Exhibit 10.46
AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
among
OPTION ONE OWNER TRUST 2002-3,
as the Company,
UBS REAL ESTATE SECURITIES INC.
as the Note Purchaser
and
OPTION ONE MORTGAGE CORPORATION,
as the Loan Originator
Dated as of March 18, 2005
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .................................................................................. 2
Section 1.1 Definitions.................................................................... 2
Section 1.2 Usage of Terms................................................................. 18
ARTICLE II COMMITMENT AND ADVANCES...................................................................... 18
Section 2.1 Commitment to Purchase......................................................... 18
Section 2.2 Minimum Usage.................................................................. 19
Section 2.3 Principal Amount of Secured Notes.............................................. 19
Section 2.4 Procedures for Making Advances................................................. 19
Section 2.5 Interest Rate.................................................................. 21
Section 2.6 Interest Payments.............................................................. 21
Section 2.7 Maximum Interest Rate.......................................................... 22
Section 2.8 Funds; Manner of Payment....................................................... 22
Section 2.9 Issuance, Registration and Transfer of Secured Notes........................... 22
Section 2.10 Principal Payments; Payment on Maturity Date................................... 23
Section 2.11 Margin Option.................................................................. 24
ARTICLE III SECURITY ................................................................................... 25
Section 3.1 Lien........................................................................... 25
Section 3.2 Further Assurances............................................................. 26
Section 3.3 Power of Attorney.............................................................. 26
Section 3.4 Duty of Care................................................................... 26
Section 3.5 Earnings on Collateral......................................................... 27
Section 3.6 Release of Collateral.......................................................... 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES............................................................... 28
Section 4.1 Company's Representations and Warranties; Representations and Warranties
Regarding the Loans............................................................ 28
Section 4.2 OOMC's Representations and Warranties.......................................... 31
ARTICLE V BREACH OF REPRESENTATION OR WARRANTY.......................................................... 34
Section 5.1 General........................................................................ 34
Section 5.2 Sole Remedy.................................................................... 35
ARTICLE VI CONDITIONS PRECEDENT TO ADVANCES............................................................. 35
Section 6.1 Receipt by the Note Purchaser of Certain Documents............................. 35
Section 6.2 Conditions Precedent to all Advances and Substitutions......................... 38
Section 6.3 Additional Collateral.......................................................... 40
ARTICLE VII COVENANTS .................................................................................. 40
Section 7.1 Affirmative Covenants.......................................................... 40
Section 7.2 Negative Covenants............................................................. 44
ARTICLE VIII INDEMNIFICATION AND REIMBURSEMENT.......................................................... 45
Section 8.1 Indemnification................................................................ 45
Section 8.2 Taxes and Other Governmental Charges........................................... 46
Section 8.3 Reimbursement of Expenses...................................................... 46
Section 8.4 Survival....................................................................... 47
ARTICLE IX EVENTS OF DEFAULT............................................................................ 47
Section 9.1 Events of Default.............................................................. 47
ARTICLE X REMEDIES ..................................................................................... 50
Section 10.1 Acceleration; Action Regarding Collateral...................................... 50
Section 10.2 Deficiency..................................................................... 51
Section 10.3 Private Sale................................................................... 51
Section 10.4 Default Rate of Interest....................................................... 51
Section 10.5 Application of Proceeds........................................................ 52
Section 10.6 Payments on Collateral to the Company.......................................... 52
Section 10.7 Cross-Collateralization; Right of Set-Off...................................... 52
ARTICLE XI MISCELLANEOUS................................................................................ 53
Section 11.1 Amendment...................................................................... 53
Section 11.2 Governing Law.................................................................. 53
Section 11.3 Notices........................................................................ 53
Section 11.4 Severability of Provisions..................................................... 55
Section 11.5 No Waiver; Cumulative Remedies................................................. 55
Section 11.6 Termination.................................................................... 55
Section 11.7 Assignment..................................................................... 56
Section 11.8 Binding Effect; Third-Party Beneficiaries...................................... 56
Section 11.9 Merger and Integration......................................................... 56
Section 11.10 No Petition.................................................................... 56
Section 11.11 Cooperation.................................................................... 56
Section 11.12 Resales of Secured Notes....................................................... 57
Section 11.13 Qualified Institutional Buyer.................................................. 57
Section 11.14 Time........................................................................... 57
Section 11.15 Headings....................................................................... 57
Section 11.16 Exhibits....................................................................... 57
Section 11.17 Counterparts................................................................... 57
Section 11.18 No Recourse to Owner Trustee................................................... 58
ii
EXHIBITS
SCHEDULE I Collateral Loan Schedule........................................................... S-1
EXHIBIT A [RESERVED]......................................................................... A-1
EXHIBIT B Representations and Warranties Regarding the Loans................................. B-1
EXHIBIT C Form of Notice of Borrowing........................................................ C-1
EXHIBIT D Underwriting Standards............................................................. D-1
EXHIBIT E Capital Adequacy Test.............................................................. E-1
iii
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT, dated as of March 18,
2005, between Option One Owner Trust 2002-3, a Delaware business trust (the
"Company"), and UBS REAL ESTATE SECURITIES INC. a Delaware corporation (the
"Note Purchaser"), and Option One Mortgage Corporation, a California corporation
("OOMC", or the "Loan Originator").
WITNESSETH:
WHEREAS, pursuant to the Sale and Servicing Agreement or one or more
transactions under the Disposition Agreement, the Company is expected to
purchase from Option One Owner Trust 2001-1A, a Delaware business trust, Option
One Owner Trust 2001-1B, a Delaware business trust, Option One Owner Trust
2001-2, a Delaware business trust or Option One Loan Warehouse Corporation, a
California corporation ("OOLWC") (any of the foregoing, in its capacity as a
seller of Loans to the Company, the "Immediate Transferor"), from time to time
(i) certain Loans that are acquired by the Immediate Transferor (if other than
OOLWC) from OOLWC, which Loans were originally acquired by OOLWC from Option One
Mortgage Corporation ("OOMC", or the "Loan Originator"), and (ii) the Other
Assets relating to such Loans; and
WHEREAS, the Company desires to obtain a series of advances (each,
an "Advance") from the Note Purchaser to be evidenced by one or more promissory
notes substantially in the form of Exhibit A to the Facility Administration
Agreement (each, a "Secured Note") to finance in whole or in part the purchase
of such Loans; and
WHEREAS, to induce the Note Purchaser to make one or more Advances,
the Company has agreed, among other inducements set forth herein, to grant to
the Note Purchaser a first priority perfected Lien in and on all of the Loans,
together with the related Other Assets and other Collateral, all of which
collectively constitute the Collateral to secure the Advances; and OOMC has
agreed, among other inducements set forth herein, to make directly to the Note
Purchaser certain of the representations and warranties set forth herein; and
WHEREAS, a list of the Loans to be included in the Collateral on the
date of the Initial Advance is set forth in Schedule I hereto (the "Collateral
Schedule" or "Loan Schedule"), which Collateral Schedule shall be supplemented
as and when additional Loans are purchased and acquired by the Company from the
Loan Originator pursuant to the Sale and Servicing Agreement with the proceeds
of the issuance of one or more additional or substitute Secured Notes;
WHEREAS, this Amended and Restated Note Purchase Agreement amends
and restates the Note Purchase Agreement dated as of July 2, 2002, between the
parties hereto, as amended;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Company, the Note Purchaser and OOMC hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below. In addition,
capitalized terms used herein and not defined herein shall have their respective
meanings as set forth in the Sale and Servicing Agreement, the Custodial
Agreement or the Facility Administration Agreement.
"Accepted Servicing Practices" shall mean the Servicer's normal
servicing practices in servicing and administering mortgage loans for its own
account, which in general shall conform to the mortgage servicing practices of
prudent mortgage lending institutions which service for their own account
mortgage loans of the same type as the Loans in the jurisdictions in which the
related Mortgaged Properties are located and which shall (i) give due
consideration to the Noteholders' reliance on the Servicer, and (ii) comply in
all material respects with all applicable laws, rules, regulations and orders.
"Actual Note Issuance Proceeds" shall have the meaning as described
in Section 2.4(d).
"Act of Insolvency" shall mean, with respect to the Company, the
Immediate Transferor, OOLWC, OOMC or any other Affiliate of the Company, (i) the
commencement by such Person as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution,
delinquency or similar law, or such Person seeking the appointment or election
of a receiver, conservator, trustee, custodian or similar official for such
Person or any substantial part of its property, or the convening of any meeting
of creditors for purposes of commencing any such case or proceeding or seeking
such an appointment or election, (ii) the commencement of any such case or
proceeding against such Person, or the seeking by another person of any such
appointment or election, which (A) is consented to or not timely contested by
such Person, or (B) results in the entry of an order for relief, such as an
appointment or election, the issuance of such a protective decree or the entry
of an order having a similar effect, or (C) is not dismissed within 60 days
(unless such Person provides to the Note Purchaser evidence reasonably
satisfactory to the Note Purchaser that such case or proceeding will be promptly
dismissed), (iii) the making by such Person of a general assignment for the
benefit of creditors, (iv) the failure by such Person generally to pay its debts
as they become due or (v) the admission in writing by such Person of its
inability to pay its debts as they become due.
"Advance Amount" shall mean, with respect to any Advance, the
initial amount of such Advance, which shall be equal to the sum of (i) the
aggregate Collateral Value of the Loans Pledged hereunder in connection with the
making of such Advance, and (ii) the aggregate Market Value of all Interim
Collateral, if any, Pledged hereunder in connection with the making of such
Advance, minus, if applicable, any portion of the foregoing sum that, if
advanced, would cause the aggregate Principal Balances of the Secured Notes to
exceed the Borrowing Base.
2
"Advance Date" shall mean the date upon which an Advance is made
available as specified in Section 2.4, which date shall be a Business Day.
"Advance Rate" shall have the meaning specified in the Pricing Side
Letter.
"Affiliate" shall mean, with respect to any specified Person, any
other Person controlling, controlled by or under common control with such
Person. For the purposes of this definition, "control" means the power to direct
the management and policies of a Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Affiliate Transfer Agreement" shall mean each agreement between (i)
OOMC, as "seller," and OOLWC, as "purchaser," (ii) if the Immediate Transferor
is not OOLWC, OOLWC, as "seller," and the Immediate Transferor, as "purchaser",
or (iii) between OOMC or any other Affiliate of the Company, as "seller" and any
Affiliate of the Company other than OOMC, as "purchaser," for the purchase and
sale or other transfer of Loans that are Collateral for the Secured Notes, and
includes each Mortgage Loan Purchase and Contribution Agreement.
"Agreement" shall mean this Amended and Restated Note Purchase
Agreement, as amended, supplemented or otherwise modified and in effect from
time to time, including any Schedules and Exhibits hereto.
"Applicable Limitations" shall have the meaning specified in the
Pricing Side Letter.
