WAREHOUSING--AGREEMENT
BETWEEN
FIDELITY MORTGAGE FUNDING, INC.
AND
CORESTATES BANK, N.A.
TABLE OF CONTENTS
1. Definitions ............................................................1
2. The Loan ...............................................................9
2.01 Commitment .............................................................9
2.02 The Note ...............................................................9
2.03 Use of Proceeds .......................................................10
2.04 Special Non-Conforming Loans ..........................................10
2.05 Advance Rates .........................................................10
2.06 Payment of Interest and Principal .....................................11
2.07 Rate of Interest on Loan ..............................................11
2.08 Banker's Year .........................................................16
2.09 Direct Charge .........................................................16
2.10 Reserve Requirements; Change in Circumstances .........................16
2.11 Administration Fee: ...................................................18
3. Conditions of Lending .................................................18
3.01 Documentation Required Prior to First Advance Only ....................18
3.02 Documentation Required In Connection With All Advances ................19
3.03 Wet Advances ..........................................................20
3.04 Continuing Warranties .................................................20
3.05 Other Requested Documents .............................................20
4. Continuing Representations and Warranties .............................20
4.01 Borrower's Organization ...............................................21
4.02 Financial Statements ..................................................21
4.03 Authority .............................................................22
4.04 Title to Collateral ...................................................22
4.05 Warranties as to Each Consumer Loan ...................................22
4.06 [INTENTIONALLY OMITTED] ...............................................23
4.07 Borrower's Locations ..................................................23
4.08 No Default ............................................................23
4.09 Outstanding Judicial Proceedings ......................................23
4.10 Accuracy of Submitted Information; No Material Omissions ..............23
4.11 Loans Not Usurious ....................................................24
4.12 Subsidiaries ..........................................................24
5. Collateral ............................................................24
5.01 Security Interest .....................................................24
5.02 Separate Assignments ..................................................25
5.03 Deposit and Other Accounts ............................................25
5.04 Servicing Rights ......................................................26
5.05 Financing Statements ..................................................26
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5.06 Limited Power of Attorney .............................................26
5.07 Delivery in Trust .....................................................26
6. Affirmative Covenants .................................................27
6.01 Note Payments .........................................................27
6.02 Circumstances Requiring Immediate Repayment of Separate Bank Advance ..27
6.03 Casualty Insurance ....................................................27
6.04 Other Insurance .......................................................27
6.05 Enforcement of Consumer Paper .........................................28
6.06 Costs of Collection ...................................................28
6.07 Notation of Assignments ...............................................28
6.08 Execution of Additional Documents .....................................28
6.09 Submission of Financial Statements ....................................28
6.10 Maintenance of Books and Records; Audits ..............................29
6.11 Compliance with Administrative Requests of Lender .....................30
6.12 Submission of Pipeline Report .........................................30
6.13 Notification of Default ...............................................30
6.14 Notification of Borrower's Default.....................................30
6.15 Maintenance of Take-Out Commitments ...................................30
6.16 Financial Covenants ...................................................30
6.17 Tax Returns ...........................................................31
6.18 Payment of Taxes ......................................................31
6.19 New Locations .........................................................31
6.20 Additional Reports ....................................................31
6.21 Accounts ..............................................................31
6.22 Compliance With Laws ..................................................31
6.23 Notice of Litigation ..................................................31
6.24 Payment of Obligations When Due .......................................32
6.25 Landlord's Waiver .....................................................32
6.26 ERISA .................................................................32
6.27 Credit Policy .........................................................32
6.28 Management ............................................................32
7. Negative Covenants ....................................................32
7.01 No Compromise of Collateral ...........................................32
7.02 Improper Use of Proceeds ..............................................33
7.03 [INTENTIONALLY OMITTED] ...............................................33
7.04 No Misleading Information .............................................33
7.05 No Change in Ownership ................................................33
7.06 No Change in Organization .............................................33
7.07 No Sale of Assets .....................................................33
7.08 No Liens ..............................................................33
7.09 No Guaranties .........................................................34
7.10 No Indebtedness .......................................................34
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8 Default ...............................................................34
8.01 Events of Default .....................................................34
8.02 Remedies Upon Default .................................................36
8.03 Remedies Cumulative ...................................................37
8.04 Indemnity .............................................................37
9. Sale of Consumer Paper ................................................38
9.01 Delivery of Consumer Paper by Lender ..................................38
9.02 Reassignment of Consumer Paper by Lender ..............................39
10. Collections ...........................................................39
11. Miscellaneous .........................................................39
11.01 Notices .............................................................39
11.02 Successors and Assigns ..............................................39
11.03 Assignment by Lender; Participations ................................40
11.04 Delay - No Waiver ...................................................40
11.05 (a) Entire Agreement - Supplemental Policies and Procedures .......40
(b) Partial Invalidity ............................................41
(c) Counterparts ..................................................41
(d) No Assignment by Borrower .....................................41
(e) Materiality; Reliance by Lender: ..............................41
(f) No Third Party Beneficiary ....................................41
(g) Confidentiality ...............................................41
11.06 Interpretation of Accounting Terms ..................................42
11.07 PENNSYLVANIA LAW; CONSENT TO JURISDICTION AND SERVICE ...............42
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WAREHOUSING AGREEMEMT
THIS AGREEMENT made and entered into as of this 23rd day of September,
1997, by and between CORESTATES BANK, N.A., a national banking association
with offices at 1339 Chestnut Street, Philadelphia, Pennsylvania 19102
(hereinafter called "Lender"), and FIDELITY MORTGAGE FUNDING, INC., a
Delaware corporation with its principal place of business at 7 East
Skippack Pike, Ambler, Pennsylvania 19002 (hereinafter called "Borrower")
WITNESSETH
Lender and Borrower desire to enter into certain secured credit
arrangements on the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual undertakings herein
and of each advance made by Lender to Borrower hereunder, the parties agree
as follows:
1. Definitions.
1.01 For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires, the terms defined in
this Paragraph shall have the meanings assigned to them in this Paragraph
and include the plural as well as the singular.
1.02 The terms which follow have the meanings herein ascribed to them:
Agreement means this Agreement as executed as of the date first above
written or, if amended or supplemented as herein provided, as so amended or
supplemented.
Applicable Percentage means (i) with respect to Non-Conforming Loans,
97% except to the extent provided in Section 2.05 hereof with respect to
Non-Conforming Loans for which Cash
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Collateral has been provided, and (ii) with respect to Special Non-
Conforming Loans, 95%.
Business Days mean days, other than a Saturday or Sunday, on which
Lender is open for business.
Cash-Collateral shall have the meaning given thereto in Section 2.05
hereof.
Closing Media means a title company and/or disbursing attorney or
other agent, in each case satisfactory to Lender.
Collateral means (a) Consumer Loans, Consumer Paper and Consumer Loan
Collateral and all other property rights, proceeds and payments relating to
Consumer Loans (whether or not Eligible Loans), (b) all other property of
Borrower hereinafter described in Paragraph 5, including Servicing Rights,
(c) all property from time to time deposited with, delivered or to be
delivered to or held by or for Lender pursuant to this Agreement, including
Cash Collateral, and (d) all proceeds of the foregoing; all of the
foregoing whether now existing or hereafter arising or acquired.
Committed Purchase Price means, with respect to a Consumer Loan, the
price at which the Investor under the applicable Take-Out Commitment has
agreed to purchase said Consumer Loan, provided that Lender shall receive
an amount at least equal to the Separate Bank Advance made against such
Consumer Loan.
Consumer Loans means loans against which any Separate Bank Advance
is made or secured pursuant to the terms of this Agreement.
Consumer Loan Collateral means personal or real property or
guaranties of third parties granted or otherwise obtained as security for
the obligations and liabilities of the obligor under a Consumer Loan.
Consumer Paper means any instrument, chattel paper, lease, installment
sales contract, promissory note, Mortgage, security agreement and any other
document or agreement evidencing and/or securing a Consumer Loan.
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Eligible Loans means Consumer Loans, each of which meets the following
requirements, unless and to the extent otherwise agreed to by Lender in
writing upon Borrower's request made in connection with a request for a
Separate Bank Advance:
(a) it is either a Non-Conforming Loan or, subject to Section 2.04
hereof, a Special Non-Conforming Loan;
(b) it is evidenced by Consumer Paper, which is valid and binding and
is executed by a bona fide third person which is a natural person with
capacity to contract and whose personal liability is not limited by the
terms thereof;
(c) the proceeds thereof are intended to be used by the obligor for
personal, family or household purposes;
(d) it is payable at either a variable or fixed rate of interest;
(e) it is, if a Special Non-Conforming Loan, subject to a Take-Out
Commitment;
(f) it is not contractually past due or otherwise in default;
(g) it was originated or acquired by Borrower not more than 30 days
prior to the date of Borrower's request for a Separate Bank Advance
therefor;
(h) the principal thereof and interest thereon is payable over a fixed
term acceptable to Lender, and is not an "interest only", "balloon" loan
having a repayment term unacceptable to Lender or "open-ended" loan (within
the meaning of Regulation Z, 12 CFR Part 226.1 et seq.);
(i) it is in compliance (to the extent each is applicable) with the
requirements of the Fair Credit Reporting Act, the Real Estate Settlement
Procedures Act of 1974, the Truth-In-Lending Act (and Regulation Z and
comparable applicable regulations of the Federal Home Loan Bank Board) and
the Equal Credit Opportunity Act (and Regulation B), each as currently and
from time to time hereafter amended, and any other law or regulation that
may from time to time be applicable to each Consumer Loan;
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(j) the Mortgage securing such Consumer Loan is insured by a prepaid
ALTA mortgagee's title insurance policy, on the most current form then in
use, or an equivalent satisfactory to Lender and the Investor from a title
insurance company satisfactory to Lender licensed to do business in the
jurisdiction in which the mortgaged premises are located insuring the
Borrower and its successors or assigns, as their respective interest may
appear, in an amount at least equivalent to the current principal balance
of the respective Consumer Loan, which title insurance policy shall insure
the Mortgage as a lien on fee simple title to the mortgaged premises having
the priority required by the definition of "Non-Conforming Loan" or
"Special Non-Conforming Loan", as applicable, with any such second mortgage
liens junior only to superior mortgages the indebtedness secured by which
is included in the determination of loan to value ratios required by the
definition of "Non-Conforming Loans" or "Special Non-Conforming Loan", as
applicable, and shall not be subject to any exceptions or objections other
than those which are permitted under the definition of "Mortgage", or are
otherwise satisfactory to Lender;
(k) the principal balance thereof, when added to the balance remaining
on any indebtedness secured by a superior lien, does not as of the date of
origination exceed the loan to value ratio required by the definition of
"Non-Conforming Loans" or "Special Non-Conforming Loans", as applicable;
(1) it is secured by a Mortgage and:
(i) the mortgaged premises are covered by fire and hazard
insurance in amounts and with insurers acceptable to Lender, with
mortgagee's endorsement satisfactory to Lender naming Borrower, its
successors or assigns, as mortgagee;
(ii) if the mortgaged premises are within an area identified by
the United States Secretary of Housing and Urban Development as an
area having special flood hazards, the mortgaged premises are covered
by flood insurance under the National Flood Insurance Act of 1968, as
currently amended (the "NFIA"), in the amount of the outstanding
principal balance of the Consumer Loan and any priority mortgage or
the maximum limit of coverage under the NFIA, whichever is more,
naming Borrower, its successors or assigns, as mortgagee;
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(m) the mortgaged premises are covered by an appraisal prepared by an
MAI or state certified appraiser and in such form as is acceptable to
Lender;
(n) it conforms to the representations and warranties set forth in
Section 4.05 hereof;
(o) it has not been repurchased or otherwise taken back by Borrower
from an Investor, previously pledged as collateral to another lender or
previously submitted as collateral to any other lender and rejected by such
lender; and
(p) it is otherwise satisfactory to Lender in its sole business
discretion.
