the Purchaser
respecting a breach of the foregoing representations and warranties.
Any cause of action against the Seller relating to or arising out of the
breach of any representations and warranties made in Subsections 6.01 or 6.02
shall accrue as to any Eligible Asset upon (i) discovery of such breach by the
Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by the
Seller to cure such breach or repurchase such Eligible Asset as specified above,
and (iii) demand upon the Seller by the Purchaser for compliance with the
relevant provisions of this Agreement.
(b) If, prior to the resale of an Eligible Asset to a third party unrelated
to the Purchaser, pursuant to a Pass-Through Transfer or a Whole Loan Transfer,
any Monthly Payment has been more than 90 days delinquent more than once during
the preceding twelve-month period, and a determination is made by the Seller at
any time thereafter to foreclose upon or otherwise comparably convert the
ownership of the related Mortgaged Property or that no further proceeds are
recoverable with respect to any such defaulted Eligible Asset, then upon making
such determination, the Seller shall repurchase the affected Eligible Asset at
the Repurchase Price.
(c) In the event that the principal balance due on an Eligible Asset is
paid in full prior to resale then the Seller shall repurchase the affected
Eligible Asset at the Repurchase Price.
VII. Covenants and Warranties of Seller.
So long as the Agreement remains in effect or Seller shall have any
obligations hereunder, Seller hereby covenants and agrees with Purchaser as
follows:
1. Affirmative Covenants. (a) Seller shall maintain a senior debt to
Shareholders' Equity ratio of not greater than eight to one. Seller shall
maintain Shareholders' Equity in an amount not
37
less than $25,000,000. As of the beginning of each subsequent fiscal year, the
minimum Shareholders' Equity less Subordinated Debt to be maintained by the
Seller going forward shall step up to be the greater of (x) $25,000,000 or (y)
80% of the Shareholders' Equity less Subordinated Debt as of the end of the
prior fiscal year.
(b) Until the later to occur of (i) the discharge and payment of all of
Seller's obligations under this Agreement and (ii) the Termination Date of this
Agreement, Seller shall, and shall cause Guarantor to, promptly upon
preparation, but in no event later than 60 days following the end of each such
party's first three fiscal quarters, deliver to Purchaser its unaudited
company-prepared financial statements as of the end of each such fiscal quarter,
prepared in accordance with GAAP. Seller shall, and shall cause Guarantor to,
promptly upon preparation, but in no event later than 90 days following the end
of such party's fourth fiscal quarter, deliver to Purchaser its audited and
certified financial statements, prepared in accordance with GAAP, as of the end
of the most recently ended fiscal year, which audits and certifications shall
each be prepared by a nationally recognized independent accounting firm or by a
regionally recognized independent accounting firm with the prior written consent
of Purchaser, which consent shall not be unreasonably withheld. In all cases,
financial statements shall include, without limitation, a balance sheet, a
profit and loss statement and a statement of cash flows. Notwithstanding
anything in this Agreement to the contrary, if the audited and certified
financial statements described in the immediately preceding sentence are (x) not
delivered within the above-specified 90 days, (y) Seller or Guarantor are
diligently using their best efforts to deliver such financial statements, and
(z) Seller provides Purchaser with a notice specifying the reason for the delay
and a date, within a reasonable time period (as determined by Purchaser), on
which such financial statements will be delivered, and they are so delivered;
then failure to deliver such financial statements within the above-specified 90
days, as the case may be, shall not be deemed to be an Event of Termination of
this Agreement.
(c) Seller and Guarantor shall each, promptly upon filing, deliver to
Purchaser copies of all material public filings made by Seller or Guarantor with
any governmental or quasi-governmental body.
38
(d) Seller shall (i) with respect to any Mortgage Assets serviced by Seller
or any of its affiliates or otherwise use its best efforts to cause to be
delivered to Purchaser monthly, the report, if any, prepared by the relevant
trustee or servicer setting forth payment activity, defaults and delinquencies
with respect to the underlying loans or receivables in respect of each Eligible
Asset acquired by Purchaser, (ii) prepare and deliver reports each month,
detailing, with respect to all Purchases, such information as the Purchaser may
from time to time reasonably request and (iii) deliver to the Purchaser on the
fifth day of each month a Detailed Mortgage Asset Schedule.
(e) Seller shall comply in all material respects with all laws, rules and
regulations to which it is or may become subject.
(f) Seller shall do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted except
where failure to maintain such authority would not have a material adverse
effect on the ability of Seller to conduct its business or to perform its
obligations under this Agreement.
(g) At all times during this Agreement, Seller shall possess sufficient net
capital and liquid assets (or ability to access the same) to satisfy its
obligations as they become due in the normal course of business.