"assignee" (or any word of similar import) shall mean, with respect
to any Person, any immediate or mediate assignee, pledgee or other transferee of
such Person.
"Basic Documents" shall mean, collectively, this Agreement, the
Secured Notes, the Loan Purchase and Contribution Agreement, the Custodial
Agreement, the Facility Administration Agreement, the Sale and Servicing
Agreement, each other Transfer Agreement, if any, the Disposition Agreement, the
Company Administration Agreement, the Trust Agreement and any and all other
agreements, certificates, instruments and other documents executed and delivered
in connection herewith and therewith or in connection with the transactions
contemplated hereby and thereby.
"Bankruptcy Code" shall mean Title 11 of the United States Code, 11
U.S.C. Sections. 101 et seq., as amended, supplemented or otherwise modified and
in effect from time to time.
"Borrowing Base" shall mean, as of any date of determination, the
sum of: (i) the aggregate Collateral Values of all Loans Pledged as such date;
(ii) the Market Value of all related Interim Collateral on such date; and (iii)
the amount of principal collections then on deposit in the Collection Account
with respect to all Loans.
3
"Business Day" shall mean any day other than a Saturday, Sunday, or
any other day on which banks in New York, California, Minnesota, Maryland or
Pennsylvania are authorized or required by law to close.
"Change in Control" shall mean (i) OOMC's failure to be a
wholly-owned Subsidiary of H&R Block Inc., (ii) OOLWC's failure to be a
wholly-owned Subsidiary (direct or indirect) of OOMC, or (iii) for an Immediate
Transferor other than OOLWC, the Immediate Transferor's failure to be a
wholly-owned Subsidiary of OOLWC.
"Chief Executive Office" shall have the meaning assigned to such
term in Article 9 of the UCC.
"Closing Date" shall mean July 8, 2002.
"Collateral" shall mean all of the Company's right, title and
interest in and to: (i) all Loans purchased or acquired by the Company from time
to time, whether pursuant to the Sale and Servicing Agreement or otherwise
(including all Qualified Substitution Loans substituted pursuant to Section
5.1), (ii) all Related Security and Collections relating to such Loans, (iii)
all Interim Collateral, (iv) the Sale and Servicing Agreement (including the
right to cause the Loan Originator to repurchase Loans as provided in Section
3.06 of the Sale and Servicing Agreement and including the right to terminate
all of OOMC's rights and obligations as the Servicer as provided in Section 9.01
of the Sale and Servicing Agreement), (v) the Loan Purchase and Contribution
Agreement, (vi) all other Affiliate Transfer Agreements and other Transfer
Agreements, if any, relating to the Loans purchased or acquired by the Company
from time to time (including all rights and remedies provided thereunder in the
event of a breach of representation or warranty by the related transferors),
(vii) all other Basic Documents now or at any time hereafter in effect, (viii)
all right, title and interest of the Company, and of each of OOLWC and the Loan
Originator (to the extent assigned to the Company) in and under the Basic
Documents, including, without limitation, the obligations of the Loan Originator
under the Loan Purchase and Contribution Agreement pursuant to which OOLWC
acquired the Loans from the Loan Originator, and (ix) all Proceeds of any and
all of the foregoing (including all monies, investments and other properties
held from time to time in the Collection Account or any other account
established pursuant to any other Basic Document).
"Collateral Schedule" or "Loan Schedule" shall mean, with respect to
any Advance, the list of all of the Loans and Interim Collateral, if any,
Pledged in connection with the making of such Advance, and, where the context
requires, shall mean all such Collateral Schedules collectively, as amended from
time to time pursuant to the Basic Documents. The Collateral Schedule shall be
transmitted either electronically or in hard copy, and shall set forth the
following information with respect to each Loan so Pledged:
(i) the Loan Originator's Loan identifying number;
(ii) the Mortgagor's name and social security number;
4
(iii) the street address of the Mortgaged Property, including the
state and zip code;
(iv) a code indicating whether the Mortgaged Property was
represented by the Mortgagor as being owner-occupied on the
date of origination;
(v) the type of Residential Dwelling constituting the Mortgaged
Property;
(vi) the months to maturity at origination, based on the original
amortization schedule;
(vii) the loan-to-value ratio at origination;
(viii) the rate of interest in effect on the Advance Date;
(ix) the day of the month on which the first monthly payment was
due, and, if different, the day of the month on which
monthly payments are due as of the Advance Date;
(x) the stated maturity date;
(xi) the amount of the monthly payment due at origination;
(xii) the amount of the monthly payment due on the first due date
after the Advance Date;
(xiii) the interest paid-through date;
(xiv) the last monthly payment date on which any portion of the
monthly payment was applied to the reduction of principal;
(xv) the original principal amount;
(xvi) the UPB as of the close of business on the notice date;
(xvii) if the Loan is an adjustable-rate loan, the initial
adjustment date thereunder, including the look-back period;
(xviii) if the Loan is an adjustable-rate loan, the gross margin
over the applicable interest rate index;
(xix) a code indicating the purpose of the Loan, as indicated by
the Mortgagor (i.e., purchase financing, rate/term
refinancing or cash-out refinancing);
(xx) if the Loan is an adjustable-rate loan, the maximum interest
rate;
5
(xxi) if the Loan is an adjustable-rate loan, the minimum
interest rate;
(xxii) the interest rate at origination;
(xxiii) if the Loan is an adjustable-rate loan, the periodic rate
cap and the maximum adjustment in the interest rate that
may be made on the first adjustment date immediately
following the Advance Date;
(xxiv) a code indicating the documentation program (i.e., full
documentation, limited documentation or stated income);
(xxv) if the Loan is an adjustable-rate loan, the applicable
interest rate index to which the gross margin is added,
including the source of such index;
(xxvi) if the Loan is an adjustable-rate loan, the first
adjustment date thereunder to occur after the Advance
Date;
(xxvii) the risk grade;
(xxviii) any risk upgrade;
(xxix) the appraised value of the Mortgaged Property at
origination;
(xxx) if different from the appraised value, the dollar value of
the review appraisal of the Mortgaged Property at
origination;
(xxxi) the sale price of the Mortgaged Property, if applicable;
(xxxii) the product type code (e.g., 3/27, 2/28, balloon, etc.);
(xxxiii) a code indicating whether the Loan is a first-lien loan or
a second-lien loan;
(xxxiv) if the Loan is a second-lien loan, the outstanding
principal balance of the first lien on the date of
origination of such Loan;
(xxxv) if the Loan is a second-lien loan, the combined
loan-to-value ratio of such Loan and the first lien to
which it is subject, as of the origination date of such
Loan;
(xxxvi) the prepayment penalty code;
(xxxvii) the prepayment penalty term;
(xxxviii) the late charge;
(xxxix) the rounding code (next highest or nearest 0.125%); and
6
(xl) the Mortgagor's FICO score, if any;
(xli) if there is mortgage insurance with respect to the Loan, a
code so indicating;
(xlii) the date the Loan was originated;
(xliii) if the Loan is negatively amortizing, a code so indicating;
(xliv) if the Loan is a Section 32 loan, a code so indicating;
(xlv) the Mortgagor's debt to income ratio;
(xlvi) the number of units included in the Mortgaged Property;
(xlvii) the remaining term of the Loan, stated in months;
(xlviii) the age of the Loan, in months;
(xlix) the first monthly payment date under the Loan;
(l) if the Loan is an adjustable-rate loan, the frequency at
which the interest rate is adjusted;
(li) if the Loan is an adjustable-rate loan, the frequency at
which the monthly payment amount is adjusted;
(lii) if the Loan is an adjustable-rate loan, the next reset date
to occur after the Advance Date;
(liii) if the Loan is an adjustable-rate loan, the maximum change
that may be made in the interest rate on any adjustment
date; and
(liv) if the loan is a Wet Funded Loan or not
The Collateral Schedule delivered with respect to any Advance Date shall also
set forth the following information with respect to the Loans set forth thereon:
(1) the number of Loans set forth thereon; (2) the aggregate UPB of all such
Loans as of the close of business on the related notice date; (3) the weighted
average interest rate of all such Loans as of the related notice date; (4) the
weighted average months to maturity of all such Loans; and (5) the weighted
average loan-to-value ratio of all such Loans.
"Collateral Value" shall have the meaning specified in the Pricing
Side Letter.
"Collection Account" shall mean the account denominated as such that
is established and maintained in the name of the Facility Administrator pursuant
to the terms of the Facility Administration Agreement for the deposit by the
Servicer (subject to the provisions of the Disposition Agreement) of monthly
remittances of principal and
7
interest, prepayments of principal (whether full or partial) received with
respect to Loans, liquidation proceeds and other amounts related to Loans.
"Collections" shall mean, with respect to any Loan, all cash
collections and other cash proceeds (other than Escrow Payments) related to a
Loan received by the Servicer or any other Person on or after the applicable
Advance Date, including all principal and interest payments made by the
Mortgagor thereon and all cash proceeds of the Related Security with respect to
such Loan.
"Commitment Amount" shall have the meaning specified in the Pricing
Side Letter.
"Commitment Term" shall mean that period of time commencing on March
19, 2005 and continuing until the earlier of (i) September 8, 2005 (or, if
applicable, such later date as may be in effect from time to time pursuant to
Section 2.10(d)), and (ii) the date upon which the Obligations are declared to
be, or become, due and payable in full in accordance with Article X.
"Company Administration Agreement" shall mean the Administration
Agreement, dated as of July 2, 2002, among the Servicer, the Company, and the
Loan Originator (including any applicable amendments, supplements, exhibits and
schedules thereto).
"Custodial Agreement" shall mean the Custodial Agreement, dated as
of July 2, 2002, among the Servicer, the Company, the Note Purchaser, the
Facility Administrator and the Custodian (including any applicable amendments,
supplements, exhibits and schedules thereto).
"Custodial Loan File" shall mean, with respect to any Loan, the
documents identified in clauses (i) through (vii) of Section 2(b) of the
Custodial Agreement which are delivered or required to be delivered by the
Company to the Note Purchaser or its designee (including the Custodian) pursuant
to this Agreement.
"Custodian" shall mean Wells Fargo Bank Minnesota, National
Association, a national banking association, as custodian under the Custodial
Agreement, or any successor thereto.
"Default" shall mean any situation that, with the giving of notice
or the passage of time, or both would, unless cured or waived, become an Event
of Default.
"Default Rate" shall mean, for any day, an annualized rate equal to
the One-Month LIBOR Rate plus 400 basis points per annum.
"Determination Date" shall have the meaning assigned to such term in
the Sale and Servicing Agreement.
"Disposition Agreement" shall mean the Master Disposition
Confirmation Agreement dated as of July 2, 2002, among the Company, the Note
Purchaser, the
8
Facility Administrator, the Loan Originator and the other parties thereto
(including any applicable amendments, supplements, exhibits and schedules
thereto).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, supplemented or otherwise modified and in effect from time to
time, and the rules and regulations promulgated thereunder.