Lender may in its discretion by written notice to Borrower adjust or
revise or add to the foregoing requirements for all Consumer Loans for
which a request for a Separate Bank Advance is thereafter made.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation or any
successor thereto.
"FNMA" shall mean the Federal National Mortgage Association, a
corporation in conformance with Title III of the National Housing Act, as
amended, or any successor thereto.
Investor means a bank, trust company, savings and loan association,
pension fund, governmental authority, insurance company, institutional
investor, investment brokerage firm, mortgage banker, or other entity,
determined by Lender, in its sole discretion, to be acceptable.
Leverage Ratio shall mean a fraction, the numerator of which is the
sum of outstanding Liabilities plus (without duplication) the unused
portion of any credit or lending commitment (including the Loan), minus
Subordinated Debt, and the denominator of which is Tangible Net Worth,
determined separately for Borrower (without consolidation or combination
with any other person or entity) in accordance with generally accepted
accounting principles consistently applied.
5
Liabilities means all liabilities and indebtedness that, in accordance
with generally accepted accounting principles consistently applied, should
be classified as liabilities on a balance sheet.
Loan means the credit facility established by Lender for the Borrower
as set forth in Section 2 hereof.
Maximum Loan Amount means $5,000,000.
Maximum Tranches means, as of any date, (i) four minus (ii) two if
principal on such date also bears interest under both the Prime Rate Option
and the Fed Funds Option, one if principal, on such date also bears
interest under either the Prime Rate Option or the Fed Funds Option, but
not both, and zero if principal on such date does not bear interest under
either the Prime Rate Option or the Fed Funds Option.
Mortgage means a mortgage or a deed of trust on residential real
estate, and securing a Consumer Loan and also creating a valid enforceable
lien on the fee simple title to real estate referred to therein (and all
buildings and improvements thereon) subject only to (i) where permitted by
the definition of "Non-Conforming Loans", a superior mortgage the
indebtedness secured by which is included in the determination of required
loan to value ratios, (ii) liens for taxes not yet due and payable or
similar governmental charges not yet due and payable or still subject to
payment without interest or penalty, (iii) zoning restrictions, utility
easements, covenants, or conditions and restrictions of record, which shall
neither defeat nor render invalid such lien or the priority thereof, nor
materially impair the marketability or value of such real estate, nor be
violated by the existing improvements or the intended use thereof.
Net Worth means the excess of assets over Liabilities as would be
shown on a balance sheet of Borrower, prepared in accordance with generally
accepted accounting principles consistently applied, determined separately
for Borrower without consolidation or combination with any other person or
entity.
Non-Conforming Loan means each Consumer Loan that is secured by a
first or second priority Mortgage on residential 1 to 4 family real estate
that is underwritten in accordance with
6
Borrower's present credit underwriting standards as set forth in
Schedule 1 hereto as such standards may hereafter be changed subject to
the prior written approval of Lender.
Operating Account means a demand deposit account of Borrower at Lender
for use by Borrower for its general business operations and for the payment
to Lender of interest, fees and other amounts payable from time to time
hereunder.
Restricted Account means a demand deposit account of Borrower at
Lender to which there may be deposited from time to time monies paid by
Investors in connection with a release of Collateral as contemplated by
Sections 2.06 and 9.01 hereof, which account shall be restricted in that
Borrower shall not be entitled to withdraw monies therefrom and Lender
shall be authorized to charge or otherwise make withdrawals from such
account for amounts due in connection with a release of Collateral or
otherwise.
Separate Bank Advance means each separate advance under the Loan.
Servicing Rights means all rights of the Borrower to service
(including subservice) any loan, whether or not a Consumer Loan, and to
receive any payment or compensation for the servicing of any such loan, and
all rights under or in connection with any agreement at any time entered
into by Borrower with respect to the servicing or subservicing of loans by
Borrower; and including all rights to receive from any mortgagor or other
obligor on whose behalf the Borrower has advanced funds, payment or
reimbursement of the amount so advanced.
Special Non-Conforming Loans means each Consumer Loan that is secured
by a multi-family dwelling in excess of four (4) dwelling units and/or is a
mixed-use dwelling used partially for non-residential purposes that is
underwritten in accordance with Borrower's present credit underwriting
standards as set forth in Schedule 2 hereto as such standards may hereafter
be changed subject to the prior written approval of Lender.
Special Non-Conforming Loans Sublimit means $1,000,000.
Subordinated Debt means unsecured indebtedness for borrowed money the
repayment of which is subordinated to all of
7
Borrower's obligations and indebtedness to Lender pursuant to a
written subordination agreement in form and substance satisfactory to
Lender.
Subsidiary means a corporation of which 50% or more of the outstanding
voting stock (except for directors' qualifying shares, if and to the extent
required by law) is owned, at the time of determination, directly or
indirectly, by Borrower.
Take-Out Commitment means an existing written commitment to Borrower
from an Investor substantially in the form, or containing the type of
information which has been, previously agreed to by Lender as satisfactory,
under the terms of which such Investor agrees to purchase Consumer Paper or
specific Consumer Paper at a committed price, and which is in full force
and effect.
Tangible Net Worth means, at any time, (a) the sum of Net Worth plus
Subordinated Debt less (b) the sum of: (i) cost of treasury shares, (ii)
surplus from write-up of assets, (iii) franchises, licenses, permits,
patents, patent applications, experimental expense, organizational expense
in excess of $1,000,000 as of September 30, 1997 and other like
intangibles, including the excess paid for assets acquired over their
respective book values on the books of the entity from which acquired, (iv)
investments in, loans to and receivables from shareholders, directors,
employees, subsidiaries, affiliated entities and partners, (v) any amounts
of capitalized purchase servicing or capitalized excess servicing reflected
as an asset, and (vi) other intangible assets, including good will,
determined separately for Borrower in accordance with generally accepted
accounting principles consistently applied.
Termination Date means September 22, 1998 or such later date to which
the parties may, without obligation to do so, hereafter agree in writing.
Warehouse Account means a demand deposit account of Borrower at Lender
to which proceeds of a Separate Bank Advance may be deposited and from
which such proceeds may be disbursed, in accordance with instructions from
Borrower to Lender, directly to the Borrower or to the Closing Media in
connection with Borrower's origination or acquisition of an Eligible Loan,
subject, however, to such escrow arrangements as Lender shall reasonably
require, as more fully set forth in Section 2.01 hereof.
8
Wet Advance means a Separate Bank Advance with respect to which the
original Consumer Paper and copy of original Mortgage required to be
delivered by Borrower pursuant to Sections 3.02.02 and 3.02.03 hereof shall
instead be delivered pursuant to Section 3.03 hereof. From and after the
date on which the Consumer Paper and copy of Mortgage with respect to any
such Wet Advance are received by Lender, such Separate Bank Advance shall
cease to be a Wet Advance for all purposes hereof.
Wet Advance Sublimit means an amount equal to 20% of the Maximum Loan
Amount.
2. The Loan.
2.01 Commitment: Borrower may from time to time prior to the
Termination Date request Lender to make an advance and lend to Borrower an
amount (a "Separate Bank Advance"), in connection with any Eligible Loan
acceptable as Collateral to Lender, and, subject to the terms and
conditions of this Agreement, Lender shall make such Separate Bank Advance
to Borrower. The aggregate unpaid principal amount at any one time
outstanding of all the Separate Bank Advances shall not exceed the Maximum
Loan Amount. Separate Bank Advances will be made by crediting the Warehouse
Account with the proceeds thereof and disbursing the same either to the
Borrower or to the Closing Media in such manner and subject to such escrow
arrangements as Lender shall reasonably require.
2.02 The Note: The Loan, which shall be in the form of a revolving
credit, shall be evidenced by Borrower's promissory note (hereinafter
called the "Note"), issued to Lender, in form and content satisfactory to
Lender. All terms of the Note are incorporated herein. The Note shall be
dated the date of this Agreement, shall bear interest payable at the rate
and in the manner provided for in Sections 2.06 and 2.07 hereof, and shall
evidence all advances of the Loan.
2.02.01 Borrower agrees that the date and amount of each advance
of the Loan shall be as set forth in the books and records of Lender
relating to such matters which shall be presumed accurate but subject
to verification and correction by Borrower within 30 days of
Borrower's receipt of a statement.
9
2.03 Use of Proceeds: The proceeds of the Loan shall be used by
Borrower solely to finance its origination or acquisition of Eligible Loans
pending sale thereof to Investors. Use of Loan proceeds for any other
purpose, including but not limited to, the repurchase of loans purchased by
an Investor and subsequently returned to Borrower, shall constitute an
Event of Default for all purposes of this Agreement.
2.04 Special Non-Conforming Loans: Notwithstanding anything to the
contrary contained herein, Lender will have no obligation to make any
Separate Bank Advance with respect to a Special Non-Conforming Loan except
to the extent Lender, in its sole discretion, determines to do so on a case
by case basis upon Borrower's request therefor, provided that (i) such
Special Non-Conforming Loan otherwise constitutes an Eligible Loan
hereunder, (ii) it is subject to a Take-Out Commitment and (iii) the
aggregate principal amount at any time outstanding of all Separate Bank
Advances for Special Non-Conforming Loans does not exceed the Special
Non-Conforming Loans Sublimit.