(h) Seller will notify Purchaser in writing of any of the following
promptly upon learning of the occurrence thereof, describing the same and, if
applicable, any remedial steps being taken with respect thereto:
(A) The occurrence or likelihood of occurrence of an Event of
Termination hereunder;
(B) The institution of any litigation, arbitration proceeding or
governmental proceeding which, in the opinion of counsel to Seller, will
have a material adverse effect on Seller or the Eligible Assets;
39
(C) The entry of any judgment or decree against Seller if the
aggregate amount of all judgments and decrees then outstanding against
Seller exceeds $500,000 after deducting (i) the amount with respect to
which Seller is insured and with respect to which the insurer has assumed
responsibility in writing, and (ii) the amount for which Seller is
otherwise indemnified if the terms of such indemnification are reasonably
satisfactory to Purchaser; or
(D) The occurrence or likelihood of any event which would allow the
obligee under any material loan agreement to which Seller is bound to
declare an event of default or accelerate the obligations of Seller
thereunder.
(i) With respect to each Eligible Asset, the Seller shall comply with all
document delivery requirements set forth in the Custodial Agreement.
(j) If, at any time, a Spread Deficiency Amount exists with respect to the
Home Equity Mortgage Assets or Home Improvement Assets owned at such time by
Purchaser, then Seller shall within five Business Days deposit with Purchaser
for credit to the Spread Deficiency Account an amount equal to the Spread
Deficiency Amount. In the event the Spread Deficiency Amount is, for a period of
three Business Days, less than zero, then Purchaser shall return to Seller such
excess Spread Deficiency Amount to Seller from such amounts deposited in the
Spread Deficiency Account pursuant to this Agreement.
(k) Seller and Guarantor shall each permit the Purchaser or its
accountants, attorneys or other agents access to all of their books and records
relating to Eligible Assets purchased and retained by Purchaser for inspection
and copying during normal business hours at all places where Seller conducts
business.
2. Negative Covenants.
- Seller shall not assign or attempt to assign this Agreement or any rights
hereunder, without first obtaining the specific written consent of Purchaser.
- Seller shall not amend its Articles of Incorporation or By-laws, which
amendment shall have or is likely to have an
40
adverse effect upon Purchaser or its interests under this Agreement, without the
prior written consent of Purchaser.
- There shall be no Change of Control, and Seller shall not merge or
consolidate with or into, any other entity without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld.
- During the term of this Agreement, Seller shall not engage in any
business other than as a consumer and mortgage finance lender and servicer,
except with the prior written consent of Purchaser.
- Neither Seller nor Guarantor shall (a) dissolve or terminate its
existence or (b) transfer any assets, except (i) intercompany loans to an
affiliate and/or Guarantor or (ii) dividends to Guarantor, to any affiliate
except as otherwise expressly permitted or contemplated hereby.
- Except in the ordinary course of business or to fulfill the obligations
of wholly owned subsidiaries, Seller shall not guarantee, endorse or otherwise
in any way become or be responsible for any obligations of any other person,
entity or affiliate, including without limitation, whether directly or
indirectly by agreement to purchase the indebtedness of any other person or
through the purchase of goods, supplies or services, or maintenance of working
capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purposes of paying or
discharging any indebtedness or obligation of such other person or otherwise;
provided, however, that nothing contained herein shall prevent Seller from
indemnifying its officers, directors and agents pursuant to its By-laws and its
Articles of Incorporation.
- Seller will not commit any act in violation of applicable laws, or
regulations promulgated pursuant thereto that relate to the Eligible Assets or
that materially and adversely affect the operations or financial conditions of
Seller.
- The sum of (i) the aggregate principal balance of Independent Whole Loan
Trades (as defined in Section 8.03) and (ii) the aggregate Co-Managed Amount,
shall not exceed 25% of the Eligible Assets sold by the Seller to the Purchaser
hereunder
41
during the period from the date hereof up to the Termination Date. In addition,
the principal balance of any such Eligible Assets so sold will not be subtracted
from the Available Amount hereunder.
VIII. Removal of Eligible Assets from Inclusion Under this Agreement Upon a
Whole Loan Transfer or a Pass-Through Transfer; Independent Whole Loan Trades.
8.01. Removal of Eligible Assets from Inclusion Under this Agreement Upon a
Whole Loan Transfer or a Pass-Through Transfer. It is the intent of the Seller
and the Purchaser that with respect to the Eligible Assets, prior to the
Termination Date, the Purchaser shall effect either:
(1) one or more Whole Loan Transfers; and/or
(2) one or more Pass-Through Transfers;
provided, however, that without the prior written consent of the Seller, no
Eligible Asset shall be the subject of more than one Whole Loan Transfer or one
Pass-Through Transfer hereunder, except for those Eligible Assets repurchased by
the Seller pursuant to the terms hereof. The Seller and the Purchaser agree that
in no event will the Seller be required to remit funds or send reports to more
than four (4) persons at any given time with respect to any Whole Loan Transfer.