"Escrow Payments" shall have the meaning specified in Article I of
the Sale and Servicing Agreement.
"Event of Default" shall have the meaning specified in Section 9.1.
"Facility Administration Agreement" shall mean the Facility
Administration Agreement, dated as of July 2, 2002, among the Company, the Note
Purchaser, the Servicer and the Facility Administrator (including any applicable
amendments, supplements, exhibits and schedules thereto).
"Facility Administrator" shall mean Wells Fargo Bank, National
Association, a national banking association, as administrator under the Facility
Administration Agreement, or any successor thereto.
"GAAP" shall mean generally accepted accounting principles applied
on a consistent basis as required thereby.
"GAAP Net Worth" shall mean, as of any date of determination and
with respect to OOMC, the "tangible net worth", as defined and determined in
accordance with GAAP, of OOMC as of such date, exclusive of any loans
outstanding to any officer or director of OOMC or its Affiliates.
"Governmental Authority" shall include any nation, government, or
state, or any political subdivision of any of them, or any court, entity, or
agency exercising executive, legislative, judicial, regulatory, or
administrative functions of or pertaining to government.
"Grant" shall mean mortgage, pledge, bargain, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Agreement. A Grant of rights in any Collateral (including any
agreement or instrument included within the definition thereof) shall include
all rights, powers and options (but none of the obligations) of the Granting
party with respect thereto or thereunder, including the immediate and continuing
right to claim for, collect, receive and give receipt for principal and interest
payments in respect of the Collateral and all other monies payable thereunder,
to give and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring proceedings in the name
of the Granting Person or otherwise and generally to do and receive anything
that the Granting Person is or may be entitled to do or receive thereunder or
with respect thereto.
9
"Initial Advance" shall mean the Advance relating to the Secured
Note issued and sold hereunder on the initial Advance Date.
"Interest Period" shall mean, with respect to each Secured Note, (i)
the period beginning on (and including) the issuance date of such Secured Note
and ending on (but excluding) the initial Payment Date thereon, and (ii) each
subsequent period beginning on (and including) a Payment Date and ending on (but
excluding) the next succeeding Payment Date.
"Interim Collateral" shall mean any of (i) cash and (ii) direct
obligations of the U.S. Treasury that are backed by the full faith and credit of
the United States of America.
"Lien" shall mean any lien, pledge, security interest, charge or
other encumbrance that secures an obligation, of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any lien or security interest) and however
created.
"LIBOR Business Day" shall mean a Business Day on which trading in
U.S. dollars is conducted between banks in the London interbank market.
"Loan" shall mean a fixed- or variable-rate, first-lien loan or
second-lien loan to one or more obligors, in each case, that is secured by a
Mortgage on a Residential Dwelling located in the United States.
"Loan Documents" shall mean each Mortgage, each Promissory Note and
each other agreement, instrument or other document executed by one or more
Mortgagors or other obligors that constitutes a portion of the Related Security
with respect to any Loan.
"Loan Purchase and Contribution Agreement" shall mean the Loan
Purchase and Contribution Agreement, dated as of July 2, 2002, between the Loan
Originator as "Loan Originator" and Option One Loan Warehouse Corporation as
"Depositor" (including any applicable amendments, supplements, exhibits and
schedules thereto).
"Margin" shall have the meaning specified in the Pricing Side
Letter.
"Margin Option" shall have the meaning specified in Section 2.11.
"Market Value" shall mean, with respect to any item of Collateral as
of any date of determination, the market value thereof as determined by the Note
Purchaser in its capacity as Market Value Agent in accordance with the relevant
provisions of the Sale and Servicing Agreement; provided that, in making any
determination pursuant to this definition, the "Market Value" of any Loan as to
which, at the time of such determination, (p) a breach of any representation or
warranty set forth on Exhibit B or in Section 4.1(m) (or in Section 4.1(k) or
4.2(h), to the extent that Section 4.1(k) or 4.2(h) applies to the
representations and warranties set forth on Exhibit B or in Section 4.1(m))
10
exists that, in the good faith judgment of the Note Purchaser, materially and
adversely affects the validity, enforceability, collectibility or value of such
Loan or the interest of the Note Purchaser or any Noteholder therein, or (q) any
portion of any payment of principal or interest due thereunder is more than 90
days past due, shall be deemed to be zero.
"Material Adverse Effect" shall mean any event or condition which
would have a material adverse effect on (i) the validity, enforceability,
collectibility or value of any Collateral or of any of the Basic Documents, (ii)
the interest of the Note Purchaser or any of its assignees in such Collateral or
in any of the Basic Documents, (iii) the validity or enforceability of, or the
ability of the Company to perform its obligations under any of the Basic
Documents or (iv) the validity or enforceability of, or the ability of any of
the Immediate Transferor, OOLWC and OOMC to perform its obligations under, the
Basic Documents.
"Maturity Date" shall mean March 31, 2035.
"Minimum Margin Contribution" shall have the meaning specified in
Section 2.11.
"Minimum Usage Fee" shall have the meaning specified in the Pricing
Side Letter.
"Mortgage" shall mean, with respect to any Loan, the mortgage, deed
of trust, deed to secure debt or other instrument securing such Loan and the
related Promissory Note and creating a Lien on and in the related Mortgaged
Property.
"Mortgaged Property" shall mean the underlying real property that
secures a Loan, in each case consisting of a parcel or parcels of land improved
by a Residential Dwelling.
"Mortgagor" shall mean the obligor or obligors on a Promissory Note,
including any Person that has acquired the related Mortgaged Property and
assumed the obligations of the original obligor or obligors under the Promissory
Note.
"Net Income" shall mean, for any period, and with respect to a
Person, the net income of the Person for such period as determined in accordance
with GAAP.
"Non-Warehouse Leverage Ratio" shall mean the ratio of (x) the
aggregate "liabilities" of such Person less any liabilities constituting
"warehouse" lending (i.e., liabilities primarily secured by an interest in
mortgage loans for the purpose of financing such mortgage loans on an interim
basis until the disposition of such mortgage loans and liabilities associated
with servicing advance receivables (up to 80% of the GAAP book value of the
servicing advance receivable)) to (y) the Tangible Net Worth of such Person. For
the purposes of this definition, the term "liability" shall mean those
obligations or liabilities that, in accordance with GAAP, would be included in
the liability side of such Person's balance sheet and shall include, without
limitation, all indebtedness subordinated to any other obligation of the
Company; provided however,
11
that liabilities secured by intangible assets, shall be included only to the
extent of the excess, if any, of the amount of liabilities over the fair market
value of such intangible assets.
"Noteholder" shall mean the Note Purchaser or any subsequent holder
of a Secured Note registered as such on the Custodial Register maintained by the
Facility Administrator pursuant to the Facility Administration Agreement.
"Notice of Borrowing" shall mean a notice with respect to each
Advance, in substantially the form set forth in Exhibit C, delivered to the Note
Purchaser and the Facility Administrator by the Company in the method and manner
set forth herein.
"Obligations" shall mean all amounts due and owing by the Company to
the Note Purchaser in connection with any Basic Document, including: (i) the
unpaid principal and, interest (including interest accruing thereon after the
Maturity Date and after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceedings, relating to
the Company, whether or not a claim for post-filing or post-petition interest is
allowed in the proceeding) on any Secured Note, when and as due, whether at
maturity, by acceleration or otherwise; and (ii) all other obligations and
liabilities of every nature of the Company from time to time owing to the Note
Purchaser, in each case whether direct or indirect, absolute or contingent, due
or to become due, or now existing or hereafter incurred (including any monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in the proceeding).
"One-Month LIBOR Rate" shall mean, for each day, the rate of
interest per annum for dollar deposits with a duration of one month that is
displayed (i) on the Telerate Page 3750 at about 11:00 a.m. (London time) on the
second LIBOR Business Day prior to such day, or (ii) if that page ceases to
display the necessary information, then on whatever page replaces it on that
service for the purpose of displaying that information (the "Telerate Rate"). If
the Telerate Rate cannot be determined, then the "One-Month LIBOR Rate" for any
day means the arithmetic mean of the rates of interest offered by two prime
banks in the London interbank market (selected by the Facility Administrator) in
respect of dollar deposits with a duration of one month at about 11:00 a.m.
(London time) on the second LIBOR Business Day prior to such day. Each
determination of the "One-Month LIBOR Rate" by the Facility Administrator
pursuant to the provisions of this Agreement or the Facility Administration
Agreement shall be conclusive and binding absent manifest error.
"Optional Redemption Date" shall mean, with respect to any Secured
Note and at any time, the day on which the then-current Commitment Term is
scheduled to end or, if such date is not a Business Day, the immediately
preceding Business Day.
"Other Assets" shall mean, with respect to any Loan purchased or
acquired from time to time by the Company (whether pursuant to the Sale and
Servicing Agreement or otherwise), any and all Related Security and Collections
relating to such Loan and any and all Proceeds of such Loan, Related Security or
Collections.
12
"Payment Date" shall mean the 10th day of each calendar month (or,
if such day is not a Business Day, the next succeeding Business Day), together
with the Redemption Date, the Maturity Date, and such additional Payment Dates
as may be designated pursuant to Section 5.4(f) of the Facility Administration
Agreement.
"Person" (whether or not capitalized) shall mean any corporation,
limited liability company, partnership, firm, joint venture, entity, natural
person, trust, estate, unincorporated organization, association, enterprise,
government or political subdivision thereof or governmental department or
agency.
"Pledge" shall mean the Grant by the Company under the Facility
Administration Agreement of its right, title and interest in any portion of the
Collateral pursuant to Section 2.2 thereof or any other provision thereof.
"Pledged Loan" shall mean, as of any date of determination, any Loan
that has been purchased or acquired by the Company (whether pursuant to the Sale
and Servicing Agreement or otherwise, including any Qualified Substitution Loan
substituted for one or more other Loans pursuant to Section 5.1) and Pledged to
the Note Purchaser under the terms of this Agreement as of such date; provided,
however, that such term shall not include any Loan that as of such date has been
released from the Lien created herein as provided in Section 3.6.
"Principal Amount" shall mean, with respect to each issued and
outstanding Secured Note of the Company, an amount equal to the sum of (i) the
initial Advance Amount of such Secured Note, minus (ii) all payments of
principal on such Secured Note pursuant to the terms hereof.