2.05 Advance Rates: Each advance of the Loan shall not exceed the
Applicable Percentage of the lesser of i) the Committed Purchase Price, ii)
the aggregate principal balance of the Eligible Loans with respect to which
such Separate Bank Advance is made, iii) the purchase price paid by
Borrower for such Consumer Loan under its dealer contract or iv) the market
value of such Consumer Loan as determined by Lender in its sole business
judgment. Notwithstanding the definition of "Applicable Percentage" to the
contrary, the Applicable Percentage applicable to any Separate Bank Advance
made with respect to a Non-Conforming Loan may exceed 97% to up to 100%
provided that Borrower first provides Lender with cash collateral ("Cash
Collateral") as security for such Separate Bank Advance and all other
liabilities and obligations, in an amount equal to the amount by which such
Separate Bank Advance made at such higher Applicable Percentage exceeds the
amount that such Separate Bank Advance would have been if made at the 97%
Applicable Percentage. Such Cash Collateral will secure the entire Separate
Bank Advance and all other obligations and liabilities of Borrower to
Lender and will be released only when the entire Separate Bank Advance,
with interest, is repaid in full and no outstanding Event of Default has
theretofore occurred.
10
2.06 Payment of Interest and Principal: Borrower shall pay monthly
installments of interest on the first day of each month. The proceeds
payable to Borrower by an Investor from the sale of Consumer Loans upon
which a Separate Bank Advance has been made shall (and Borrower shall, and
authorizes Lender to, direct the Investor that such proceeds shall) be
forwarded via federal wire transfer by the Investor directly to the
Restricted Account, and the amount so received shall first be applied to
all amounts advanced by Lender with respect to such Consumer Loans and any
other amounts (including without limitation any amounts due upon any
declaration incident to an Event of Default) due and owing Lender
pursuant to this Agreement, and the balance, if any, of such proceeds shall
be remitted to Borrower by crediting its Operating Account with the amount
thereof; should Borrower ever receive such proceeds from the Investor, the
same will be held in trust for the Lender and immediately remitted to
Lender with all necessary endorsements (which Lender is authorized to make
on Borrower's behalf) for application as aforesaid. Should the aggregate
unpaid principal amount at any time outstanding of all Separate Bank
Advances exceed the Maximum Loan Amount, the Borrower will immediately
upon Lender's demand repay the principal thereof to the extent of such
excess. The entire principal balance of the Loan shall be due and payable
in full on the Termination Date.
2.07 Rate of Interest on Loan:
(a) Unless a LIBOR election is made pursuant to the terms of
subsection (b) hereof, the daily outstanding principal balance of the
Loan shall bear interest under one or both of the following options
(herein, the "Prime Rate Option" or the "Fed Funds Option"): a per
annum rate equal to, at Borrower's option, (i) Lender's Prime rate of
interest (herein, the "Prime-Based Rate) or (ii) the Fed Funds Rate
plus 2.50 percentage points (herein, the "Fed Funds Based Rate"). As
used herein, (i) "Prime" means that rate (which is not necessarily the
lowest rate of interest charged by Lender to any borrower or group or
class of borrowers) so designated and established by Lender, as such
rate may change from time to time and (ii) "Fed Funds Rate" means the
daily rate of interest announced from time to time by the Board of
Governors of the Federal Reserve System as the "Federal Funds Rate".
Interest at the Prime Rate Option or the Fed Funds Option shall
change from time to time effective as of the date in each change in
the Prime rate or the Fed Funds Rate, as applicable. Borrower shall,
11
on the first Business Day of each month with respect to principal of
the Loan then outstanding and for which Borrower desires the Prime
Rate Option or the Fed Funds Option to apply, and at the time of each
Separate Bank Advance with respect to the principal amount thereof
and for which Borrower desires the Prime Rate Option or the Fed
Funds Option to apply, specify to Lender in writing the interest
rate Option to be applicable to any portion of principal for the
balance of the then calendar month, it being understood that both
the Prime Rate Option and the Fed Funds Option can be applicable
simultaneously to different portions of principal outstanding under
the Loan. Should Borrower fail to specify a rate of interest as
aforesaid or in accordance with subsection (b) below, then the
Option theretofore in effect will be deemed to have been selected
unless such principal is a new Separate Bank Advance, in which case
the Prime Rate Option will be deemed to have been selected.
(b) (1) As used in this subsection (b), the following terms
shall have the following meanings:
(A) "LIBOR Rate" means for any day during each Rate Period
(a) the per annum rate of interest (computed on a basis of a year
of 360 days and actual days elapsed) determined by Lender as
being the composite rate available to Lender at approximately
11:00 a.m. London time in the London Interbank Market, as
referenced by Telerate (page 3750), in accordance with the usual
practice in such market, for the Rate Period elected by Borrower,
in effect two (2) London business days prior to the funding date
for a requested LIBOR Rate advance for deposits of dollars in
amounts equal (as nearly as may be estimated) to the amount of
the LIBOR Rate advance which shall then be loaned by Lender to
Borrower as of the time of such determination, as such rate (the
"Base Rate") may be adjusted by the reserve percentage applicable
during the Rate Period in effect (or if more than one such
percentage shall be applicable, the daily average of such
percentages for those days in such Rate Period during which any
such percentage shall be so applicable) under regulations issued
from time to time, by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including without limitation, any emergency,
supplemental or other marginal reserve requirement) for Lender
with respect to liabilities or assets consisting of or including
"Eurocurrency Liabilities" as such term is defined in Regulation
D of the Board of Governors of the Federal Reserve System, as in
12
effect from time to time, having a term equal to such Rate
Period ("Eurocurrency Reserve Requirement"), plus (b) 1.50
percentage points. Such reserve adjustment shall be effectuated
by calculating, and the LIBOR Rate shall be equal to, (a) the
quotient of (i) the Base Rate divided by (ii) one minus the
Eurocurrency Reserve Requirement, plus (b) 1.50 percentage
points.
(B) "Notification" means telephonic notice (which shall be
irrevocable) by Borrower to Lender that Borrower has requested
that the LIBOR Rate shall apply to some portion of the principal
amount of the Loan in accordance with the provisions of Section
2.07 (b) (2) hereof, which notice shall be given no later than
10:00 a.m. Philadelphia time, on the day which is at least 3
Business Days prior to the Business Day on which such election is
to become effective, and which notice shall specify (i) the
principal amount of the Loan to be subject to such rate(s);
(ii) whether such amount is a new advance, a renewal of a
previous request of such rate, a conversion from one interest
rate to another, or a combination thereof; (iii) the Rate
Period(s) selected; and (iv) the date on which such request is to
become effective (which date shall be a date selected in
accordance with subsection (2) hereof).
(C) "Rate Period" means for any portion of principal for
which Borrower elects the LIBOR Rate the period of time for which
such rate shall apply to such principal portion. Rate Periods for
principal earning interest at the LIBOR Rate shall be for periods
of 1 week or 1, 2 or 3 months and for no other length of time,
Provided, that, no Rate Period may end after the Termination
Date.
(2) (A) By giving Notification, and so long as no Event of
Default is outstanding, Borrower may request to have all or a
portion of the outstanding principal of the Loan as hereinafter
permitted earn interest at the LIBOR Rate as follows: (i) with
respect to the principal amount of any Separate Advance under the
Loan, from the date of such advance until the end of the Rate
Period specified in the Notification; and/or (ii) with respect
to the principal amount of any portion of Loan outstanding and
earning interest at the LIBOR Rate at the time of the
Notification related to such principal amount, from the
expiration of the then current Rate Period related to such
principal amount until the end of the Rate Period specified in
the Notification; and/or (iii) with
13
respect to all or any portion of the principal amount of Loan
outstanding and earning interest at the Prime-Based Rate or the
Fed Funds Based Rate at the time of Notification, from the date
set forth in the Notification until the end of the Rate Period
specified in the Notification.
(B) Borrower understands and agrees: (i) that subject to the
provisions of this Agreement, the Prime-Based Rate, the Fed Funds
Based Rate and the LIBOR Rate may apply simultaneously to
different parts of the outstanding principal of the Loan, (ii)
that the LIBOR Rate may apply simultaneously to various portions
of the outstanding principal for various Rate Periods, (iii) that
the LIBOR Rate applicable to any portion of outstanding principal
may be different from the LIBOR Rate applicable to any other
portion of outstanding principal, (iv) that the principal portion
of the Loan for which a LIBOR Rate election is being made shall
not be less than $1,000,000 per election and, if in excess
thereof, shall be in integral multiples of $1,000,000, (v) that
no more than the Maximum Tranches of principal of the Loan
bearing interest at the LIBOR Rate may be outstanding at any one
time, (vi) that the Borrower's right to elect the LIBOR Rate will
not be available at any time upon or after the occurrence of an
Event of Default, and (vii) that Lender shall have the right to
terminate any Rate Period, and the interest rate applicable
thereto, prior to maturity of such Rate Period, if Lender
determines in good faith (which determination shall be
conclusive) that continuance of such interest rate has been made
unlawful by any law, to which Lender may be subject, in which
event the principal to which such terminated Rate Period
relates thereafter shall earn interest at the Prime-Based Rate or
the Fed Funds Based Rate, at Borrower's election.
(3) After expiration of any Rate Period, any principal portion
corresponding to such Rate Period which has not been converted or
renewed in accordance with this Section shall earn interest
automatically at the LIBOR Rate as if Borrower had made an election
therefor in accordance herewith for the same Rate Period as the Rate
Period then expired (or if the Rate Period which would be deemed to
have been selected would extend beyond the Termination Date, then at
the Prime-Based Rate).
(4) Borrower shall indemnify Lender against any loss or expense
(including loss of margin) which Lender has
14
sustained or incurred as a consequence of: (a) any payment of any
principal amount earning interest at the LIBOR Rate on a day other
than the last day of the corresponding Rate Period (whether or not
any such payment is made pursuant to acceleration upon or after an
Event of Default, demand by Lender otherwise made or prepayment
otherwise required under this Agreement, by reason of an
application of proceeds incident to an insured loss or condemnation
of property, or for any other reason, and whether or not any such
payment is consented to the Lender or any Lender, unless Lender
shall have expressly waived such indemnity in writing); (b) any
attempt by Borrower to revoke in whole or part any Notification
given pursuant to this Agreement; or (c) any attempt by Borrower to
convert or renew any principal amount earning interest at the LIBOR
Rate on a day other than the last day of the corresponding Rate
Period (whether or not such conversion or renewal is consented to
by Lender, unless Lender shall have expressly waived such indemnity
in writing).
(5) In the event that, as a result of any changes in applicable
law or the interpretation thereof, it becomes unlawful for Lender to
maintain Eurodollar liabilities sufficient to fund any LIBOR Rate
loan, then Lender's obligation to convert to or maintain a LIBOR Rate
shall be suspended until such time as Lender may again cause the LIBOR
Rate to be applicable to the Loan and such principal earning interest
at the LIBOR Rate shall accrue interest instead at the Prime-Based
Rate and/or the Fed Funds Based Rate, as elected by Borrower.