With respect to each Whole Loan Transfer or Pass-Through Transfer, as the
case may be, entered into by the Purchaser, the Seller agrees:
(i) to cooperate fully with the Purchaser and any prospective purchaser
with respect to all reasonable requests and due diligence procedures
including participating in meetings with rating agencies, credit
enhancers and such other parties as the Purchaser shall designate and
participating in meetings with prospective purchasers of the Eligible
Assets or interests therein and providing information reasonably
requested by such purchasers;
42
(ii) to execute all Reconstitution Agreements provided that each of the
Seller and the Purchaser is given an opportunity to review and
reasonably negotiate in good faith, the content of such documents not
specifically referenced or provided for herein;
(iii)with respect to any Whole Loan Transfer or Pass-Through Transfer
occurring within 12 months (unless otherwise specified in the related
Purchase Request) of the related Purchase Date, the Seller shall make
the representations and warranties set forth herein regarding the
Seller and the Eligible Assets as of the date of the Whole Loan
Transfer or Pass-Through Transfer, to the extent true as of such date,
but modified to the extent necessary to accurately reflect the pool
statistics of the Eligible Assets as of the date of such Whole Loan
Transfer or Pass-Through Transfer;
(iv) to deliver to the Purchaser for inclusion in any prospectus or other
offering material such publicly available information regarding the
Seller, its financial condition and the mortgage loan delinquency,
foreclosure and loss experience of its portfolio as is customarily set
forth in a prospectus supplement with respect to a comparable mortgage
pool, the underwriting of mortgage loans, the servicer, the servicing
and collection of mortgage loans, lending activities and loan sales of
the servicer, regulatory matters and delinquency and loss experience
and any additional information reasonably requested by the Purchaser,
and to deliver to the Purchaser unaudited consolidated financial
statements of the Seller, in which case the Purchaser shall bear the
cost of having such statements audited by certified public accountants
if the Purchaser desires such an audit, or as is otherwise reasonably
requested by the Purchaser and which the Seller is capable of
providing without unreasonable effort or expense, and to indemnify the
Purchaser and its affiliates
43
for material misstatements or omissions contained in such information;
(v) to deliver to the Purchaser and to any Person designated by the
Purchaser, at the Purchaser's expense, such statements and audit
letters issued by reputable, certified public accountants pertaining
to information provided by the Seller pursuant to clause (iv) above as
shall be reasonably requested by the Purchaser (it being acknowledged
by Purchaser that the delivery of such statements and letters is
subject to the consent of such accountants);
(vi) to deliver to the Purchaser, and to any Person designated by the
Purchaser, such legal documents and in-house opinions of counsel as
are customarily delivered by originators or servicers, as the case may
be, and reasonably determined by the Purchaser to be necessary in
connection with Whole Loan Transfers or Pass-Through Transfers, as the
case may be, it being understood that the cost of any opinions of
outside special counsel that may be required for a Whole Loan Transfer
or Pass-Through Transfer, as the case may be, shall be the
responsibility of the Seller;
(vii)to cooperate fully with the Purchaser and any prospective purchaser
with respect to the preparation of Eligible Asset documents and other
documents and with respect to servicing requirements reasonably
requested by the rating agencies and credit enhancers;
(viii) to negotiate and execute one or more subservicing agreements between
the Seller and any master servicer which is generally considered to be
a prudent master servicer in the secondary mortgage market designated
by the Purchaser in its sole discretion after consultation with the
Seller and/or one or more custodial and servicing agreements among the
Purchaser, the Seller and a third party custodian/trustee which is
generally
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considered to be a prudent custodian/trustee in the secondary mortgage
market designated by the Purchaser in its sole discretion after
consultation with the Seller, in either case for the purpose of
pooling the Eligible Assets with other Eligible Assets for resale or
securitization; and
(ix) in connection with any securitization of any Eligible Assets, to
execute a Reconstitution Agreement among the Purchaser, the Seller and
a trustee, which is generally considered to be a prudent trustee in
the secondary mortgage market, to be selected by the Purchaser in its
sole discretion after consultation with the Seller, which
Reconstitution Agreement may, at the Purchaser's direction, contain
contractual provisions including, but not limited to, a 24-day
certificate payment delay (54-day total payment delay), servicer
advances of delinquent payments of interest through liquidation
(unless deemed non-recoverable by the Servicer) and prepayment
interest shortfalls (to the extent of the monthly servicing fee
payable thereto), servicing and mortgage loan representations and
warranties which in form and substance conform to the representations
and warranties in this Agreement and to secondary market standards for
securities backed by mortgage loans similar to the Eligible Assets (as
reasonably determined by the Purchaser), and such provisions with
regard to servicing responsibilities, investor reporting, segregation
and deposit of principal and interest payments, custody of the
Eligible Assets, and other covenants as are required by the Purchaser
and one or more nationally recognized rating agencies for mortgage
pass-through transactions with the highest ratings from such
nationally recognized rating agencies which are "mortgage related
securities" for the purposes of the Secondary Mortgage Market
Enhancement Act of 1984, unless otherwise mutually agreed.