"Proceeds" (whether or not capitalized) shall mean (i) "proceeds" as
defined in Article 9 of the UCC, with respect to any of the Collateral,
including all cash and non-cash proceeds and further including all accounts,
accounts receivable, contract rights, money, claims for money (whether or not
earned by performance), checks, deposit accounts, documents, instruments,
chattel paper, investment property (including securities, securities
entitlements, securities accounts, commodity contracts and commodity accounts),
general intangibles, rights to proceeds of letters of credit and other property
(including goods, fixtures, products and accessions), and (ii) whether or not
constituting "proceeds" as defined in Article 9 of the UCC: (x) any and all
proceeds of any insurance policy, indemnity, warranty, or guaranty payable to
the Company from time to time with respect to any of the Collateral; (y) all
payments (in any form whatsoever) made or due and payable to the Company from
time to time in connection with any reacquisition, confiscation, condemnation,
seizure or forfeiture of any part of the Collateral by any Governmental
Authority or any sale, transfer or other disposition of any part of the
Collateral; and (z) dividends and any other amounts or property paid or
distributed, or payable or distributable, on or in respect of, or in connection
with, any of the Collateral.
13
"Promissory Note" shall mean the original executed promissory note
or other evidence of indebtedness evidencing the indebtedness of a Mortgagor
under a Loan, together with any rider, addendum or amendment thereto.
"Qualified Institutional Buyer" shall mean a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act.
"Qualified Loan" shall mean, as of any date of determination
(including the date of issuance of any related Secured Note), a Loan with
respect to which each of the representations and warranties set forth on Exhibit
B is true and correct in all material respects.
"Qualified Substitution Loan" shall mean any Loan (i) that meets all
the requirements of this Agreement with respect to substitutions of Collateral
(including that each of the representations and warranties set forth on Exhibit
B be true and correct in all material respects with respect thereto), and (ii)
as to which the Company has (a) the right, either directly or through
assignments of such rights under one or more Affiliate Transfer Agreements, to
cause the Loan Originator to repurchase such Loan on substantially the same
terms and conditions as those set forth in Section 3.06 of the Sale and
Servicing Agreement, and (b) the right to Pledge such rights to the Note
Purchaser as provided herein.
"Records" shall mean all Loan Documents and other material documents
held or maintained by or for the Loan Originator or the Company (or other
originator or transferor of any Loan under any Transfer Agreement) or any of
their respective agents with respect to (i) any Loans sold to the Company
pursuant to the Sale and Servicing Agreement or otherwise acquired by the
Company, or (ii) the related Mortgagors or other obligors under any Related
Security, including any and all Required Documents and all Servicing Records
maintained by or for the benefit of the Servicer, including print-outs of Loan
histories and other records with respect to any Loan stored in the Servicer's
computerized servicing systems; provided that the foregoing definition of
"Records" is not intended to entitle any Person to direct access to the
computerized systems of any other Person.
"Redemption Date" shall mean, with respect to any Secured Note, the
date on which such Secured Note is redeemed by the Company at the Note
Purchaser's election as provided in Section 2.10. Such date may be any Business
Day on or after the Optional Redemption Date and prior to the Maturity Date of
such Secured Note, as designated by the Note Purchaser in a written notice
delivered to the Company at least two (2) Business Days prior to such date.
"Related Security" shall mean, with respect to any Loan, all of the
Company's right, title and interest in and to:
(i) the Mortgaged Property securing such Loan;
(ii) all other Liens, if any (and the property subject
thereto), from time to time purporting to secure payment of such Loan or
performance of
14
any obligation with respect thereto, whether pursuant to the related Loan
Documents or otherwise, together with all financing statements or other
documents executed or filed for the purpose of perfecting any such Lien or
placing such Lien of public record or otherwise imparting actual or
constructive notice thereof;
(iii) all guarantees, indemnities, warranties, insurance (and
proceeds and refunds of premiums in respect thereof) or other agreements
or arrangements of any kind from time to time supporting or securing
payment of such Loan or performance of any obligation with respect
thereto, whether pursuant to the Loan Documents related to such Loan or
otherwise;
(iv) the right to service such Loan, including all agreements
relating to the servicing and administration of such Loan and all
agreements relating to the custody of the Records relating to such Loan;
(v) all Records related to such Loan; and
(vi) all Proceeds of any of the foregoing.
"Remittance Period" shall have the meaning assigned to such term in
the Sale and Servicing Agreement.
"Residential Dwelling" shall mean any one of the following, none of
which is a cooperative: (i) an attached or detached one-family dwelling, (ii) an
attached or detached two- to four-family dwelling, (iii) an attached or detached
one-family dwelling unit in a Fannie Mae eligible condominium project, (iv) an
attached or detached one-family dwelling in a planned unit development, or (v) a
mobile home affixed to and constituting real property under applicable state
law.
"Responsible Officer" shall mean, as to any Person, the chief
executive officer, the president, the chief operating officer, any executive
vice president or the chief financial officer of such Person.
"Sale and Servicing Agreement" shall mean the Amended and Restated
Sale and Servicing Agreement, dated as of March 18, 2005, among the OOLWC as
"Depositor", the Company, the Loan Originator and the Facility Administrator
(including any applicable amendments, supplements, exhibits and schedules
thereto).
"Secured Note" shall mean a Secured Note issued by the Company in
order to finance the purchase from the Loan Originator of one or more Loans.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securitization" shall have the meaning assigned to such term in the
Disposition Agreement.
15
"Servicer" shall mean OOMC in its capacity as servicer of the Loans,
and, to the extent applicable, each other Person as may be appointed from time
to time in accordance with the provisions hereof to act as servicer or
Subservicer of any or all of the Loans.
"Shortfall" shall have the meaning specified in Section 2.11.
"Subservicer" shall mean such Person as may be appointed from time
to time by the Servicer to act as a subservicer of any or all of the Loans that
are part of the Collateral, provided that such Person is acceptable to and
approved by the Company and the Note Purchaser.
"Subsidiary" of a Person shall mean any other Person more than fifty
percent (50%) of the outstanding voting securities of which shall at any time be
owned or controlled, directly or indirectly, by such Person or by one or more
Subsidiaries of such Person. For purposes of this definition, "voting
securities" shall mean shares, interests, participations or other equivalents of
corporate stock, partnership or limited liability company interests or any other
participation, right or other interest in the nature of an equity interest that
ordinarily have voting power for the election of directors, managers or
trustees, whether at all times or only so long as no senior class of equity
interest has such voting power by reason of any contingency.
"Tangible Equity" shall mean, with respect to any Person, the
aggregate "assets" of such Person less (i) the aggregate "liabilities" of such
Person, (ii) all intangible assets (including capitalized servicing) of such
Person; provided, however that with respect to residual interests and retained
interests in warehouse facilities only 50% of the value of such intangible
assets will be deducted from the related Person's aggregate "assets" and
provided, further that 50% of any deferred tax component of the write-up in the
value of any residual interests will be added to the aggregate "assets" of such
Person for purposes of determining its Tangible Equity, and (iii) any
investments in or loans to the shareholders, directors, officers, employees,
Subsidiaries and Affiliates of such Person (excluding investments in or loans to
such Person's parent or to H&R Block Inc.). For the purposes of this definition,
(x) the term "asset" shall have the meaning ascribed to such term by GAAP, but
shall also include so-called deferred points and fees; and (y) the term
"liability" shall mean those obligations or liabilities that, in accordance with
GAAP, would be included in the liability side of such Person's balance sheet and
shall include, without limitation, all indebtedness subordinated to any other
obligation of the Company; provided however, that liabilities secured by
intangible assets, shall be included only to the extent of the excess, if any,
of the amount of liabilities over the fair market value of such intangible
assets.
"Tangible Equity Requirement Failure" shall mean, as of any date of
determination and with respect to OOMC, that OOMC's Tangible Equity as of such
date is less than $130,000,000.
16
"Tangible Net Worth" shall be defined and determined in accordance
with GAAP and exclusive of (i) any loans outstanding to any officer or director
of OOMC or its Affiliates, (ii) any intangibles, and (iii) any receivables from
H&R Block Inc.
"Telerate Rate" shall have the meaning specified in the definition
of "One-Month LIBOR Rate."
"Transfer Agreement" shall mean an agreement between OOMC or any
Affiliate thereof as the "purchaser," and a third party originator or seller
(including any Affiliate of OOMC) as the "seller" or other transferor, for the
purchase and sale or other transfer of Loans that are Collateral for a Secured
Note.
"Transferor" shall mean a third party originator or seller
(including any Affiliate of OOMC) that is a "seller" or other transferor under a
Transfer Agreement.
"Trust Agreement" means the trust agreement pursuant to which the
Company is organized.
"UCC" shall mean the Uniform Commercial Code, as in effect in the
relevant jurisdiction, as amended, supplemented or otherwise modified from time
to time.
"Underwriting Standards" shall mean the Loan Originator's
underwriting policies and guidelines (including any and all amendments,
supplements or other modifications thereto) as set forth in Exhibit D (as such
Exhibit may be amended, supplemented or modified from time to time, subject to
Section 7.2(f)).
"UPB" shall mean, with respect to any Loan as of any date of
determination, the unpaid principal balance (determined without taking into
account any principal payments made with respect to such Loan on such date).
"Wet Funding Custodial File Delivery Date" As defined in the Sale
and Servicing Agreement.
"Wet Funded Loan" shall mean a Loan which is pledged to the Note
Purchaser, simultaneously with the origination thereof by the Company pursuant
to Section 2.4(d) and is funded in part or in whole with proceeds of the
purchase of Notes. A Loan shall cease to be a Wet Funded Loan when documents are
received by the Custodian as provided in Section 2.4(d)(iii).
"Wet Funding Schedule" shall have the meaning specified in Section
2.4(d)(ii).
17
Section 1.2 Usage of Terms. For purposes of this Agreement: (i) the
singular includes the plural and the plural includes the singular; (ii) words
importing any gender include the other genders; (iii) the words "and" and "or"
are used in the conjunctive or disjunctive as the sense and circumstances may
require, (iv) references to "writing" include printing, typing, lithography and
other means of reproducing words in a visible form; (v) references to agreements
and other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and not
prohibited by this Agreement or the Sale and Servicing Agreement; (vi)
references to Persons include their permitted successors and assigns; (vii) any
form of the word "include" shall be deemed to be followed by the words "without
limitation"; (viii) the phrase "in and to" shall be deemed to include "under"
and "with respect to" whenever appropriate; (ix) unless the context clearly
requires otherwise, the word "finance" shall be deemed to include "refinance";
(x) the words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision; and (xi) Article, Section, Schedule and Exhibit
references, unless otherwise specified, refer to Articles and Sections of and
Schedules and Exhibits to this Agreement. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding."
ARTICLE II
COMMITMENT AND ADVANCES
Section 2.1 Commitment to Purchase. (a) Subject to the terms and
conditions set forth herein, the Company hereby agrees to sell to the Note
Purchaser, and the Note Purchaser hereby agrees to purchase from the Company,
during the Commitment Term, one or more Secured Notes in the method and manner
set forth herein. The purchase price for each Secured Note shall be equal to the
original Principal Amount thereof. The aggregate Principal Amount of all Secured
Notes issued and outstanding shall not exceed the Commitment Amount, unless the
Note Purchaser in its sole discretion consents in writing to an increase in the
aggregate Principal Amount that may be issued and outstanding hereunder.