(6) In the event that the Borrower shall have requested the LIBOR
Rate in accordance herewith and Lender shall have reasonably
determined that Eurodollar deposits equal to the amount of the
principal to earn interest at the LIBOR Rate and for the Rate Period
specified are unavailable, impractical or unlawful with respect to
Lender, or that the rate based on the LIBOR Rate will not adequately
and fairly reflect the cost to Lender of the LIBOR Rate applicable to
the specified Rate Period, of making or maintaining the principal
amount of the Loan at the LIBOR Rate specified by the Borrower during
the Rate Period specified, or that by reason of circumstances
affecting Eurodollar markets, adequate and reasonable means do not
exist for ascertaining the rate based on the LIBOR Rate applicable to
the specified Rate Period, Lender shall promptly give notice of such
determination to the Borrower that the LIBOR Rate is not available. A
determination by Lender
15
hereunder shall be conclusive evidence of the correctness of the
fact and amount of such additional costs or unavailability. Upon
such a determination, (i) the right of Borrower to select, convert
to, or maintain a LIBOR Rate shall be suspended until Lender shall
have notified the Borrower that such conditions shall have ceased
to exist, and (ii) that portion of the Loan subject to the
requested LIBOR Rate shall accrue interest instead at the Prime-
Based Rate and/or the Fed Funds Based Rate, at Borrower's Option.
(c) To the extent permitted by law, upon and during the
continuance of an Event of Default, the rate of interest shall,
commencing three (3) days after Lender gives Borrower written
notice thereof, increase by three (3) percentage points in
excess of the otherwise applicable rate ("Default Rate").
(d) Interest shall continue to accrue on the unpaid
principal balance of the Loan at the applicable contract rate set
forth in this Agreement even if all sums due hereunder are
accelerated and reduced to judgment.
2.08 Banker's Year: All interest calculations shall be based on a 360
day year for the actual days elapsed.
2.09 Direct Charge: Borrower authorizes Lender to charge Borrower's
Operating Account with the amount of any interest, fees or other sums from
time to time due by Borrower to Lender.
2.10 Reserve Requirements: Change in Circumstances:
(a) Notwithstanding any other provision herein, if after the date
of this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or
not having the force of law) shall impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of,
deposits with or for the account of or credit extended by Lender, or
shall impose on Lender any other condition affecting this Agreement,
Lender's commitment or the Loan extended by Lender, and the result of
any of the foregoing shall be to increase the cost to Lender of making
or maintaining such Loan or to reduce the amount of any sum received
or receivable by Lender hereunder (whether of principal, interest or
otherwise) by an amount deemed by Lender to be material, then
16
the Borrower will, subject to subpart (c) below, pay to Lender upon
demand such additional amount or amounts as will compensate Lender
for such additional costs incurred or reduction suffered.
(b) If Lender shall have determined that after the date of this
Agreement the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices
entitled "International Convergence of Capital Measurement and Capital
Standards," or the adoption after the date hereof, of any other law,
rule, regulation or guideline regarding capital adequacy, or any
change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender (or any lending office
of Lender) or Lender's holding company with any request or directive
regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Lender's capital or
on the capital of Lender's holding company, if any, as a consequence
of this Agreement, Lender's commitment or any Loan advance by Lender
pursuant hereto to a level below that which Lender or Lender's holding
company could have achieved but for such adoption, change or
compliance (taking into consideration Lender's policies and the
policies of Lender's holding company with respect to capital adequacy)
by an amount deemed by Lender to be material, then from time to time
the Borrower shall, subject to subpart (c) below, pay to Lender such
additional amount or amounts as will compensate Lender or Lender's
holding company for any such reduction suffered.
(c) A certificate of Lender setting forth such amount or amounts
(including computation of such amount or amounts) as shall be
necessary to compensate Lender or its holding company as specified in
paragraph (a) or (b) above, as the case may be, shall be delivered to
the Borrower not less than 30 days prior to the date (the
"Implementation Date") such additional compensation will be
implemented, retroactively if necessary but in no event with respect
to increased costs or reduction in amounts received or receivable or
in return on capital incurred or suffered with respect to any period
more than 90 days prior to delivery of such certificate. Within 30
days of delivery to Borrower of such certificate, Borrower may by
written notice to Lender elect to
17
terminate the Loan effective as of the Implementation Date, in
which event Borrower shall on the Implementation Date repay to Lender
all principal, interest and other reasonable fees and expenses owing
under this Agreement (including the additional compensation otherwise
due by reason of this Section 2.10 through the date of final
repayment) and release Lender from any further commitment or
obligation hereunder. If Borrower does not elect to terminate the Loan
as aforesaid, Borrower shall on the Implementation Date pay to Lender
the amount shown as due on any such certificate.
(d) Failure on the part of Lender to demand compensation for any
increased costs or reduction in amounts received or receivable or
reduction in return on capital with respect to any period shall not,
except as next noted, constitute a waiver of Lender's right to demand
compensation with respect to such period or any other period,
provided, that Lender shall not be entitled to compensation for any
increased costs or any such reduction with respect to any period more
than 90 days prior to delivery of a certificate as set forth in
subparagraph (c) above. The protection of this Section shall be
available to Lender regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, guideline
or other change or condition which shall have occurred or been
imposed. Each determination by Lender under this Section shall be in
good faith and shall be conclusive absent manifest error.
2.11 Administration Fee: Borrower will pay Lender an
administration fee of $32.00 per Consumer Loan upon and at the time at
which any Separate Bank Advance is made hereunder.
3. Conditions of Lending.
3.01 Documentation Required Prior to First Advance Only:
Delivery by Borrower of each of the following to Lender shall be
conditions precedent to the making of the first advance of the Loan:
3.01.01 The executed Note of Borrower;
3.01.02 A certified copy of a resolution of Borrower's Board
of Directors authorizing the borrowing herein provided for, the
execution and delivery of this Agreement and the
18
Note, and the endorsing and assigning to Lender of the
Collateral as herein provided;
3.01.03 Certificates, as of the most recent dates
practicable, of the Secretary of State of Delaware, the Secretary
of State of each state in which Borrower is qualified as a
foreign corporation, and the department of revenue or taxation of
each of the foregoing states, or other evidence satisfactory to
Lender, as to the good standing of Borrower.
3.01.04 A written opinion of counsel to Borrower, dated the
date of this Agreement and addressed to Lender, in form and
substance satisfactory to Lender.
3.01.05 A certificate, dated the date of this Agreement,
signed by the president or vice president of Borrower to the
effect that:
(1) The representations and warranties set forth in
Section 4 of this Agreement are true, complete and correct
as of the date hereof;
(2) No Event of Default hereunder, and no event which,
with the giving of notice or the passage of time, or both,
could become such an Event of Default, has occurred as of
the date hereof; and
(3) All conditions set forth in this Section 3.01 have
been fulfilled.
3.02 Documentation Required In Connection With All Advances:
Borrower shall deliver to Lender a Schedule of Eligible Loans and a
Loan Cover Sheet, each in form provided by Lender for this purpose and
duly completed and executed by Borrower. Subject to Section 3.03
hereof, concurrently with the making of each Separate Bank Advance,
Borrower shall deliver to Lender the following, as applicable:
3.02.01 A copy of the applicable Take-Out Commitment if
otherwise required hereby, in form and content satisfactory to
Lender, agreeing to purchase that specific Eligible Loan(s);
19
3.02.02 The original Consumer Paper, duly endorsed in favor
of Borrower, its successors and assigns, without recourse;
3.02.03 Copy of the original Mortgage, together with an
original assignment thereof in recordable form and assigned in
blank, duly executed by the mortgagee;
3.02.04 An assignment by Borrower in blank in recordable
form of all Consumer Paper;
3.02.05 Such additional documents or instruments as may be
required by Lender and/or by the Investor.
3.03 Wet Advances: Notwithstanding Section 3.02 hereof to the
contrary, Lender will permit Wet Advances up to an aggregate
principal amount at any time outstanding equal to the Wet Advance
Sublimit. If on any date the aggregate principal amount outstanding of
Wet Advances exceeds the Wet Advance Sublimit, Borrower shall
immediately prepay the principal of Wet Advances in an amount equal to
such excess. In the event that for any reason (including by reason of
any fault of the Closing Media) the original Consumer Paper and copy
of Mortgage is not received by Lender within 5 Business Days following
the date on which such Wet Advance was made, Borrower shall within one
(1) day of the first to occur of Borrower's actual knowledge thereof
or Lender's written demand with respect thereto prepay the full
principal amount of such Wet Advance.
3.04 Continuing Warranties: At the time any Separate Bank Advance
is requested by Borrower, and as a precondition to the making of any
advance hereunder, no Event of Default shall have occurred and be
continuing, and no event shall have occurred which, with the lapse of
time or the giving of notice or both, shall constitute such Event of
Default; and Borrower shall have paid all fees and charges due and
payable by Borrower hereunder.
3.05 Other Requested Documents: Borrower shall deliver directly
to Lender any documents pertaining to the Eligible Loan which Lender
specifically requests.
4. Continuing Representations and Warranties.
19
In order to induce Lender to enter into this Agreement and to induce
Lender to make each Separate Bank Advance, Borrower warrants and represents
that as of the date hereof, at the time of the making of each Separate Bank
Advance hereunder, at the time each Consumer Paper is delivered to Lender,
and at the time of sale of each Consumer Loan to the Investor, that:
4.01 Borrower's Organization: Borrower is a corporation, duly
organized and existing and in good standing under the laws of
Delaware, and Borrower is qualified to do business in and in good
standing in every other jurisdiction where its business or operations
requires such qualification. All of Borrower's shareholders and their
respective shares of capital stock of each class, are listed on
Exhibit "A" hereto. The execution, delivery and performance of this
Agreement, the Note and other documents required of Borrower have been
duly authorized by all requisite action and will not violate the
Borrower's charter or by-laws or any applicable statutes or
regulations or any agreements or judgements to which Borrower is a
party or by which it or its property is bound. This Agreement and the
Note are valid and binding obligations of Borrower, enforceable in
accordance with their terms except as may be limited by bankruptcy,
insolvency, moratorium, reorganization and other similar laws or
equitable principles affecting the enforcement of creditors' rights
generally, and the consent or approval of governmental authorities or
of third parties is not required for the validity of Borrower's
obligations hereunder or thereunder or, if required, has been obtained
and remains in full force and effect.