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With respect to each Pass-Through Transfer, Purchaser agrees that Seller
may direct the Purchaser to engage certain third parties as co-managers with
respect to a portion of Pass-Through Transfers (the aggregate of such portion,
"the Co-Managed Amount"). Any fees of such co-managers shall be paid by
Purchaser.
This Agreement shall terminate with respect to all Eligible Assets sold or
transferred pursuant to a Whole Loan Transfer, an Independent Whole Loan Trade
or a Pass-Through Transfer. All Eligible Assets not sold or transferred pursuant
to a Whole Loan Transfer, an Independent Whole Loan Trade or Pass-Through
Transfer shall continue to be subject to this Agreement and shall continue to be
serviced in accordance with the terms hereof and with respect thereto this
Agreement shall remain in full force and effect.
With respect to any disposition of the initial $500,000,000 of Eligible
Assets, other than Home Improvement Assets, as provided in this Section VIII,
the Seller shall pay to the Purchaser either (a) with respect to any Whole Loan
Transfer, 0.35% of the principal balance of such Eligible Assets on the date of
such Whole Loan Transfer or (b) with respect to a Pass-Through Transfer, 0.35%
of the principal balance of such Eligible Assets on the date of such
Pass-Through Transfer, payable in the form of an underwriting fee paid to an
affiliate of the Purchaser. With respect to the disposition of Eligible Assets
in excess of the initial $500,000,000, the fees payable to the Purchaser shall
be negotiated by the Purchaser and the Seller. With respect to the disposition
of the initial $100,000,000 of Home Improvement Assets pursuant to this Section
VIII, the Seller shall pay the Purchaser 1.00% of the principal balance of such
Home Improvement Assets. With respect to the disposition of Home Improvement
Assets in excess of the initial $100,000,000, the fees payable to the Purchaser
shall be negotiated by the Purchaser and the Seller. There will be no fee
payable on any Independent Whole Loan Trade.
With respect to any disposition of Eligible Assets as provided in this
Section VIII, the Purchaser shall have the right subject to Section 4.01 to
choose the method of disposition which, in its sole discretion, will optimize
the proceeds payable to the Seller.
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8.02 Repurchases. The Seller shall, at the Purchaser's request in
connection with the consummation of a Whole Loan Transfer or Pass-Through
Transfer, repurchase such Eligible Assets on the date of such Whole Loan
Transfer or Pass-Through Transfer at the Repurchase Price for each such Eligible
Asset.
8.03. Independent Whole Loan Trade. Prior to the Termination Date, the
Seller may instruct the Purchaser to sell Eligible Assets previously sold to the
Purchaser to an independent third party on a whole loan basis by notifying the
Purchaser of its intent and paying the Purchaser the Repurchase Price (an
"Independent Whole Loan Trade"). Notwithstanding the foregoing, the sum of (i)
the aggregate principal balance of such Independent Whole Loan Trades and (ii)
the aggregate Co-Managed Amount shall not exceed 25% of the Eligible Assets sold
by the Seller to the Purchaser hereunder during the period from the date hereof
up to the Termination Date. In addition, the principal balance of any such
Eligible Assets so sold will not be subtracted from the Available Amount
hereunder.
IX. Seller's Servicing Obligations.
The Seller, as independent contract servicer, shall service and administer
the Mortgage Loans in accordance with the terms and provisions set forth in
Article V, VI, VII and VIII of the Whole Loan Agreement attached as Exhibit K
which sections are hereby incorporated in this Agreement in their entirety
(with, however, the changes and adjustments as provided in this Agreement) as if
the same were contained in this Section IX.
With respect to the following provisions set forth in the Whole Loan
Agreement attached as Exhibit K, the Seller shall service the Mortgage Loans and
be subject to all of the obligations as required by the "Seller" pursuant to the
Whole Loan Agreement and the Purchaser shall have all the rights as afforded the
"Certificateholder" thereunder:
5.01 Seller to Act as Servicer.
5.02 Liquidation of Mortgage Loans.
5.03 Collection of Mortgage Loan Payments.
5.04 Establishment of Certificate Accounts;
Deposits in Certificate Accounts.
5.05 Withdrawals from the Certificate Account.
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5.06 Transfer of Accounts.
5.07 Maintenance of Hazard Insurance.
5.08 Fidelity Bond; Errors and Omissions Insurance.
5.09 Liquidation Reports.
5.10 Notification of Adjustments (to the extent the Mortgage Loans are
Adjustable Rate Mortgage Loans).