(b) The Custodian shall be required under the Custodial Agreement to
amend (which may be manually) the Collateral Schedule upon the addition or
deletion of Collateral related thereto, and the Borrowing Base shall be adjusted
accordingly.
(c) With the exception of the Principal Amount, the calculation of
the Advance Amount reflected thereon and the Maturity Date, each Secured Note
shall have substantially the same terms as each other Secured Note, including
the base interest rate, the Payment Date and the Optional Redemption Date. Each
Secured Note shall be secured by all of the Collateral, equally and ratably with
each other Secured Note issued hereunder.
18
Section 2.2 Minimum Usage. The Company and OOMC hereby acknowledge
that the Note Purchaser is entering into this facility with the understanding
that the Note Purchaser expects to receive the Minimum Usage Fee as and when
provided in the Pricing Side Letter.
Section 2.3 Principal Amount of Secured Notes. The initial Principal
Amount of each Secured Note shall be the related Advance Amount; provided that
the Note Purchaser shall not be required to make any Advance in an amount that
is less than twenty million dollars ($20,000,000). Under no circumstances shall
a Noteholder other than the Note Purchaser be required to make any Advance at
all hereunder.
Section 2.4 Procedures for Making Advances.
(a) If the Company desires to obtain an Advance hereunder, other
than the Initial Advance, the Company shall deliver a Notice of Borrowing to the
Note Purchaser and to the Facility Administrator, specifying the amount of
Advance requested and the requested Advance Date, not later than 3:30 p.m., New
York City time, two (2) Business Days prior to the requested Advance Date for
any Loans which are not Wet Funded Loans, and (ii) 4:30 p.m., New York City
time, one (1) Business Day prior to the Advance Date for any Loans which are Wet
Funded Loans. Each Notice of Borrowing shall (i) specify the requested Advance
Date, (ii) include a Mortgage Loan Tape in electronic form containing detailed
information with respect to the Loans (other than the Wet Funded Loans) that the
Company proposes to pledge to the Note Purchaser and to be included in the
Borrowing Base in connection with such Notice of Borrowing, and (iii) attach a
different certificate of the Company as required by Section 6.02(c) hereof. With
respect to Wet Funded Loans, the Company shall provide the Note Purchaser with
(i) a detailed listing of the Wet Funded Loans the Company proposed to pledge by
9:00 a.m. New York City time on the related Advance Date and (ii) a final
listing of the Wet Funded Loans the Company proposed to pledge by 4:00 p.m. New
York City time on the related Advance Date.
(b) If on the designated Advance Date the conditions of this
Agreement (including those of the related Notice of Borrowing) have been either
satisfied by the Company or waived by the Note Purchaser, the related Advance
Amount shall be funded on such Advance Date by the Note Purchaser. Each Advance
shall be made available to the Company in immediately available funds to the
account identified by the Company against delivery by the Company to the Note
Purchaser of a Secured Note, duly executed on behalf of the Company by the
Facility Administrator, in a Principal Amount equal to the Advance Amount.
(c) In the case of a Loan which is not a Wet Funded Loan, the
Company shall release to the Custodian, no later than 7:30 a.m. Pacific time,
two (2) Business Days (or such later time as the Custodian and the Company may
agree) prior to the requested Advance Date, the Custodial Loan File pertaining
to each Loan to be pledged to the Note Purchaser and included in the Borrowing
Base on such requested Advance Date, in accordance with the terms and conditions
hereof and of the Custodial Agreement.
19
(d) With respect to each Loan which is a Wet Funded Loan pledged to
the Facility Administrator and included in the Borrowing Base on a requested
Advance Date:
(i) Not later than 4:30 p.m. New York City time at least one
Business Day prior to the related Advance Date, the Company shall
deliver to the Facility Administrator a report detailing the
approximate outstanding principal balance of Wet Funded Loans to be
pledged to the Note Purchaser on such Advance Date and the
approximate principal amount of the related Notes.
(ii) An amount up to the expected original principal amount of each
Wet Funded Loan, shall be remitted, in whole or in part, as
requested by the Company, by the Note Purchaser, provided that, on
or prior to the related Advance Date, the Company shall provide to
the Note Purchaser a schedule (the "Wet Funding Schedule") setting
forth the mortgage loan identification number, the Mortgagor name,
the outstanding principal balance of Wet Funded Loans, the amount to
be remitted for each Wet Funded Loan to be pledged to the Facility
Administrator on such Advance Date and the aggregate of all such
amounts, to be remitted on such Advance Date.
(iii) The Company shall deliver the Custodial Loan File related
thereto to the Custodian for receipt by the Custodian no later than
the Wet Funded Custodial File Delivery Date.
(iv) No later than the close of business, New York City time, on the
Business Day following each Advance Date, the Company shall forward
to the Note Purchaser a schedule with respect to each Wet Funded
Loan funded on such Advance Date setting forth the related Loan
number, the Mortgagor name, the amount of each such Wet Funded Loan,
and a list of each wire actually issued in respect to such Wet
Funded Loan, setting forth the amount, the payee, and the wire
reference number, as appropriate. Any amounts with respect to each
Wet Funded Loan which have not funded will be remitted by the
Company back to the Note Purchaser no later than the close of
business on the Business Day following each Advance Date.
(e) Pursuant to the Custodial Agreement, the Custodian shall:
Issue a Trust Receipt by 1:00 p.m. Pacific time in connection
with each delivery of Loans to the Custodian under the Custodial
Agreement (or any change in the Loans held by the Custodian
hereunder, including the conversion of Wet Funded Loans to Loans
that are not Wet Funded Loans prior to 1:00 p.m. Pacific time on
the date of issuance of such Trust Receipt), and a cumulative
Exceptions Report and cumulative Loan Schedules shall be attached
to such Trust
20
Receipt. Separate Trust Receipts will be delivered in connection
with Wet Funded Loans and Loans which are not Wet Funded Loans.
Upon the issuance of a new Trust Receipt for Wet Funded Loans or
for Loans which are not Wet Funded Loans, the prior Trust Receipt
for such Loans shall be deemed canceled. If any Wet Funded Loans
have not funded pursuant to Section 2.4(d)(iv), then the
Custodian shall issue a new Trust Receipt reflecting such
unfunded Wet Funded Loans.
(f) The Company shall furnish to the Note Purchaser a preliminary
Mortgage Loan Schedule with respect to Wet Funded Loans not later than 4:30 p.m.
New York City time on the Business Day preceding the related Advance Date,
confirmed by near-final Mortgage Loan Schedule for such Wet Funded Loans
received by the Note Purchaser not later than 6:00 p.m. New York City time on
the Business Day prior to the related Advance Date.
(g) Subject to Section 6 hereof, the purchase price of each Advance
required under Section 2.1 will then be made available (or deemed made
available) to the Company by the Note Purchaser by means of transfer, via wire
transfer, of the funds made available to the Note Purchaser for the Advance, to
the following account of the Company (or such other account as it may identify
by notice given to the Note Purchaser not later than the third Business Day
before the relevant Advance Date):_______, for the A/C of the Company, in trust,
ABA#_________, Attn:_________., in funds immediately available to the Company.
Section 2.5 Interest Rate. The Principal Amount of each Secured Note
shall bear interest, for each day, at a rate per annum equal to the One-Month
LIBOR Rate plus the Margin, in each case computed on the basis of a 360-day year
for the actual number of days elapsed.
Section 2.6 Interest Payments.
All interest accrued on each Secured Note for each Interest Period
shall be payable in arrears on each Payment Date for the related Interest Period
from amounts allocable to interest on the Loans on deposit in the Collection
Account (including net investment earnings on deposit in such Account) on the
Determination Date immediately preceding the Payment Date, together with such
additional amounts, if any, as may be deposited into the Collection Account
prior to such Payment Date by the Servicer pursuant to the Sale and Servicing
Agreement, and to the extent that such interest receipts and deposits by the
Servicer are insufficient, from the Company directly. Any interest receipts
remaining in the Collection Account with respect to the Remittance Period then
most recently ended following payment of the interest due on the related Payment
Date shall be immediately released to the Company. All interest accrued and
unpaid as of the Maturity Date of any Secured Note, or, if earlier, the
applicable Redemption Date, shall be payable thereon.
21
Section 2.7 Maximum Interest Rate.
If, by the terms of this Agreement or any Secured Note, the Company
at any time is required or obligated to pay interest at a rate in excess of the
maximum rate permitted by applicable law, the rate of interest payable with
respect to the affected Secured Notes shall be immediately reduced to that
maximum rate and the portion of all prior applicable interest payments in excess
of the maximum rate permitted by applicable law shall be applied in reduction of
the Principal Amounts of the affected Secured Notes.
Section 2.8 Funds; Manner of Payment.
Each payment under or in connection with this Agreement or any
Secured Note shall be paid by the Company, or (without limiting the Company's
obligation to make any and all payments required hereunder or under any Secured
Note) by the Facility Administrator on behalf of the Company, in each case,
without set-off or counterclaim (except as the parties may otherwise agree in
the normal course of business) and in immediately available funds, to the Note
Purchaser at its office located at 1285 Avenue of the Americas, New York, New
York or to any other location that the Note Purchaser or any Noteholder
specifies to the Company, not later than 3:00 p.m. New York City time on the
date on which the payment is payable. If the date for any payment of principal
is extended or any reason, by operation of law or otherwise, interest shall
accrue at the then-applicable rate during the extension (subject, if applicable,
to Section 10.4).
Section 2.9 Issuance, Registration and Transfer of Secured Notes.
Each Advance shall be evidenced by the issuance of a new Secured
Note. Each Secured Note shall be duly executed by the Company and be payable to
the Note Purchaser, or its registered assigns, in an initial Principal Amount
equal to the related Advance Amount. Each Secured Note shall be dated the date
of the related Advance, be stated to mature on the Maturity Date, and provide
for the payment of interest in accordance with Sections 2.5, 2.6, 2.7, 2.8, 2.10
and 10.4.
The final payment of principal to be made on any Secured Note shall
be made only upon surrender of such Secured Note to the Company (or the Facility
Administrator on behalf of the Company at its corporate trust office in
Columbia, Maryland). Any sale or transfer of a Secured Note may be made only in
a transaction that is exempt from the registration requirements of the
Securities Act, and only to a Person that the selling or transferring Person
reasonably believes to be a Qualified Institutional Buyer, and the Secured Notes
shall bear a legend to that effect. Every Secured Note presented or surrendered
to the Facility Administrator for registration of transfer or exchange shall be
accompanied by a written instrument, executed by the transferee, substantially
in the form of Exhibit C to the Facility Administration Agreement and otherwise
reasonably satisfactory to the Note Purchaser, indicating that such sale or
transfer is being effected in full compliance with, or is exempt from, the
registration requirements of the Securities Act. Any new Secured Note issued in
22
exchange for a Secured Note shall be executed by the Facility Administrator on
behalf of the Company and delivered by the Facility Administrator.