4.02 Financial Statements: All financial statements and financial
information heretofore delivered to Lender are true and correct in
all material respects as of the date made. As of the date of this
Agreement and as of the date of any borrowing hereunder, there has not
been, nor does Borrower anticipate the occurrence of, nor is Borrower
aware of any circumstance which with the passage of time could
reasonably be expected to result in, any Event of Default or any
material change of an adverse nature sufficient to impair Borrower's
ability to repay every Separate Bank Advance or to continue to conduct
its business as it is being conducted on the date hereof. Borrower has
no material contingent liabilities or unusual forward or long-term
commitments which are not disclosed by or reserved against in said
financial statements
21
furnished to Lender or have not been disclosed to Lender in
writing. At the date of this Agreement and at the date of each
advance requested by Borrower hereunder, Borrower warrants and
reaffirms there are no material unrealized or anticipated losses
from any commitments of the Borrower except as previously disclosed
in writing to Lender.
4.03 Authority: All requisite action for the authorization,
execution and delivery by Borrower of this Agreement and the Note, and
for the assigning and endorsing by Borrower of the Collateral as
provided for hereunder, has been duly taken and has not been
rescinded.
4.04 Title to Collateral: Borrower is or will be the legal and
beneficial owner (subject only to potential claims of an Investor
arising solely out of a Take-Out Commitment) of the Collateral at the
time pledged, free and clear of all security interests liens and
encumbrances, and has the right to assign the same to Lender
as contemplated by this Agreement.
4.05 Warranties as to Each Consumer Loan: Each Consumer Loan upon
which any Separate Bank Advance is made is, unless otherwise agreed to
by Lender in connection with a particular Consumer Loan, an Eligible
Loan and will remain as such until the related Separate Bank Advance
is repaid in full; is in full force and effect; has not been modified
and is not past due or otherwise in default; is not subject to defense
or right of set-off on the part of the maker or makers of the Consumer
Paper; is secured by a valid Mortgage on fee simple residential real
estate, free from damage or casualty; represents a bona fide
transaction which has been carried out in accordance with all
applicable laws and regulations, including, but not limited to, the
making of all required disclosures correctly to all persons entitled
to receive them within the time specified under such laws or rules and
regulations, which shall include but not be limited to:
(a) Real Estate Settlement Procedures Act of 1974, as
amended - Regulation X;
(b) Fair Credit Reporting Act;
(c) Equal Credit Opportunity Act - Regulation B;
22
(d) Truth-In-Lending Act - Regulation Z;
and applicable regulations of the office of Thrift Supervision and
the Comptroller of the Currency; and for which the total
consideration to be advanced by a lender shall in fact have been
advanced less closing and other fees and costs which may
customarily be deducted from the loan proceeds.
4.06 [INTENTIONALLY OMITTED]
4.07 Borrower's Locations: The address of Borrower set forth
above in this Agreement is its chief executive office and the
addresses indicated on Exhibit "B" attached hereto are all of the
Borrower's offices or locations;
4.08 No Default: Borrower has no knowledge of any default under
any material, term or provision or any agreement to which it is a
party or by which it is bound or to which any of its property is
subject, which default would have a material adverse effect on
Borrower's creditworthiness. It is agreed that a breach of the terms
of any mortgage warehouse loan agreement with any other lender shall
be deemed to have such a material adverse effect.
4.09 Outstanding Judicial Proceedings: There are no outstanding
criminal proceedings pending or threatened, or judgements, actions or
proceedings pending or threatened before any court or governmental
authority, bureau or agency, with respect to or affecting the Borrower
wherein damages alleged or owed exceed $25,000 in any such proceeding,
judgment or action or in the aggregate for all such proceedings,
judgments or actions, nor are there any such actions, judgments or
proceedings in which Borrower is a plaintiff or complainant (excepting
routine foreclosures) wherein damages alleged or owed exceed $25,000
in any such proceeding, judgment or action or in the aggregate for all
such proceedings, judgments or actions.
4.10 Accuracy of Submitted Information; No Material Omissions:
No certificate, opinion, financial statement or any other statement
made or furnished to Lender by or on behalf of the Borrower in
connection with this Agreement or the transaction contemplated herein,
contains any untrue statement of a material
23
fact, or omits a material fact necessary in order to make the
statements contained therein or herein not misleading.
4.11 Loans Not Usurious: The Consumer Loans are not usurious.
4.12 Subsidiaries: Borrower has no Subsidiaries and is a wholly
owned Subsidiary of Resource America, Inc.
5. Collateral.
5.01 Security Interest: Borrower hereby grants to Lender, as
collateral security for all Separate Bank Advances and for the Loan
and the Note and all other present and future obligations,
liabilities and indebtedness of Borrower of every kind (whether
principal, interest, fees, costs and expenses or otherwise) under this
Agreement (the "Secured Obligations"), a security interest in all
accounts, accounts receivable and loans receivable in respect of which
any Separate Bank Advance is made by Lender, now existing or hereafter
acquired or arising, and in all notes, instruments, mortgages and
chattel paper, including all Consumer Paper and Consumer Loan
Collateral, evicencing or securing each said account, account
receivable, loan receivable and Consumer Loans, and in all contracts,
documents, files, instruments, general intangibles, property, rights,
proceeds and payments relating thereto, including without limitation
the following:
5.01.01 All payments and prepayments of principal, interest,
and other income due or to become due thereon and all proceeds
therefrom, and all the right, title and interest of every nature
whatsoever of Borrower in and to the same and every part of such
property including, without limitation, the following:
(a) All rights, liens and security interests existing with
respect thereto or as security therefor;
(b) All hazard insurance (including without limitation flood
insurance) policies, title insurance policies or condemnation
proceeds with respect thereto;
(c) All prepayment premiums and late payment charges with
respect thereto;
24
5.01.02 All real estate acquired by Borrower by deed in lieu
of foreclosure or by foreclosure attributable thereto;
5.01.03 All Take-Out Commitments related thereto and the
proceeds resulting from sales by Borrower pursuant thereto;
5.01.04 All right, title and interest of Borrower in and to
all files, surveys, certificates, correspondence, appraisals,
computer programs, tapes, discs, cards, accounting records, and
other records, information, and data of Borrower relating
thereto;
5.01.05 The proceeds from the sale or other disposition of
any Collateral;
5.01.06 Any other property and proceeds thereof that may,
from time to time hereafter, be subject to the security interests
created hereby;
5.01.07 All business records, computer tapes, software,
microfiche, etc., necessary to identify and locate the Collateral
and protect or enforce Lender's or any Lender's rights therein.
5.02 Separate Assignments: At the time of making each Separate
Bank Advance, Lender may require Borrower to deliver a separate
assignment to Lender of all of Borrower's right, title and interest in
the Consumer Paper and Consumer Loan Collateral and other property,
right, proceeds or payment forming part of the Collateral including
but not limited to all Borrower's rights in and to any applicable
Take-Out Commitment and insurance policies and proceeds and Borrower
will pay the cost of filing the same in all public offices.
5.03 Deposit and Other Accounts: Borrower hereby grants to
Lender, as security for the Secured Obligations, a lien and security
interest in, and assignment of, all amounts at any time standing to
Borrowers account in any and all deposit, restricted, operating or
other accounts now or hereafter maintained by Borrower with Lender,
including without limitation the Operating Account, Restricted Account
and Warehouse Account, which lien and security interest is in addition
to, and not in lieu of, any right of setoff otherwise available to
Lender under applicable law.
25
5.04 Servicing Rights: Borrower hereby grants to Lender and each
Lender, as security for the Secured Obligations, a first lien security
interest in all Servicing Rights, if any, and all proceeds thereof.
5.05 Financing Statements: Borrower will execute one or more
financing statements covering the Collateral pursuant to the Uniform
Commercial Code, in form satisfactory to Lender, and will pay the cost
of filing the same in all public offices. A copy of this Agreement may
be recorded as a financing statement.
5.06 Limited Power of Attorney: Borrower hereby irrevocably
makes, constitutes and appoints Lender its attorney-in-fact with full
power of substitution for and on behalf and in the name of Borrower
(which Lender is under no obligation to use) to endorse any checks,
instruments or other papers in Lender's possession representing
payments on or proceeds of Consumer Paper and Consumer Loan Collateral
or Take-Out Commitments; to complete, execute, deliver and record any
assignment or other document, including financing statements, covering
the Collateral; to endorse any Consumer Paper in the name of Borrower
and do every other act or thing necessary or desirable to effect
transfer of Consumer Paper, Consumer Loan Collateral or any related
Collateral and/or to protect the interest of Lender in the Collateral;
to take all necessary and appropriate action in Borrower's name with
respect to any Separate Bank Advances hereunder and servicing of
Consumer Paper and Consumer Loan Collateral or sale of Collateral
under any Take-Out Commitment; to take any and all action which Lender
deems appropriate to commence, prosecute, settle, discontinue, defend
or otherwise dispose of any claim relating to any Take-Out Commitment,
insurance or guarantee, Consumer Paper, Consumer Loan Collateral or
other Collateral; and to sign Borrower's name whenever and wherever
appropriate to the performance of this Agreement, including, but not
limited to, execution in Borrower's name of any document necessary to
perfect or protect Lender's security interest granted hereunder. This
appointment shall be deemed coupled with an interest but shall only
extend to dealings with regard to the Collateral.
5.07 Delivery in Trust: Should Lender ever deliver any Consumer
Paper or other Collateral to Borrower for purposes of correction
thereof or otherwise, or to an Investor in connection with an
Investor's purchase thereof, or to any other person or
26
entity for any reason, the same shall be delivered subject to
Lender's liens and security interest therein and upon an express
trust for the benefit of Lender until the same is returned to
Lender or the Separate Bank Advance to which such Consumer Paper
relates has been repaid in full with accrued interest.
6. Affirmative Covenants.
Borrower covenants and agrees:
6.01 Note Payments: To pay the Loan (as provided in the Note and
this Agreement) when due including but not limited to interest upon
the Loan.
6.02 Circumstances Requiring Immediate Repayment of Separate Bank
Advance: To repay in full within three (3) days after the first to
occur of Borrower's actual knowledge thereof or Lender's written
demand with respect thereto, any Separate Bank Advance, plus accrued
interest, if the Consumer Loan with respect to which such Separate
Bank Advance was made (a) shall be rejected as unsatisfactory for
purchase by the pertinent Investor if a Take-Out Commitment was
required in connection with such Separate Bank Advance pursuant to the
terms hereof; (b) has not been purchased within the applicable
warehouse period specified in Schedule 1 or Schedule 2, as applicable,
hereto after funding by Lender or within the time permitted under any
applicable Take-out Commitment, whichever occurs first; (c) said
Consumer Loan becomes 31 or more days contractually past due or in
default; (d) as provided in the final sentence of Section 3.03 hereof;
or (e) the improvements covered by the applicable Mortgage have
sustained a casualty loss in excess of 5% of the appraised value of
the land and improvements, whether or not covered by insurance.