6.01 Distributions.
6.02 Statements to the Certificateholders.
6.03 Advances by the Seller.
6.04 Prepayment Interest Shortfalls.
7.01 Assumption Agreements.
7.02 Satisfaction of Mortgages and Release of Mortgage Files.
7.03 Servicing Compensation.
7.04 Annual Statement as to Compliance.
7.05 Annual Independent Certified Public Accountants' Servicing Report.
7.06 Certificateholders' Right to Examine Seller Records.
8.01 Seller Shall Provide Access and Information as Reasonably Required.
8.02 Financial Statements.
Any cross references in Exhibit K in the sections listed above to other
sections set forth in Exhibit K are likewise incorporated herein and made a part
hereof.
To the extent any provision or definition set forth in Exhibit K shall
conflict with any provision set forth in this Agreement, the provision or
definition in this Agreement shall govern.
X. Fees and Other Costs.
2. Net Securities Amount. Seller agrees to pay Purchaser during the term of
this Agreement, on the last business day of any calendar month the Net
Securities Amount owed to Purchaser, if any, with respect to the applicable
Tranche. Seller shall invoice Purchaser for such amount three business days
prior to the last business day of such calendar month.
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3. Hold Harmless. Seller hereby agrees to pay, and to indemnify, protect, save
and hold harmless, on an After-Tax Basis (as defined in Section 10.06 below),
Purchaser from and against any and all Taxes (as defined in Section 10.03 below)
other than (i) income taxes of Purchaser, (ii) Taxes that result from the
misconduct or negligence of Purchaser or from the failure of Purchaser to file
tax returns or certificates of exemption from withholding or other reports,
properly and on a timely basis or to claim a deduction or credit and (iii) Taxes
that are based on or measured by fees or compensation received by the Purchaser,
which may at any time be imposed or asserted by reason of, in connection with or
in respect of the Eligible Assets or any transactions contemplated hereby,
whether imposed on Purchaser, Seller, or the Eligible Assets or otherwise,
whether collected directly from the party upon which the tax is imposed, by
withholding or otherwise whether arising by reason of the acts to be performed
by Seller hereunder or otherwise.
4. Definition of Taxes. For purposes of this Section 10, the term "Taxes" shall
mean all taxes, charges, fees, levies or other assessments including, without
limitation, excise, property and sale taxes (including, in each such case, any
interest, penalties or additions attributable to or imposed on or with respect
to any such assessment) imposed by the United States, any state or political
subdivision thereof, any foreign government or any other jurisdiction or taxing
authority.
5. After-Tax Calculation. For purposes of this Section 10, in determining the
additional amount necessary so that any payment hereunder is paid on an
After-Tax Basis, such calculation shall be based on Purchaser's effective tax
rate in effect from time to time under applicable law.
6. Contest, Payment, Interest. In the event that Purchaser becomes aware that a
taxing jurisdiction has made or is making a claim with respect to any Tax for
which Seller may be liable under this Section 10, Purchaser shall promptly
notify Seller thereof; provided, however, that if Purchaser fails to promptly
notify Seller thereof, such failure shall not relieve Seller of its obligations
hereunder, except and only to the extent that Seller is materially prejudiced by
such failure. If reasonably requested by Seller within 30 days of receipt of
such notice, Seller shall, at its expense, be entitled to contest the imposition
of such Tax.
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All payments due pursuant to this Section 10 shall be paid no later than the
later of (i) five Business Days after the date of such notice or (ii) five
Business Days before the date the Tax to which such amount payable hereunder
relates is due or is to be paid accompanied by a written statement (which
written statement shall, at the request of Seller, be verified by a nationally
recognized independent accounting firm mutually acceptable to the Seller and
Purchaser, such verification to be at the Seller's expense unless such
accountants determine that the amount payable by the Seller is less than
ninety-five percent (95%) of the amount shown on such written statement)
describing in reasonable detail the Tax and the computation of the amount
payable; provided, however, that Seller shall not be entitled to any payment in
respect of accountants' fees and expenses incurred in connection with the
contest of a taxing authority assessment. Without in any way limiting
Purchaser's remedies, any such amount not paid when due, shall bear interest at
a rate equal to the Default Rate.
7. Definition of "After-Tax Basis"; Tax Savings. For purposes of this Section
10, the term "After-Tax Basis" shall mean an amount which after deduction of the
net increase in federal, state and foreign income taxes required to be paid by
Purchaser with respect to the receipt of such amount is equal to the payment
required under the provision of this Section 11 which requires payment to be
made on an After-Tax Basis. If Purchaser subsequently realizes a tax deduction
or credit (including foreign tax credit and any reduction in Taxes) not
previously taken into account in computing such payment, Purchaser shall
promptly pay to Seller an amount equal to the sum of (I) the actual reduction in
Taxes, if any, realized by Purchaser which is attributable to such deduction or
credit and (II) the actual reduction in Taxes, if any, realized by Purchaser as
a result of any payment made by Purchaser pursuant to this sentence.