Section 2.10 Principal Payments; Payment on Maturity Date.
(a) In addition to such payments of principal as the Company may be
required to make pursuant to Section 5.1 or Article X or as provided in
Subsection 2.10(b), 2.10(c) or 2.11, on each Payment Date, the Company shall
prepay the Secured Notes in an amount equal to the sum of the aggregate amount
held in the Collection Account in respect of the principal of Loans (whether as
part of a regular monthly installment of principal and interest, in respect of
any whole or partial prepayment of any Loan, or in respect of the liquidation of
any Loan) at the close of business on the Determination Date immediately
preceding such Payment Date. Each payment of principal shall be applied to the
repayment of the principal of the Secured Notes in proportion to the amounts of
principal collected with respect to each Secured Note.
(b) From time to time, the Note Purchaser may, in the exercise of
its rights under Article IV and Section 6.3 of the Trust Agreement (and in
compliance therewith), direct that the Company sell one or more Loans to one or
more identified Persons and on specified terms and conditions, and apply the
proceeds of such sale (i) to the extent required to avoid the occurrence of a
Shortfall upon giving effect to such sale, to the prepayment of the principal of
the Secured Notes, and (ii) to the payment of accrued and unpaid interest on
that portion of the Secured Notes so prepaid, to the date of prepayment. The
Company shall comply with all such directions, and, upon the closing of such
sale, shall apply the proceeds thereof in accordance with the preceding
sentence.
(c) The Company shall repay the Principal Amount of each Secured
Note in full on the Maturity Date, together with all accrued and unpaid interest
thereon to the Maturity Date and all other accrued and unpaid Obligations under
the Basic Documents. In addition, if the Note Purchaser so elects in its sole
discretion (such election to be made by the Note Purchaser in writing and
delivered to the Company at least two (2) Business Days prior to the date
specified in the writing as the Redemption Date), the Company shall repay the
respective Principal Amounts of all issued and outstanding Secured Notes in full
on the Optional Redemption Date, together with all accrued and unpaid interest
thereon to the Optional Redemption Date and all other accrued and unpaid
Obligations under the Basic Documents. Pursuant to the preceding sentence, the
Note Purchaser hereby elects, and the Company hereby acknowledges receipt of
such notice of election, to require the Company to repay the respective
Principal Amounts of all issued and outstanding Secured Notes in full on the
Optional Redemption Date (which shall be the Redemption Date), together with all
accrued and unpaid interest thereon to, but not including, the Redemption Date
and all other accrued and unpaid Obligations under the Basic Documents;
provided, however, that the Note Purchaser and the Company may mutually agree to
revoke such election on any date that is 90 or more days prior to the Optional
Redemption Date. Any extension of the Commitment Term effected pursuant to
Section 2.10(d) shall automatically extend the then-current Optional Redemption
Date and Redemption Date.
23
(d) (i) The Company, by notice in writing delivered to the Note
Purchaser (each such notice, an "Extension Request") no later than the date that
is 180 days before the then-current Optional Redemption Date, may request that
the Note Purchaser agree to extend the Commitment Term for an additional period,
in each case, ending on a Business Day not more than three hundred sixty-four
(364) days from the date upon which the Note Purchaser approves such request (if
applicable).
(ii) Upon receipt of any Extension Request from the Company, the
Note Purchaser shall undertake a credit assessment of the Company consistent
with the Note Purchaser's then-current credit standards and practices, and, if
the Note Purchaser decides, in its sole and total discretion, to extend the
Commitment Term for an additional period as described in the preceding clause
(i), the Note Purchaser shall so notify the Company that it has approved the
Extension Request, and of the last day of the Commitment Term, as so extended,
which shall be a Business Day not more than 364 days after the date of such
Notice. If the Note Purchaser does not respond to the Company within thirty (30)
days after the date on which it receives the Extension Request, the Note
Purchaser shall be deemed to have declined the Extension Request.
(iii) The Company and OOMC acknowledge that the Note Purchaser
has not made any representations to the Company or OOMC regarding its intention
to extend the Commitment Term as set forth in this Section 2.10(a), and that the
Note Purchaser shall not have any obligation to extend the Commitment Term.
(e) For the avoidance of doubt, any Minimum Usage Fee shall be
calculated as of the last day of the relevant Minimum Usage Period , and shall
be due and payable on the last day of such Minimum Usage Period (whether or not
it is the Redemption Date) or, if applicable, the last day of the Commitment
Term, and shall constitute an accrued and unpaid Obligation for purposes of
calculating the amounts required to be paid in connection with any prepayment of
the Secured Notes in full.
Section 2.11 Margin Option.
At any time and from time to time, the Note Purchaser shall have the
right to determine whether the Borrowing Base supports the aggregate Principal
Amounts of the Secured Note. The right to make such determination includes the
right to determine the Market Value of each Loan with respect to the acquisition
of which a Secured Note was issued at any time and from time to time. If at any
time the Note Purchaser determines that the aggregate Principal Amounts of the
Secured Notes exceed the Borrowing Base, then, in each such case, a "Shortfall"
shall exist.
The Note Purchaser shall give written notice to the Company and
OOLWC of such determination and of the amount of such Shortfall (each such
notice, a "Margin Option") and, if notice is provided by 11:00 a.m. New York
City time, within one Business Day (and otherwise, within two Business Days)
after receipt of such Margin Option, (a) OOLWC has contributed to the Company
(i) to the extent held by or reasonably available to OOLWC, Qualified
Substitution Loans having an aggregate Collateral Value equal to at least the
amount of such Shortfall, and (ii) to the extent that
24
sufficient Qualified Substitution Loans are not so held by, or reasonably
available to, OOLWC, cash in an amount equal to at least the difference between
the amount of such Shortfall and the aggregate Collateral Value of such
Qualified Substitution Loans as are contributed by OOLWC to the Company (the
"Minimum Margin Contribution"); and (b) the Company has Pledged such Qualified
Substitution Loans, together with all Other Assets related thereto, to the Note
Purchaser and has paid such cash to the Note Purchaser, for immediate
application to the repayment of the principal of the Secured Notes, then the
Shortfall shall be deemed to have been cured. If, within such period, the
Shortfall has not been so cured, or if, prior to expiration of such period,
OOLWC has notified the Note Purchaser that OOLWC does not intend to effect the
Minimum Margin Contribution, such occurrence shall constitute an Event of
Default; provided, however, that nothing contained herein shall either obligate
OOLWC to effect any Minimum Margin Contribution or impose any liability to the
Note Purchaser on OOLWC for any election by OOLWC not to effect a Minimum Margin
Contribution.
If any portion of the proceeds of an Advance are made available to
the Company in connection with the inclusion in the Borrowing Base of a proposed
Wet Funded Loan which is not actually made on the Advance Date, the Company
shall not later than one Business Day after that Advance Date prepay that
portion of the principal amount of the Notes which corresponds to such proposed
Wet Funded Loan. The interest accrued on the amount of the prepayment from and
including the relevant Advance Date and to but excluding the date of the
prepayment (or, if the prepayment is made on the Advance Date, one day's
interest thereon) shall be included in the interest payable hereunder on the
next following Payment Date.
Notwithstanding any other provision of this Agreement or any other
Basic Document to the contrary, if OOLWC effects all or any portion of a Minimum
Margin Contribution, the Company shall immediately (x) Pledge to the Note
Purchaser all Qualified Substitution Loans, together with all Other Assets
related thereto, and (y) pay, or cause to be paid, to the Note Purchaser, all
cash contributed to the Company by OOLWC in response to the precipitating Margin
Option. All such cash shall be immediately applied to repayment of the principal
of the Secured Notes.
ARTICLE III
SECURITY
Section 3.1 Lien.
The due and punctual payment and performance by the Company of all
of its obligations hereunder, including the payment of any and all amounts
required to be paid pursuant to the Secured Notes and the payment of any and all
other Obligations, shall at all times be secured by a Lien on and in all of the
Company's right, title and interest of any kind and nature whatsoever (whether
now owned or existing or at any time hereafter acquired or arising) in and to
the Collateral, which shall at all times be a Lien of first priority. Such Lien
shall be granted by the Company, pursuant to the Facility
25
Administration Agreement, to the Facility Administrator as collateral agent and
secured party for the benefit and on behalf of the Note Purchaser.
Section 3.2 Further Assurances.
Promptly upon the Note Purchaser's request from time to time, the
Company shall perform (or cause to be performed) such further acts and shall
execute, acknowledge and deliver (or cause to be executed, acknowledged and
delivered) to the Note Purchaser or its designee such further documents,
consistent with the terms of this Agreement (including UCC-1 financing
statements naming the Company as debtor and the Facility Administrator as
secured party and any continuation statements relating thereto), as the Note
Purchaser may deem necessary or advisable in order to evidence, establish,
maintain, protect, enforce or defend its rights in and to the Collateral
(including any and all of the Pledged Loans) or otherwise to carry out the
intent and accomplish the purposes of this Agreement. To the fullest extent
permitted by applicable law, the Facility Administrator shall be permitted from
time to time to sign and file continuation statements and amendments thereto and
assignments thereof without the Company's signature. In all cases, carbon,
photographic or other reproduction of this Agreement or any financing statement
shall be sufficient as a financing statement.
Section 3.3 Power of Attorney.
The Company hereby appoints each of the Note Purchaser and the
Facility Administrator as the Company's true and lawful attorney-in-fact, with
the right (but not the obligation) to act in the Company's name, place and
stead, with full power of substitution and delegation, for the purpose of
carrying out the provisions of this Agreement and taking any action and
executing any documents consistent with the terms of this Agreement and the
Facility Administration Agreement that the Note Purchaser shall deem necessary
or advisable to accomplish the purposes hereof (including any financing or
continuation statements that may be necessary to perfect or continue any Lien
granted to the Facility Administrator as described in Section 3.1). This
appointment as attorney-in-fact is irrevocable and is coupled with an interest
until such time as the Commitment Term has ended, all Obligations have been paid
in full, and all other obligations of the Company under the Basic Documents have
been performed in full. Without in any way limiting the generality of the
foregoing, the Facility Administrator shall have the right and power to receive,
endorse and collect all checks made payable to the order of the Company on
account of the principal of or interest on any of the Pledged Loans and to give
full discharge of the same.
Section 3.4 Duty of Care.
Neither the Note Purchaser nor the Facility Administrator shall have
any duty with respect to any of the Collateral except to use commercially
reasonable care in the safekeeping and preservation of any of the Collateral
that may come into its actual possession. To the fullest extent permitted under
applicable law, the Company hereby waives the defense of impairment of the
Collateral. The Company shall take any reasonable and necessary action
appropriate to preserve the Note Purchaser's or the
26
Facility Administrator's rights in the Collateral against any other Person, and
shall defend the Collateral against all claims and demands of all Persons, at
all times, that are adverse to the Note Purchaser or the Facility Administrator,
in its capacity as collateral agent and secured party for the benefit and on
behalf of the Note Purchaser.