6.03 Casualty Insurance: To place, or cause to be placed, and
maintained at all times, such fire and extended coverage insurance on
all real estate or other property covered by any Consumer Loan
Collateral as may be required by the Investor or by Lender.
6.04 Other Insurance: To maintain (a) liability insurance and
fire and other hazard insurance on its properties, with responsible
insurance companies approved by the Lender, in such amounts and
against such risks as is customarily carried by similar
27
businesses operating in the same vicinity; and (b) within thirty
(30) days after notice from Lender, will obtain such additional
insurance as Lender shall reasonably require, all at the sole expense
of the Borrower. Copies of such policies, as well as copies of errors
and omissions policies and Fidelity Bonds, if any, maintained by
Borrower, shall be furnished to the Lender without charge upon request
of the Lender.
6.05 Enforcement of Consumer Paper: To enforce payment and
collection, at Borrower's expense, of all Consumer Paper.
6.06 Costs of Collection: To pay the reasonable costs of
collection (including attorneys' fees) of any of the Collateral, the
enforcement or collection of which has been undertaken by Lender.
6.07 Notation of Assignments: To make appropriate notations on
its books of all assignments and liens granted to Lender hereunder,
and to give such notice thereof as Lender may from time to time
reasonably require.
6.08 Execution of Additional Documents: To execute such
additional instruments or assignments of the Collateral as Lender may
from time to time reasonably require.
6.09 Submission of Financial Statements:
6.09.01 Submission of Monthly Financial Statements: To
furnish to Lender within forty-five (45) days after the close of
each month in each fiscal year, Borrower's financial statements,
to include a balance sheet and income statement and statement of
cash flow of the Borrower for such month, subject to year end
audit adjustments, prepared by Borrower in accordance with
generally accepted accounting principles consistently applied and
certified true and correct by Borrower's Chief Financial Officer,
Controller or Vice President of Finance.
6.09.02 Submission of Ouarterly Financial Statements: To
furnish to Lender within sixty (60) days after the close of each
quarterly accounting period in each fiscal year, Borrower's
financial statements, to include a balance sheet and income
statement and statement of cash flow of the Borrower for such
period, subject to year end audit adjustments, prepared by
28
Borrower in accordance with generally accepted accounting
principles consistently applied and certified true and correct by
Borrower's Chief Financial Officer, Controller or Vice President
of Finance.
6.09.03 Submission of Year End Financial Statement: To
furnish to Lender within ninety (90) days after the close of each
fiscal year: (a) a statement of shareholders' equity; (b) an
income statement for such fiscal year; (c) a cash flow statement
for such fiscal period; and (d) a balance sheet as of the end of
such fiscal year, all in reasonable detail, including all
supporting schedules and comments; the statements and balance
sheet to be audited by an independent certified public accountant
selected by the Borrower and acceptable to Lender (Lender
hereby acknowledging that Grant Thornton is acceptable); and
accompanied by such accountant's opinion letter reasonably
satisfactory to Lender and certified true and correct by
Borrower's Chief Financial Officer, Controller or Vice President
of Finance.
6.09.04 Covenant Compliance: That each financial statement
submitted pursuant to this Section 6.09 shall include (a) the
then current Tangible Net Worth, and (b) the then Leverage
Ratio. All such numbers shall be accompanied by work sheet
calculations used to arrive at reported result. Borrower shall
also provide Lender with a Covenant Compliance Worksheet in form
acceptable to Lender, certified as true, correct and complete by
Borrower's Chief Financial Officer, Controller or Vice President
of Finance.
6.09.05 Intentionally Omitted,
6.09.06 Projections: To furnish to Lender, as requested by
Lender, a projected balance sheet, income statement and cash flow
statement for each of the upcoming 12 months.
6.09.07 Management Letters: To furnish to Lender, all
reports, including management letters, from time to time issued
to Borrower by its accountants performing a year-end audit
relating to Borrower's financial and accounting policies and
procedures.
6.10 Maintenance of Books and Records; Audits: To maintain
adequate books, accounts and records in accordance with generally
accepted accounting practices with appropriate notations
29
thereon of all assignments to Lender; and to permit Lender, or
its representatives at any reasonable time to inspect or examine or
audit the books, accounts and records of Borrower. Borrower shall be
responsible to Lender for such audit fees as Lender may reasonably
assess in connection with any such audit or examination, not to
exceed, unless an Event of Default shall be continuing, $4,500 per
audit.
6.11 Compliance with Administrative Requests of Lender: To comply
with such reasonable administrative directions as Lender may give in
order to provide proper servicing of the Separate Bank Advances
hereunder.
6.12 Submission of Pipeline Report: To provide when requested by
Lender, a copy of the Borrower's pipeline report in form and substance
satisfactory to Lender.
6.13 Notification of Default: In connection with any Consumer
Loan in respect of which a Separate Bank Advance has been made, to
notify Lender within two Business Days of Borrower's discovery of any
default thereunder or any claim asserted in connection therewith or of
the termination of the Take-out Commitment related thereto or of the
rejection by the Investor under said Take-Out Commitment to purchase
said Consumer Loan.
6.14 Notification of Borrower's Default: To advise Lender in
writing within three Business Days after the expiration of any
applicable cure period, of any uncured material default known to
Borrower in connection with any material agreement to which Borrower
is bound.
6.15 Maintenance of Take-Out Commitments: To keep all Take-Out
Commitments in full force and effect and subject to no lien,
assignment or other interest (other than that of the Lender)
6.16 Financial Covenants: To maintain on a consolidated basis for
the Borrower and its consolidated subsidiaries:
(a) Tangible Net Worth of not less than $1,000,000;
(b) a Leverage Ratio of not more than 5 to 1.
30
6.17 Tax Returns: To furnish Lender with copies of federal income
tax returns filed by Resource America, Inc. or, if tax returns are
filed separately by Borrower, by Borrower, within ten (10) days of
Lender's written request.
6.18 Payment of Taxes: To pay or cause to be paid when due, all
taxes, assessments and charges or levies imposed upon it or on any of
its property or which it is required to withhold and pay over, except,
as to taxes other than such as to which any lien which attaches with
respect thereto has or would with the passage of time have priority
over the liens and security interests granted to Lender, where
contested in good faith by appropriate proceedings with adequate
reserves therefor having been set aside on its books provided, however
that the Borrower shall pay or cause to be paid all such taxes,
assessments, charges or levies forthwith whenever foreclosure on any
lien that attaches (or security therefor) appears imminent.
6.19 New Locations: To furnish Lender with the name and
addresses of all new offices and locations, including relocations of
existing offices, no later than thirty (30) Business Days prior to the
date Borrower commences occupation of said premises.
6.20 Additional Reports: To promptly furnish Lender with such
reports and information as it deems reasonably necessary from time to
time.
6.21 Accounts: To maintain an Operating Account, Warehouse
Account and Restricted Account with Lender.
6.22 Compliance With Laws: To comply with all present and future
laws applicable to it in the operation of its business, and all
material agreements to which it is subject.
6.23 Notice of Litigation: To give immediate notice to Lender of:
(1) any litigation in which it is a party if an adverse decision
therein would require it to pay over more than $25,000 in such
litigation or in the aggregate for all such litigation or deliver
assets the value of which exceeds such sum (whether or not the claim
is considered to be covered by insurance); and (2) the institution of
any other suit or any administrative proceeding involving it that
might materially and adversely affect its operations, financial
conditions, property or business.
31
6.24 Payment of Obligations When Due: To pay when due (or within
applicable grace periods) all material indebtedness due third persons,
except when the amount thereof is being contested in good faith, by
appropriate proceedings and with adequate reserves therefor being set
aside on the books of Borrower.
6.25 Landlord's Waiver: To use its best efforts to obtain from
the landlord of each premises leased by Borrower a waiver of all
rights in or to the Collateral.
6.26 ERISA: Borrower will (1) fund all its Employee Benefit Plans
in accordance with no less than the minimum funding standards of
Section 302 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (2) furnish Lender, promptly after the filing of
the same, with copies of all reports or other statements filed with
the United States Department of Labor, the Pension Benefit Guaranty
Corporation ("PBGC") or the Internal Revenue Service ("IRS") with
respect to all such Plans, or which Borrower, or any member of a
Controlled Group, may receive from the United States Department of
Labor, the IRS or the PBGC, with respect to all such Employee Benefit
Plans, and (3) promptly advise Lender of the occurrence of any
Reportable Event or Prohibited Transaction with respect to any such
Employee Benefit Plan(s) and the action which Borrower proposes to
take with respect thereto; or (4) promptly advise Lender of any claim
for withdrawal liability made against it or a member of its Controlled
Group.
6.27 Credit Policy: To maintain Borrower's current credit
underwriting standards and quality control procedures unless Lender
first approves any change thereof in writing.
6.28 Management: To maintain a chief financial officer, chief
executive officer and chief operating officer acceptable to Lender.
7. Negative Covenants.
Without the prior written consent of Lender, Borrower will not:
7.01 No Compromise of Collateral: Make any compromise, adjustment
or settlement in respect of any of the Collateral or accept anything
other than cash in payment of the Collateral.
32
7.02 Improper Use of Proceeds: Use the proceeds of the Loan, or
permit them to be used, for any purpose other than to purchase or
originate Eligible Loans pursuant to the terms of this Agreement.
7.03 [INTENTIONALLY OMITTED].
7.04 No Misleading Information: Furnish to Lender any certificate
or document that contains any untrue statement of material fact or
omits a material fact necessary to make it not misleading in light of
the circumstances under which it was furnished.
7.05 No Change in Ownership: Permit or suffer any change in the
shareholders of the Borrower and their respective shareholder shares.
7.06 No Change in Organization: Change its name, enter into any
merger, consolidation, reorganization or recapitalization, or
reclassify its capital stock, or liquidate or dissolve or acquire any
stock in or all or substantially all of the assets of or any
partnership or joint venture interest in, or make any loan to or
investment in, any other person or entity, other than (i) consumer
loans made in the ordinary course of its business and (ii) the
acquisition of substantially all of the assets of or all of the
capital stock of Tri-Star Financial Services ("Tri-Star"), provided,
that if such acquisition is a stock acquisition, Borrower will,
concurrently with its acquisition thereof, cause Tri-Star to execute
and deliver to Lender all documents and instruments, including an
amendment to this Agreement, required by Lender for the purposes of
joining Tri-Star to this Agreement as a co-borrower.