8. Additional Fees and Expenses. The Purchaser shall pay any commissions due its
salesmen and the legal fees and expenses of its attorneys. All other costs and
expenses incurred in connection with the transfer and delivery of the Eligible
Assets pursuant to this Agreement or any Reconstitution Agreement, including
without limitation recording fees, fees for title policy endorsements and
continuations, and fees for recording intervening assignments of Mortgage, shall
be paid by the Seller. The Seller shall pay the on-going fees of any custodian
or trustee under a
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Reconstitution Agreement out of its Servicing Fee (which Servicing Fee is
0.50%). The Seller shall pay (i) the acceptance and file review fees of any
custodian or trustee under this Agreement or any Reconstitution Agreement and
(ii) the costs of legal counsel and legal opinions, accounting comfort letters
and fees, printing of disclosure documents, rating agency fees, credit
enhancement provider up-front fees, SEC filing fees and the costs of any and all
related document preparations associated with any Reconstitution Agreement
unless stated otherwise in the Purchase Request; provided, however, that the
fees and expenses payable by the Seller in connection with the preparation of
this Agreement shall not exceed $15,000.
The Seller shall pay one-half of the costs associated with the reasonable
reunderwriting and reappraisals performed by the Purchaser in connection with
any purchase of Eligible Assets.
On the Termination Date whether as a result of an Event of Termination or
otherwise, if the Seller has not provided sufficient Eligible Assets to reduce
the Available Amount to zero, the Seller shall pay to the Purchaser an amount
(the "Shortfall Payment") equal to (i) 0.20% multiplied by (ii) the Available
Amount as of the Termination Date as reduced by any amounts purchased by the
Purchaser pursuant to the terms hereof and not yet disposed of through either an
Independent Whole Loan Trade, a Pass-Through Transfer or a Whole Loan Transfer.
XI. Events of Termination.
Each of the following events shall constitute an "Event of Termination"
hereunder (whatever the reason for such Event of Termination and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body).
2. Failure to Perform. Failure of Seller to deliver to Purchaser or its
designee the relevant Eligible Assets on the relevant Purchase Date; or failure
of Seller to pay when due any sums or amount equal to or greater than $100,000
payable hereunder or under any Purchase or to pay within one Business Day of the
due
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date any sums or amount less than $100,000 payable hereunder or under any
Purchase.
3. Failure of Representation or Warranty. Any of the representations and
warranties made by Seller herein, or in any certificate or other document
delivered pursuant to or in connection with this Agreement or any transaction
contemplated hereby, shall prove to be untrue in any material respect when made
or deemed made.
4. Failure of Covenant. Failure of Seller to observe and perform any material
non-monetary covenant, condition or other agreement on its part to be observed
or performed hereunder and such default shall continue unremedied for five
Business Days.
5. Bankruptcy Event. (a) Appointment of a receiver, conservator, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of
Seller, or of any substantial part of its Property, the ordering of the
winding-up or liquidation of its affairs, or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of Seller in
any involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect which such order remains undischarged or
unstayed, as the case may be, for 60 days; or
- Commencement by Seller of a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by Seller to the entry of an order for relief in an involuntary case
under any such law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of Seller or of any substantial part of Seller's property, or the
making by Seller of any general assignment for the benefit of creditors, or the
failure of Seller generally to pay its debts as such debts become due, or the
taking of corporate action by Seller in furtherance of any of the foregoing.
6. Seller Default. Default by Seller whether as principal, guarantor or surety,
in the payment of any principal or interest on any indebtedness or any other
obligation of Seller in the amount of $250,000 or more.
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7. Material Adverse Change. A material adverse change in the condition
(financial or otherwise) of Seller shall have occurred which, in the reasonable
judgment of Purchaser, materially impairs the ability of Seller to perform its
obligations hereunder.
8. Cross-Default. The occurrence and continuance of an "event of default" or of
an "event of termination" on the part of Seller or Guarantor under either (i)
any material agreement of Seller or Guarantor, or (ii) any other agreement
between Seller or Guarantor, on the one hand, and Purchaser or any of its
affiliates on the other hand, which has not been waived by the Purchaser.
9. Change of Control. Any Change of Control of the Seller.
10. Pre-Existing Condition. The discovery by the Purchaser during its continuing
due diligence of the Seller of a condition or event which existed at or prior to
the execution hereof and which the Purchaser, in its sole reasonable discretion,
determines materially and adversely affects:
(i) the condition (financial or otherwise) of the Seller, its
subsidiaries or affiliates; or
(ii) the ability of either the Seller or the Purchaser to fulfill its
respective obligations under this Agreement.