Section 3.5 Earnings on Collateral.
With respect to each Secured Note, so long as an Event of Default
shall not have occurred, the aggregate interest collected on all of the Loans
constituting related Collateral that relates to the prior Remittance Period as
of the related Determination Date may, to the extent not required to pay
interest on such Secured Note that accrued during the related Interest Period or
to discharge any other Obligation (including the payment of interest on any
other Secured Note), be paid by the Facility Administrator to the Company or as
otherwise provided in the Facility Administration Agreement, and if by being so
paid it is distributed in any manner other than to the Note Purchaser or any
person acting on behalf of the Note Purchaser (e.g., the Facility
Administrator), then the distributions shall be released from the Lien granted
to the Facility Administrator by the Facility Administration Agreement. The Note
Purchaser may, in its sole discretion after the occurrence and during the
continuation of an Event of Default, direct the Facility Administrator to remit
all amounts that would otherwise be available for distribution to the Company or
its designee (including any Certificateholder under the Trust Agreement) with
respect to the Collateral to be transferred directly to the Note Purchaser.
Section 3.6 Release of Collateral.
(a) Release Upon Repurchase or Prepayment of Loan. At any time that
a Loan that has been Pledged by the Company hereunder is repurchased or prepaid
in full (whether to cover a Shortfall pursuant to Section 5.1 or otherwise), the
Company may obtain a release from the Facility Administrator of its Lien with
respect to the Loan(s) that are repurchased or as to which a prepayment is made,
and the Note Purchaser shall so instruct the Facility Administrator.
(b) Release Upon Sale of Loans and Prepayment of Secured Notes. If
the Note Purchaser shall direct the sale of any Loan as described in Subsection
2.10(b), then, provided that immediately after giving effect to such sale (and
taking into account the application of the proceeds of such sale, in whole or in
part, to the prepayment of the Secured Notes), no Shortfall would exist, (i) the
Note Purchaser shall cause the Facility Administrator to release its Lien with
respect to such Loan and (ii) provided, further, that no Default or Event of
Default then exists or would be caused thereby, the Note Purchaser shall cause
the Facility Administrator to release its Lien with respect to that portion, if
any, of the proceeds of such sale in excess of the amount required under Section
2.10(b) to be applied to the payment of the principal of and interest on the
Secured Notes.
(c) Documentation. Any release of the Facility Administrator's Lien
with respect to any part of the Collateral as a result of a repurchase or
prepayment shall be evidenced by the execution and delivery by the Facility
Administrator of appropriate
27
documentation to evidence the release, such documentation to be prepared at the
expense of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Company's Representations and Warranties;
Representations and Warranties Regarding the Loans.
(i) The Company and OOMC jointly and severally represent and warrant
to the Note Purchaser, with respect to Section 4.1(m), on the date of the Pledge
hereunder of the related Loan; and (ii) the Company severally represents and
warrants to the Note Purchaser, with respect to each other subsection of this
Section 4.1, on the date of this Agreement, on the date of each Advance and on
each date on which any Collateral is released to it or substituted by it, that:
(a) Due Organization. The Company is a business trust duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all power and all material governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction in which its business is now conducted. The Company is duly
qualified to do business in, and is in good standing in, every other
jurisdiction in which the nature of its business requires it to be so qualified.
(b) Authorization; Binding Effect. The Company has full power and
authority to execute and deliver this Agreement and each Secured Note and to
perform its obligations under the Basic Documents to which it is a party. The
Basic Documents to which the Company is a party have been duly authorized by all
necessary action and do not require any additional approval by anyone that has
not already been obtained. The Basic Documents to which the Company is a party
have been duly executed and delivered by the Company and constitute its valid
and legally binding obligations, enforceable against it in accordance with their
respective terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity and equitable
remedies, regardless of whether enforcement is considered in a proceeding in
equity or at law.
(c) No Conflict. Neither the execution and delivery nor the
performance by the Company of the Basic Documents to which it is a party will
conflict with the governing instruments of the Company or conflict with, result
in a breach, violation or acceleration of, or constitute a default or require
any consent under any instrument or agreement to which the Company is a party or
by which the Company or its properties may be bound, or any law, order, or
regulation applicable to the Company of any Governmental Authority having
jurisdiction over the Company or its properties, and do not and will not result
in or require the creation of any Lien (other than pursuant to this Agreement)
with respect to any of the Company's properties.
28
(d) Approvals. Neither the execution and delivery nor the
performance by the Company of the Basic Documents to which it is a party
requires any authorization, approval, consent, license, exemption (other than
any self-executing exemption), filing, registration, or any other action except
those which have been obtained and are in full force and effect or where the
failure to comply with the requirement would not adversely affect the delivery,
execution or performance by the Company of the Basic Documents.
(e) No Defaults. Neither the Company nor any of its Affiliates is in
default under any mortgage, borrowing agreement or other instrument or agreement
pertaining to indebtedness for borrowed money to which it is a party or by which
its properties are bound, which default is likely to result in a Material
Adverse Effect. No Event of Default has occurred and is continuing under this
Agreement.
(f) Good Title. The Company holds good and indefeasible title to,
and is the sole owner of, all right, title and interest in and to the Collateral
(including any and all Loans and the related Other Assets given as security for
any of the Company's obligations hereunder), free and clear of all Liens,
participations and rights of others (except for the Lien created by this
Agreement), and on each date this representation is made, the Note Purchaser has
a first priority Lien with respect to the Collateral and no further action in
the nature of delivery of possession or filing, including any filing of any
document (other than the filing of a UCC-1 financing statement with the
Secretary of the State of California naming the Company as "debtor" and the Note
Purchaser as "secured party" and describing the Collateral as the "collateral"
therein, but only if such filing has not previously been made), is required to
establish and (insofar as a security interest may be perfected by filing or
possession) perfect the Lien with respect to the Collateral in favor of the Note
Purchaser against all third parties in any jurisdiction.
(g) Chief Executive Office. The Company's Chief Executive Office is
located at 3 Ada, Irvine, CA 92618. The Custodial Loan Files concerning the
Pledged Loans are held in the offices of the Custodian under the Custodial
Agreement in the State of California.
(h) Taxpayer Identification Number. The Company's federal taxpayer
identification number is 3543125.
(i) Tax Liens. There are no delinquent federal, state, city, county,
or other taxes relating to any of the Company, the Immediate Transferor, OOLWC
or OOMC except those taxes (i) that are being contested by such Person in good
faith, (ii) that are not material in amount, (iii) with respect to which payment
has been stayed by a court of competent jurisdiction, (iv) that relate to a
Mortgage Property, or (v) that would not have a Material Adverse Effect.
(j) No Litigation. There are no actions, suits, investigations or
other proceedings pending or, to the best knowledge of the Company after due
inquiry, threatened against or affecting the Company by or before any court,
arbitrator, or Governmental Authority (i) asserting the invalidity of this
Agreement or any of the other
29
Basic Documents, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or any of the other Basic Documents,
or (iii) which is reasonably likely to materially and adversely affect the
validity, enforceability, collectibility or value of any Pledged Loan that is
being Pledged on such date or other Collateral that is being Pledged on such
date or the interest of the Note Purchaser or any Noteholder. There are no
preliminary or permanent injunctions or orders by any court or other
Governmental Authority pending adversely affecting this Agreement or any of the
other Basic Documents or any of the transactions contemplated hereby or thereby.
(k) All Documents True and Correct. All representations and
warranties made, and all information, reports, financial statements (including
financial statements of OOMC), exhibits, schedules, and documents or copies of
documents furnished to the Note Purchaser by or on behalf of the Company
pursuant to or in connection with the negotiation, preparation, delivery or
performance of this Agreement and the other Basic Documents to which the Company
is a party, or with the transactions contemplated hereby, are true and correct
and, when considered as a whole, complete in every material respect or (in the
case of projections, based on reasonable estimates), at the time when made or,
if limited to a specific date, as of the date to which they refer, and no such
writing or information contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading. There is no fact known to a Responsible Officer of the
Company or the Loan Originator that, after due inquiry, could reasonably be
expected to have a Material Adverse Effect that has not been disclosed herein,
in the other Basic Documents to which the Company is a party or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Note Purchaser for use in connection with the transactions
contemplated hereby or thereby.
(l) Investment Company Act. The Company is not, nor is it controlled
by, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(m) Qualified Loans. Each and every Loan that is a Pledged Loan is
also a Qualified Loan.
(n) Ownership of the Company. The Company is, indirectly, a
wholly-owned Subsidiary of OOMC and is wholly-owned, directly, by OOLWC.
(o) Debt. The Company does not have any outstanding debt obligation
for money borrowed (other than debt arising under this Agreement), any other
(i.e., debt arising for reasons other than money borrowed) material debt
obligations other than amounts owed to the Immediate Transferor in consideration
of assets purchased by the Company under the Sale and Servicing Agreement or
pursuant to the Disposition Agreement.
(p) Ordinary Course. The transactions contemplated by this Agreement
are in the ordinary course of business of the Company. The Company will
30
engage in each acquisition of Loans under the Sale and Servicing Agreement or
pursuant to the Disposition Agreement as a principal and not as an agent.
(q) Solvency. The Company is solvent, is able to pay its debts as
they become due and has capital sufficient to carry on its business and its
obligations hereunder. The Company will not be rendered insolvent by the
execution and delivery of this Agreement or the performance of its obligations
hereunder. No petition of bankruptcy (or similar insolvency proceeding) has been
filed by or against the Company. (r) No Intent to Hinder or Defraud. In
incurring any obligation or making any "transfer" (as defined in Section 101 of
the Bankruptcy Code) of property or any interest therein pursuant to this
Agreement (whether in connection with an Advance or otherwise), the Company does
not intend to hinder, delay or defraud any Person to which the Company is or
will become, on or after the date on which such obligation is incurred or such
transfer is made, indebted.
(s) Reasonably Equivalent Value. With respect to any obligation
incurred by the Company or any "transfer" (as defined in Section 101 of the
Bankruptcy Code) of property or any interest therein made by the Company
pursuant to this Agreement (whether in connection with an Advance or otherwise),
(i) the Company has received "reasonably equivalent value" within the meaning of
Section 548(a)(1)(B)(i) of the Bankruptcy Code for such obligation or transfer,
(ii) the Company is not and will not become "insolvent" within the meaning of
Section 101(32) of the Bankruptcy Code at the time of or as a result of
incurring such obligation or making such transfer, (iii) the Company is not
engaged in, and is not about to engage in, any business or transaction for which
the any property remaining with the Company constitutes "unreasonably small
capital" within the meaning of Section 548(a)(1)(B)(ii)(II) of the Bankruptcy
Code, and (iv) the Company does not intend to incur, and does not believe that
it will incur, "debts" within the meaning of Section 101(12) of the Bankruptcy
Code that would be beyond the Company's ability to pay as such debts matured.