7.07 No Sale of Assets: Borrower will not sell, transfer, lease
or otherwise dispose of all or (except for the sale of loans and other
financial products in the ordinary course of its business and the
disposition of equipment or other fixed assets which in Borrower's
reasonable judgment is no longer needed in the ordinary course of its
business) any part of its assets.
7.08 No Liens: Borrower will not mortgage, pledge, grant or
permit to exist a security interest in or lien on any of its assets of
any kind, real or personal, tangible or intangible, now
33
owned or hereafter acquired including without limitation the
Collateral, except (i) for purchase money liens in equipment, (ii)
existing liens shown on Exhibit C hereto, (iii) liens in favor of
Lender hereunder, and (iv) liens on Consumer Paper, other than such as
against which Lender has made any Separate Bank Advance hereunder,
securing indebtedness permitted by Section 7.10(5) hereof.
7.09 No Guaranties: Borrower will not become liable, directly or
indirectly, as guarantor, surety, endorser or otherwise, for any
obligation or indebtedness of any other person, except for endorsement
of commercial paper for deposit or collection in the ordinary course
of business. Usual and customary representations and warranties
made by Borrower to investors, buyers and other warehouse lenders of
Consumer Paper as to the underlying obligors thereon shall not
constitute a "guaranty" for this purpose.
7.10 No Indebtedness: Borrower will not incur, create, assume or
permit to exist any indebtedness of any nature, except (1) to Lender
pursuant hereto, (2) trade indebtedness incurred in the ordinary
course of business,(3) purchase money indebtedness for equipment and
capital lease obligations not in excess of $75,000 at any time
outstanding, (4) Subordinated Debt, and (5) warehouse indebtedness in
favor of other warehouse lenders provided that any such warehouse
lender first executes an intercreditor agreement in favor of and in
form and substance acceptable to Lender.
8. Default.
8.01 Events of Default: Borrower shall be in default under this
Agreement upon the happening of any of the following events or
conditions:
8.01.01 Failure to pay any principal or interest when due or
any fee, expense or other amount required to be paid by Borrower
hereunder within five (5) days after written notice from Lender
thereof;
8.01.02 Default in the performance of any other obligation,
covenant or liability of Borrower contained or referred to herein
and, if such default relates to the covenants set forth in
Sections 6.04, 6.08, 6.20 or 6.23, the same is not cured within
30 days after Lender provides Borrower with written notice
thereof;
34
8.01.03 Any warranty, representation or statement furnished
to Lender by or on behalf of Borrower in connection with this
Agreement proves to have been false in any material respect when
made or furnished;
8.01.04 Loss, theft, substantial damage, destruction,
abandonment, sale or encumbrances to or of the Collateral or any
part thereof, or the making of any levy, seizure or attachment
thereof or thereon;
8.01.05 Dissolution, termination of existence, insolvency,
business failure, appointment of a receiver for benefit of
creditors by, or the commencement of any case or proceeding under
any bankruptcy or insolvency law by or against Borrower or any of
its Subsidiaries unless said proceeding, if commenced against
Borrower or any of its Subsidiaries, is dismissed within 30 days,
from the date it is filed;
8.01.06 Occurrence of any material adverse change in the
financial or operating condition of Borrower;
8.01.07 Five (5) days or more shall elapse from the date of
release of any Consumer Paper and any other item of Collateral to
Borrower made at Lender's sole discretion subject to such terms
and conditions as Lender may from time to time require and such
Collateral has not been returned to Lender;
8.01.08 Twenty-one (21) days or more (or such greater time
as Lender may approve) shall elapse from the date of shipment or
delivery of Collateral to an Investor without Lender having
received full payment of the Separate Bank Advance(s) or portions
thereof secured thereby;
8.01.09 The occurrence of any circumstance that would cause
any Consumer Loan in respect of which a Separate Bank Advance was
made to fail to conform to the definition of Eligible Loan;
8.01.10 If presently held or later obtained, subsequent loss
of FNMA and/or FHLMC certification;
35
8.01.11 Failure of Borrower to observe or perform any
agreement of any nature whatsoever with Lender;
8.01.12 Borrower's default under the terms and conditions of
any other loan or credit agreement or other material agreement
with Lender or any third party, including any contract granting
Borrower Servicing Rights.
8.02 Remedies Upon Default: Upon such default, at Lender's
election, no additional advances shall be made by Lender and/or this
Agreement may be terminated and/or all sums now or hereafter owed by
Borrower to Lender may be declared to be immediately due and payable,
and Lender may charge Borrower's DDA account for any or all sums due
and owing to Lender. Lender shall have the rights and remedies of a
secured party under the Uniform Commercial Code in addition to the
rights and remedies provided herein or in any other instrument or
paper executed by Borrower, including, at its option and in its sole
discretion, until all sums now or hereafter owed to the Lender are
paid in full, the right or rights to:
8.02.01 Communicate with and notify the obligors under any
Consumer Loans of Borrower's assignments hereunder, and note any
such assignment on Borrower's records;
8.02.02 Take over the exclusive right to collect the
Collateral at the sole expense of the Borrower, without any
obligation to preserve rights against third parties. For any
acts done or not done incident to such collection or liquidation,
Lender shall not be liable in any manner. Lender shall have the
right to settle, compromise, or adjust Collateral and the claims
or right of Borrower thereunder and accept return of the real
estate or other Consumer Loan Collateral involved, and in turn
sell and dispose of all said real estate without notice to or
approval of Borrower, Lender may employ agents and attorneys to
collect or liquidate any Collateral, and Lender shall not be
liable for such Collateral or defaults of any such Lenders and
attorneys;
8.02.03 To effect collection of any Consumer Loan, take
possession of and open any mail addressed to Borrower whether on
Borrower's premises or elsewhere and to remove, collect, and
apply all payments therein contained and as attorney in fact for
Borrower, sign the Borrower's name to any receipts, checks,
notes,
36
agreements, assignments or other instruments or letters, in
order to collect, sell or liquidate the Collateral. This power
shall be irrevocable;
8.02.04 Require Borrower to assemble all books and records
of account relating to the Collateral and make them available to
Lender at its office herein set forth or such other place as may
be designated by Lender;
8.02.05 Enter the office of Borrower and take possession of
any of the Collateral including any records that pertain to the
Collateral; and
8.02.06 Undertake to service any Consumer Loans and upon the
happening of such, Borrower shall transfer to Lender all escrow
funds, records, and any other documents relating to any such
Consumer Loans then held by it.
8.03 Remedies Cumulative: All remedies available to Lender shall
be cumulative and not alternate in that the exercise of one or more of
them shall not preclude exercising one or more of the others.
8.04 Indemnity: (a) Borrower agrees to defend, protect, indemnify
and hold harmless Lender and its officers, directors, employees,
attorneys and Lenders (including, without limitation, those retained
in connection with the satisfaction or attempted satisfaction of any
of the conditions set forth herein) (collectively, the "Indemnities")
from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnities in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnities shall be
designated a party thereto), imposed on, incurred by, or asserted
against such Indemnities (whether direct, indirect or consequential
and whether based on any federal or state laws or other statutory
regulations, including, without limitation, securities and commercial
laws and regulations, under common law or at equity, or on contract or
otherwise) in any manner relating to or arising out of this Agreement,
or any act, event or transaction related or attendant thereto, the
making of the Loan, the management of the Loan or the use or intended
use of the proceeds of the Loan (collectively, the
37
"Indemnified Matters"); provided, that Borrower shall have no
obligation to an Indemnitee hereunder with respect to (i) Indemnified
Matters caused by or resulting from the willful misconduct or gross
negligence of that Indemnitee, as determined by a court of competent
jurisdiction, or (ii) any loss directly resulting from and which would
not have occurred but for the failure of Lender to perform its
obligations under this Agreement. To the extent that the undertaking
to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or
public policy, Borrower shall contribute the maximum portion which it
is permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Matters incurred by the
Indemnities.
(b) Without prejudice to the survival of any other obligation of
Borrower hereunder, the obligations and indemnities of Borrower
contained in this Section shall survive the termination of this
Agreement and payment in full of principal and interest hereunder and
under the Notes.
9. Sale of Consumer Paper.
So long as no Event of Default or event which with the passage of
time and/or the giving of notice would constitute an Event of Default
has occurred hereunder, Lender shall:
9.01 Delivery of Consumer Paper by Lender: Upon sale by Borrower
of any Consumer Loan on which a Separate Bank Advance has been made
hereunder and receipt by Lender of the entire proceeds thereof in an
amount sufficient to repay in full the Separate Bank Advance related
thereto, Lender shall deliver the Consumer Paper as requested by
Borrower to the Investor. Lender agrees to send the original Consumer
Paper together with the loan document delivery package received from
Borrower directly to the pertinent Investor no later than one Business
Day after receipt of said sale proceeds. Proceeds received by Lender
from the Investor shall be deposited in the Restricted Account for
application to the related Separate Bank Advance and any other amounts
then due by Borrower hereunder, and any sums remaining after full
repayment of the pertinent Separate Bank Advance and such other
amounts will be promptly credited to Borrower's Operating Account.
Lender may require Borrower to deliver a cover letter, in form
satisfactory to Lender, directing Investor to make payment directly to
Lender.
38
9.02 Reassignment of Consumer Paper by Lender. Reassign to
Borrower any Consumer Paper referred to in Paragraph 6.02 hereof, and
to deliver all supporting papers, upon payment in full to Lender of
the respective Separate Bank Advance, plus accrued interest.
10. Collections.
Upon default if so requested by Lender, in writing, Borrower
shall act as the representative of, and in trust for, Lender in
receiving and collecting all monies payable on any Consumer Loan and
after collection thereof shall deposit the same in the Restricted
Account, and the same shall be held by Lender as part of the
Collateral hereunder. Lender, upon deposit in the Restricted Account
of any monies payable on any such Consumer Loan, may, in its sole
discretion, apply all or any part thereof to the payment of Borrower's
obligation arising out of the related Separate Bank Advance or toward
any other Secured Obligation.
11. Miscellaneous.
11.01 Notices: Except as to routine business matters, any and all
communications between the parties hereto or notices provided herein
to be given in writing shall be i) delivered in person, ii) sent by
both certified or registered mail, return receipt requested, and by
regular mail, iii) by overnight courier service that provides for
proof of delivery; or iv) via facsimile transmission; addressed as
follows: if to Lender, 1339 Chestnut Street, F.C.1-8-12-7,
Philadelphia, PA 19102, (Fax No. (215) 786-8304), Attention: Andrew
Tauber; if to Borrower: Fidelity Mortgage Funding, Inc., 7 East
Skippack Pike, Ambler, Pennsylvania 19002 (Fax No. (215)648-3524)
Attention: ___________, or to such other address any party may by
notice indicate to the others from time to time. Unless sooner
received, all notices shall be deemed delivered two (2) days after
mailing, as herein set forth. Actual knowledge of the contents of the
notice, however received, shall constitute proper notice hereunder.