XII. Payment.
2. Method of Payment. Any payment due under this Agreement shall be made
promptly and by wire transfer.
3. Late Payments. Any late payments shall bear interest at a rate of "Prime" (as
then set forth in The Wall Street Journal) plus 400 basis points (the "Default
Rate"), except that payments made one Business Day late shall bear interest at
the then "federal funds" rate plus any customary margin.
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XIII. Greenwich Change of Control.
If a change of control (as such term is defined in the Securities Exchange
Act of 1934, as amended) shall occur with respect to Greenwich the Seller shall
have the right to terminate this Agreement and shall not be obligated to make
any Shortfall Payment pursuant to Section 10.07; provided, however, if the
surviving entity has substantially the same management as in place prior to such
change, no change of control shall be deemed to have occurred.
XIV Remedies.
If an Event of Termination occurs and is continuing, Purchaser may, to the
extent provided or permitted by applicable law and this Agreement, pursue any
available legal remedy including the sale or other disposition of some or all of
the Eligible Assets and related Collateral in accordance with the provisions of
Section 4.01; provided, however, Purchaser shall not be obligated to offer the
relevant Eligible Asset to Seller for purchase pursuant to the right of first
refusal contained in Section 4 if any of the events described in subsections
11.04, 11.07(ii) or 11.09 hereof or any monetary default of the Seller in its
obligations hereunder have occurred and are continuing. Following an Event of
Termination, no further Purchase hereunder shall occur, unless such Event of
Termination shall have been waived by the Purchaser.
XV. Termination Resulting from Competition.
If Greenwich Capital Holdings, Inc. or any wholly-owned subsidiary thereof
materially competes directly with the principal business lines of the Seller as
of the date hereof, the Seller shall have the right to terminate this Agreement
and shall not be obligated to make any Shortfall Payment pursuant to Section
10.07.
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XVI. Term.
This Agreement shall terminate on the earlier to occur of an Event of
Termination or the Termination Date. In the event this agreement expires on the
Termination Date and at that time there exists no Event of Termination, then,
immediately prior to such Termination Date, as to all Eligible Assets then owned
by Purchaser, a Required Sale Event shall be deemed to occur unless this
Agreement is extended.
XVII. Exclusive Benefit of Parties; Assignment.
This Agreement is for the exclusive benefit of the parties hereto and their
respective successors and assigns and shall not be deemed to give any legal or
equitable right to any other person. This Agreement may not be assigned by any
party hereto without the prior written consent of the other party hereto.
XVIII. Amendment; Waivers.
This Agreement may be amended from time to time only by written agreement
of Seller and Purchaser. Any forbearance, failure, or delay by a party in
exercising any right, power, or remedy hereunder shall not be deemed to be a
waiver thereof, and any single or partial exercise by a party of any right,
power or remedy hereunder shall not preclude the further exercise thereof. Every
right, power and remedy of a party shall continue in full force and effect until
specifically waived by it in writing. No right, power or remedy shall be
exclusive, and each such right, power or remedy shall be cumulative and in
addition to any other right, power or remedy, whether conferred hereby or
hereafter available at law or in equity or by statute or otherwise.
XIX. Execution in Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
instrument.
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XX. Effect of Invalidity of Provisions.
In case any one or more of the provisions contained in this Agreement
should be or become invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall in no way be affected, prejudiced or disturbed thereby.
XXI. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to its rules regarding conflict of
laws.
XXII. Notices.
Any notices, consents, directions, demands and other communications given
under this Agreement (unless otherwise specified herein) shall be in writing and
shall be deemed to have been duly given when personally delivered at or
telefaxed to the respective addresses or facsimile numbers, as the case may be,
set forth on the signature page hereof for Seller and Purchaser, or to such
other address or facsimile number as either party shall give notice to the other
party pursuant to this Section. Notices, consents, etc. may also be effected by
first class mail, postage prepaid sent to the foregoing addresses and will be
effective upon receipt by the intended recipient.
XXIII Entire Agreement.
This Agreement, including the Exhibits hereto, contains the entire
agreement of the parties hereto with respect to the subject matter hereof, and
supersedes all prior and contemporaneous agreements between them, whether oral
or written, of any nature whatsoever with respect to the subject matter hereof.
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XXIV. Indemnities.