11.02 Successors and Assigns: The terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. All
representations, warranties, covenants (affirmative and negative) and
agreements herein contained on the part of
39
Borrower shall survive the making of any Separate Bank Advance and
the execution of Borrower's Note, and shall be effective as long as
any sums remain due and owing to Lender.
11.03 Assignment by Lender: Participations: (a) Lender may, at
any time, transfer or assign its Note and its rights under this
Agreement in whole or in part, without the prior written consent of
Borrower; (b) Lender may grant participations in its Note and in
rights under this Agreement and may, provided that Lender first has
such participant sign Lender's standard confidentiality agreement,
furnish to its participants or prospective participants financial and
other information concerning the Borrower in connection therewith.
11.04 Delay - No Waiver -- No delay in exercising, or failure to
exercise any right, power or remedy accruing to Lender through any
breach or default of Borrower under this Agreement, or any
acquiescence to any such breach or default, or to any similar breach
or default thereafter occurring, shall impair any such right, power
or remedy of Lender nor shall any waiver of any single breach or
default be deemed a waiver of any breach or default thereafter
occurring. Any waiver, permit, consent or approval of any kind or
character on the part of Lender of any provision or condition of the
Agreement, must be in writing and shall be effective only to the
extent of such writing specifically set forth. In the event Lender is
required to take any action to collect sums due under the Note or to
enforce, renegotiate, restructure or modify the terms of this
Agreement, or is required to institute, defend or otherwise
participate in any action at law or suit in equity arising from this
Agreement, or any Consumer Loan or Consumer Loan Collateral forming
part of the Collateral, Borrower, in addition to all other sums which
it may be called upon to pay, will pay Lender's fees, expenses and
costs, including the reasonable fees, incurred by Lender in connection
therewith. Nothing in this Agreement shall be deemed any waiver or
prohibition of Lender's right of set-off, except that Lender agrees to
not set-off against any legitimate custodial or escrow account in
which Borrower accumulates funds owned by individual mortgagors or
other third parties.
11.05 (a) Entire Agreement-Supplemental Policies and Procedures:
This Agreement, together with the Note and other documents executed in
connection herewith, sets forth the entire
40
agreement among the parties hereto, and there are no other
agreements, express or implied, written or oral, except as set
forth herein and thereon. This Agreement may not be amended,
altered or changed except in writing by all parties hereto. It is
contemplated that from time to time Borrower and Lender will
enter into supplemental agreements establishing policies and
procedures to carry out the terms of this Agreement. Such
agreements shall constitute amendments hereto provided they are
signed by Borrower and Lender.
(b) Partial Invalidity: The inapplicability or
unenforceability of any provision of this Agreement shall not
limit or impair the operation or validity of any other provisions
of this Agreement.
(c) Counterparts: This Agreement may be executed in any
number of counterparts, each of which, when executed and
delivered, shall be an original, but such counterparts shall
together constitute one and the same instrument.
(d) No Assignment by Borrower: This Agreement shall not be
assignable by Borrower without the express written approval of
Lender.
(e) Materiality Reliance by Lender: All covenants,
agreements and representations made herein and in documents
delivered in support of this Agreement, now or in the future,
shall be deemed to have been material and relied on by Lender and
shall not merge with this Agreement.
(f) No Third Party Beneficiary: The parties hereto
understand and agree that there is no intention to confer any
benefits upon any person or legal entity not a party to this
Agreement.
(g) Confidentiality: All information and materials provided
to Lender and Lenders by Borrower shall be treated with the same
degree of confidentiality as Lender maintains with regard to
similar information of its other customers generally. Nothing
contained herein shall prevent Lender from releasing to actual or
proposed loan participants such information regarding Borrower as
Lender may deem pertinent and necessary.
41
11.06 Interpretation of Accounting Terms: Each accounting term
used in this Agreement which is not specifically defined shall have
the meaning customarily given to it in accordance with generally
accepted accounting principles.
11.07 PENNSYLVANIA LAW; CONSENT TO JURISDICTION AND SERVICE: THIS
AGREEMENT AND THE NOTE SHALL BE GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA. BORROWER AGREES AND CONSENTS TO THE
EXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF PHILADELPHIA,
PENNSYLVANIA AND/OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN
DISTRICT OF PENNSYLVANIA. BORROWER AND LENDER HEREBY WAIVES ALL RIGHT
TO DEMAND A JURY TRIAL, IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER
ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING AND
IRREVOCABLY AGREES TO SERVICE OF PROCESS SENT BY CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, AND REGULAR MAIL TO THE ADDRESS AS SET FORTH
HEREIN, OR SUCH ADDRESS AS MAY APPEAR IN LENDER'S RECORDS.
IN WITNESS WHEREOF, the parties have executed this Agreement all
as of the day and year first hereinabove written.
CORESTATES BANK, N.A.,
By: /s/ Andrew Tauber
------------------------
Andrew Tauber
Vice President
FIDELITY MORTGAGE FUNDING, INC.
By:
------------------------
Attest:
--------------------
42
SCHEDULE 1
FIDELITY MORTGAGE FUNDING, INC.
NON-CONFORMING CREDIT UNDERWRITING CRITERIA
Classes of Loans A(1) B C D(2)
Warehouse Period 90 90 90 45
Debt to Income 50% 50% 50% 60%
Loan to Value 90% 85% 80% 75%
Mortgage Loan Maximum $200,000 on any non pre-approved
Mortgage Loan. Any loan over
$200,000 provided that the loan
is pre-approved by the Bank.
Employment Must be verified on all Loans.
The Borrower can underwrite and
close NIQ and NIV Loans.
Property 1 - 4 Family Dwelling; both owner
occupied and investor properties
are eligible.
Appraisal Required on all Loans.
Closings Must be closed by counsel or
title company.
Schedule 1 [continued on next page]
(1) With respect to Class "A" Mortgage Loans, the Bank will
permit such Mortgage Loans to have a loan-to-value ratio not to
exceed one hundred percent (100%) and a debt-to-income ratio not to
exceed 45%.
(2) Limited to 10% of Maximum Loan Amount.
43
The Bank in its sole discretion retains the right to accept or
reject any collateral.
From time to time, the Borrower may request a revision on the
credit underwriting criteria set out above provided (i) the
Borrower submits a revised Schedule 1 to the Bank for its written
approval; and (ii) the Bank approves the revised Schedule, in
writing, as evidenced by a letter from the Bank to the Borrower.
44
Schedule 2
Fidelity Mortgage Funding, Inc.
Small Multi Family/Mixed use Loans Underwriting Criteria
(Advance Rate is 95% with a 60 day warehouse period)
Eligible Property
Residential properties which may include income from nonresidential
sources.
Minimum Debt Service Coverage Ratio
2-6 Units: Net income equal or exceed debt service.
7 or more Units: 1.20x based on net income available for debt service.
Maximum Loan to Value
70%
Occupancy
Both owner occupied and investor properties are eligible.
Loan Limits
Minimum: $50,000
Maximum: $500,000
Lien Position
First liens only
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EXHIBIT "A"
Ownership of Stock
a. 100% of authorized and issued capital stock is owned by Resource
America, Inc.
EXHIBIT "B"
Location
a. 7 East Skippack Pike, Ambler, Pennsylvania 19002
NOTE
$5,000,000.00 September 23, 1997
FOR VALUE RECEIVED, and intending to be legally bound, FIDELITY MORTGAGE
FUNDING, INC. ("Borrower") promises to pay to the order of CORESTATES BANK, N.A.
("Bank") at Bank's office, the lesser of FIVE MILLION ($5,000,000.00) or the
principal balance outstanding hereunder pursuant to the provisions of the
Warehousing Agreement referred to below. The actual amount due and owing from
time to time hereunder shall be evidenced by the Bank's records of receipts and
disbursements hereunder which shall be conclusive evidence of such amount.
Borrower further agrees to pay interest on the unpaid principal amount
outstanding hereunder in accordance with the terms and conditions of the
Warehousing Agreement.
This Note constitutes the "Note" referred to in that certain Warehousing
Agreement of even date herewith between Borrower and Bank, to which agreement
reference is hereby made for the terms and provisions thereof, and for
additional rights and limitations of such rights of the Borrower and Bank
thereunder, including, but not limited to, provisions for Borrower's right to
borrow, prepay and reborrow part or all of the principal hereof under certain
conditions and for the acceleration of Borrower's liabilities to Bank upon the
occurrence of certain events as therein specified.
In the event counsel is employed to collect this obligation or to protect the
security hereof, Borrower agrees to pay, upon demand, the reasonable attorneys'
fees of Bank, whether suit be brought or not, and all other costs and expenses
reasonably connected with collection.
Borrower and any endorser, guarantor or surety, jointly and severally, waive
presentment, protest and demand, notice of protest, demand and dishonor and
nonpayment of this Note, and expressly agree that this Note, or any payment
hereunder, may be extended from time to time without in any way affecting the
liability of the Borrower or any endorser hereof.
The validity and construction and enforceability of, and the rights and
obligations of Borrower and Bank under this Note and the aforesaid Warehousing
Agreement shall be governed by, construed and enforced in accordance with the
substantive laws of the Commonwealth of Pennsylvania.
If permitted by law, Borrower hereby authorizes and empowers any attorney of any
court of record upon the occurrence of any Event of Default under the
Warehousing Agreement to appear for and confess judgment against Borrower
without prior notice to Borrower or prior opportunity to be heard for such sums
as shall have become due under this Note and all other obligations hereunder of
Borrower to Bank, with or without declaration, with costs of suit (including,
without limitation, reasonable attorneys' fees and disbursements) and release of
error, without stay of execution. If a
copy of this Note, verified by affidavit of Bank or someone on behalf of Bank,
shall have been filed in such action, it shall not be necessary to file the
original Note as a warrant of attorney. The authority and power to appear for
and enter judgment against Borrower shall not be exhausted by one or more
exercises thereof, or by any imperfect exercise thereof, and shall not be
extinguished by any judgment entered pursuant thereto; the authority and power
may be exercised on one or more occasions, from time to time, in the same or
different jurisdictions, as often as Bank shall deem necessary or desirable, for
all of which this Note shall be a sufficient warrant.
IN WITNESS WHEREOF, Borrower has caused these presents to be executed the day
and year first above written.
FIDELITY MORTGAGE FUNDING, INC.
By:
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Attest:
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