Without limiting any other rights which Purchaser or Seller may have
hereunder or under applicable law, and in addition to any other indemnity
provided hereunder, Seller hereby agrees to indemnify Purchaser and its
respective officers, directors, agents and employees (each, an "Indemnified
Party") from and against any and all Losses incurred by any of them relating to
or resulting from:
(i) any representation or warranty made by Seller (or any officers,
employees or agents of Seller) under or in connection with this Agreement,
any periodic report required to be furnished hereunder or any other
information or document delivered by Seller pursuant hereto, which shall
have been false or incorrect in any material respect when made or deemed
made;
(ii) the failure by Seller to (a) comply with any applicable law, rule
or regulation with respect to any Purchase or (b) perform or observe any
material obligation or covenant hereunder; or
(iii) the failure by Seller (if so requested by Purchaser) to execute
and properly file, or any delay in executing and properly filing, financing
statements or other similar instruments or documents under the Uniform
Commercial Code of any applicable jurisdiction or other applicable laws
with respect to the Eligible Assets.
Promptly after receipt by an indemnified party under this Section XXIV of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section XXIV, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability that it may have to any indemnified party otherwise than
under this Section XXIV. In case any such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent that it may elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified party,
to assume the defense thereof, with
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counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party or parties shall have reasonably
concluded that there may be legal defenses available to it or them and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
elect separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable for
any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by you in the case of paragraph (a) of
this Section XXIV, representing the indemnified parties under such paragraph (a)
who are parties to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party; and except
that, if clause (i) or (iii) is applicable, such liability shall only be in
respect of the counsel referred to in such clause (i) or (iii).
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XXV. RESPA Obligations.
Seller agrees to discharge on Purchaser's behalf all obligations, including
without limitation, all disclosure obligations, which Purchaser may have under
the Real Estate Settlement Procedures Act of 1974, as amended, in connection
with Purchaser's purchases of Eligible Assets hereunder. Purchaser agrees to
provide Seller with such information as is reasonably necessary for Seller to
discharge such obligations and hereby appoints Seller as its agent in its name
for the purposes of, and only for the purposes of, performing such obligations.
Seller hereby agrees to indemnify Purchaser and its respective officers,
directors, agents and employees from any losses suffered by any such party in
connection with Seller's obligations under this Section 25.
XXVI. Survival.
The sole indemnification with respect to Taxes, as defined in Section 10
hereof, is that set forth in Section 10 hereof. All indemnities and undertakings
of Seller and Purchaser hereunder shall survive the termination of this
Agreement.
XXVII. Right of Set-off.
Upon the occurrence of any event or circumstance which requires Seller to
make a payment hereunder, Purchaser is hereby authorized then or at any time or
times thereafter, without notice to Seller (any such notice being expressly
waived by Seller), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final), including without limitation,
the Performance Deposit Amount, at any time held and other indebtedness at any
time owing by Purchaser to or for the credit or the account of Seller against
any and all of the obligations of Seller now or hereafter existing hereunder,
irrespective of whether or not Purchaser shall have made any demand hereunder.
Purchaser agrees promptly to notify Seller after any such set-off and
application made by Purchaser, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
Purchaser under this Section 27 are in addition to other rights and remedies
which Purchaser may have.
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XXVIII. Consent to Service.
Each party irrevocably consents to the service of process by registered or
certified mail, postage prepaid, to it at its address given pursuant to Section
22 hereof.
XXIX. Submission to Jurisdiction; Waiver of Trial by Jury.
With respect to any claim arising out of this Agreement each party
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the Borough of
Manhattan, City of New York, and each party irrevocably waives any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court,
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in any inconvenient forum and further
irrevocably waives the right to object, with respect to such claim, suit, action
or proceeding brought in any such court, that such court does not have
jurisdiction over such party, provided that service of process is made as set
forth in Section 28 hereof, or by any other lawful means. To the extent
permitted by applicable law, Purchaser and Seller each irrevocably waive all
right of trial by jury in any action, proceeding or counterclaim arising out of
or in connection with this Agreement or any matter arising hereunder.
XXX. Construction.
The headings in this Agreement are for convenience only and are not
intended to influence its construction. References to Sections, Schedules and
Exhibits in this Agreement are to the Sections of and Schedules and Exhibits to
this Agreement. The Schedules and Exhibits are hereby incorporated into and form
a part of this Agreement. In this Agreement, the singular includes the plural,
the plural the singular, the words "and" and "or" are used in the conjunctive or
disjunctive as the sense and circumstances may require and the word "including"
means "including, but not limited to." Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
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XXXI. Further Agreements.
The Seller and the Purchaser each agree to execute and deliver to the other
such reasonable and appropriate additional documents, instruments or agreements
as may be necessary or appropriate to effectuate the purposes of this Agreement.
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IN WITNESS WHEREOF, the Purchaser and the Seller have caused their names to
be signed hereto by their respective officers thereunto duly authorized, all as
of the date first written above.
GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC.
By:
Name:
Title:
Phone: (203) 622-3881
Facsimile: (203) 629-4640
CITYSCAPE CORP.
By:
Name:
Title:
Phone: (914) 592-6677
Facsimile: (914) 592-7060
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