(t) Contemporaneous Exchange. With respect to any "transfer" (as
defined in Section 101 of the Bankruptcy Code) of property or any interest
therein made by the Company pursuant to this Agreement (including the Company's
Grant to the Note Purchaser of a Lien with respect to Pledged Loans in exchange
for an Advance to the Company to finance its purchase of such Pledged Loans),
such transfer is intended as a "contemporaneous exchange for new value" given to
the Company within the meaning of Section 547(c)(1) of the Bankruptcy Code.
(u) Underwriting Standards. The Note Purchaser has been provided
with true and complete copies of the Underwriting Standards, a copy of which is
attached hereto as Exhibit D.
Section 4.2 OOMC's Representations and Warranties.
OOMC severally represents and warrants to the Note Purchaser, with
respect to each subsection of this Section 4.2 on the date of this Agreement, on
the date
31
of each Advance and on each date on which any Collateral is released to the
Company or substituted by the Company, that:
(a) Due Organization. OOMC is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
all corporate power and all material governmental licenses, authorizations,
consents and approvals required to carry on its business in each jurisdiction in
which its business is now conducted. OOMC is duly qualified to do business in,
and is in good standing in, every other jurisdiction in which the nature of its
business requires it to be so qualified.
(b) Authorization; Binding Effect. OOMC has full corporate power and
authority to execute and deliver this Agreement and each other Basic Document to
which it is a party and to perform its obligations hereunder and thereunder. The
Basic Documents have been duly authorized by all necessary corporate action on
the part of OOMC and do not require any additional approval by anyone that has
not already been obtained. The Basic Documents to which OOMC is a party have
been duly executed and delivered by OOMC and constitute its valid and legally
binding obligations, enforceable against it in accordance with their respective
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization,
and similar laws of general applicability relating to or affecting creditors'
rights and to general principles of equity and equitable remedies, regardless of
whether enforcement is considered in a proceeding in equity or at law.
(c) No Conflict. Neither the execution and delivery nor the
performance by OOMC of the Basic Documents to which it is a party will conflict
with the Articles of Incorporation or bylaws of OOMC or conflict with, result in
a breach, violation or acceleration of, or constitute a default or require any
consent under any instrument or agreement to which OOMC is a party or by which
OOMC or its properties may be bound, or any law, order, or regulation applicable
to OOMC of any Governmental Authority having jurisdiction over OOMC or its
properties, and do not and will not result in or require the creation of any
Lien with respect to any of OOMC's properties.
(d) Approvals. Neither the execution and delivery nor the
performance by OOMC of the Basic Documents to which it is a party requires any
authorization, approval, consent, license, exemption (other than any
self-executing exemption), filing, registration, or any other action except
those which have been obtained and are in full force and effect or where the
failure to comply with the requirement would not adversely affect the delivery,
execution or performance by OOMC of the Basic Documents to which it is a party.
(e) No Defaults. Neither OOMC nor any of its Affiliates is in
default under any mortgage, borrowing agreement or other instrument or agreement
pertaining to indebtedness for borrowed money to which it is a party or by which
its properties are bound, which default is likely to result in a Material
Adverse Effect.
(f) Tax Liens. There are no delinquent federal, state, city, county,
or other taxes relating to any of the Company, the Immediate Transferor, OOLWC
or
32
OOMC except those taxes (i) that are being contested by such Person in good
faith, (ii) that are not material in amount, (iii) with respect to which payment
has been stayed by a court of competent jurisdiction, (iv) that relate to a
Mortgage Property, or (v) that would not have a Material Adverse Effect.
(g) No Litigation. There are no actions, suits, investigations or
other proceedings pending or, to the best knowledge of OOMC after due inquiry,
threatened against or affecting OOMC by or before any court, arbitrator, or
Governmental Authority (i) asserting the invalidity of this Agreement or any of
the other Basic Documents, (ii) seeking to prevent the consummation of any of
the transactions contemplated by this Agreement or any of the other Basic
Documents, or (iii) which is reasonably likely to materially and adversely
affect the validity, enforceability, collectibility or value of any Pledged Loan
that is being Pledged on such date or other Collateral that is being Pledged on
such date or the interest of the Note Purchaser or any Noteholder. There are no
preliminary or permanent injunctions or orders by any court or other
Governmental Authority pending adversely affecting this Agreement or any of the
other Basic Documents or any of the transactions contemplated hereby or thereby.
(h) All Documents True and Correct. All representations and
warranties made, and all information, reports, financial statements, exhibits,
schedules, and documents or copies of documents furnished to the Note Purchaser
by or on behalf of OOMC pursuant to or in connection with the negotiation,
preparation, delivery or performance of this Agreement and the other Basic
Documents to which OOMC is a party, or with the transactions contemplated
hereby, are true and correct and, when considered as a whole, complete in every
material respect or (in the case of projections, based on reasonable estimates),
at the time when made or, if limited to a specific date, as of the date to which
they refer, and no such writing or information contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading. There is no fact known to
a Responsible Officer of OOMC that, after due inquiry, could reasonably be
expected to have a Material Adverse Effect that has not been disclosed herein,
in the other Basic Documents to which OOMC is a party or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Note Purchaser for use in connection with the transactions contemplated
hereby or thereby.
(i) Investment Company Act. OOMC is not, nor is it controlled by, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(j) Ownership of the Company. The Company is, indirectly, a
wholly-owned Subsidiary of OOMC and is wholly-owned, directly, by OOLWC.
33
ARTICLE V
BREACH OF REPRESENTATION OR WARRANTY
Section 5.1 General.
If, after giving effect to the reduction of the Market Value of any
one or more Pledged Loans to zero in accordance with the definition of "Market
Value" by reason of the breach of a representation or warranty set forth on
Exhibit B or in Section 4.1(m) (or in Section 4.1(k) or 4.2(h) to the extent
that Section 4.1(k) or 4.2(h) relates to the representations and warranties set
forth on Exhibit B or in Section 4.1(m)), a Shortfall would exist, then:
(i) if such breach is curable, not later than ninety (90) days after
the earlier of the Company's or OOMC's discovery of such breach and the
Company's or OOMC's receipt of notice to that effect from the Note
Purchaser or any other Noteholder, or
(ii) if such breach is not curable, within two Business Days after
the earlier of the Company's or OOMC's discovery of such breach and the
Company's or OOMC's receipt of notice to that effect from the Note
Purchaser or any other Noteholder,
the Company and OOMC, jointly and severally, shall (x) if such breach is
curable, cure, or require the Loan Originator (if the breach is also a breach of
the Loan Originator's representations and warranties pursuant to Section 3.05 of
the Sale and Servicing Agreement) to cure, the breach in all material respects,
or (y) whether or not such breach is curable, (1) prepay on any Business Day the
affected Secured Notes in an amount at least equal to such Shortfall, (2) pledge
(or, in the case of OOMC, cause to be pledged) additional Qualified Substitution
Loans the Collateral Value of which equals or exceeds the amount of the
Shortfall (subject to satisfaction of the conditions set forth herein and such
other conditions as the Note Purchaser shall reasonably specify, which shall not
include the payment of any breakage fee), or (3) enforce the Company's right to
require the Loan Originator (if the breach is also a breach of the Loan
Originator's representations and warranties pursuant to Section 3.05 of the Sale
and Servicing Agreement) to repurchase the affected Pledged Loan at the
applicable Repurchase Price. If the Company and OOMC fail so to cure a Shortfall
within the applicable cure period set forth in the preceding sentence, then the
Note Purchaser or Noteholder, in addition to any other right, remedy, power or
privilege it may have in respect of such failure, may, if applicable, enforce
the Company's rights against the Loan Originator pursuant to either clause (x)
or subclause (3) of clause (y) of the preceding sentence.
If the Company demands that the Loan Originator repurchase a Loan
that the Loan Originator is required to repurchase pursuant to the Sale and
Servicing Agreement and the Loan Originator shall fail to do so, the Company
shall nevertheless be required to cure such breach by taking other curative
action permitted by this Section 5.1.
34
Without in any way derogating from the Company's obligation to
deliver to the Custodian with respect to each Pledged Loan the Custodial Loan
File required to be delivered pursuant to Section 2 of the Custodial Agreement,
the parties agree that not later than three (3) Business Days after the earlier
of (p) the Company's receipt of notice from the Note Purchaser or any Noteholder
or from the Custodian, and (q) the Company's discovery that the Custodial Loan
File required to be delivered pursuant to Section 2 of the Custodial Agreement
have not been so delivered, the Company shall (a) cure the breach in all
material respects, (b) substitute for the affected Pledged Loans one or more
Qualified Substitution Loans the aggregate Collateral Value of which equals or
exceeds the aggregate Collateral Value of the affected Pledged Loans (subject to
satisfaction of the conditions set forth herein and such other conditions as the
Note Purchaser shall reasonably specify, which shall not include the payment of
any breakage fee), or (c) or repurchase, or cause the Loan Originator (if the
breach is also a breach of the Loan Originator's representations and warranties
pursuant to Section 3.05 of the Sale and Servicing Agreement) to repurchase, the
affected Pledged Loan(s) for an amount equal to the Collateral Value thereof.
Section 5.2 Sole Remedy.
Apart from the determination of "Market Value" as provided in
Section 1.1, the right of the Note Purchaser to give notice of Margin Options as
provided in Section 2.11, Section 5.1 provides the sole remedy available to the
Note Purchaser with respect to the breach of any representation or warranty set
forth on Exhibit B or in Section 4.1(m) (or in Section 4.1(k) or 4.2(h), to the
extent that Section 4.1(k) or 4.2(h) applies to the representations and
warranties set forth on Exhibit B or in Section 4.1(m)). Notwithstanding the
foregoing, the parties acknowledge that (i) the Note Purchaser is the assignee
of, and may enforce directly against the Loan Originator, all rights with
respect to the Loan Originator's obligations under Sections 2.05 and 3.06 of the
Sale and Servicing Agreement, and (ii) the Note Purchaser is the assignee of,
and may enforce directly against the related Transferor, all rights and remedies
provided under any applicable Transfer Agreement in the event of a breach of any
representation or warranty with respect to a Pledged Loan.
ARTICLE VI
CONDITIONS PRECEDENT TO ADVANCES
Section 6.1 Receipt by the Note Purchaser of Certain Documents.
No Advance will be made by the Note Purchaser unless, in addition to
the conditions precedent set forth in Section 6.2 having been satisfied on or
before the relevant Advance Date, the Note Purchaser shall have received:
(i) On the initial Advance Date (i.e., the Advance Date of the
initial Secured Note issued and sold hereunder), in addition to the documents
set forth in
35
paragraph (ii) below, each of the following documents, each in form and
substance reasonably satisfactory to the Note Purchaser:
(a) A copy of this Agreement, executed and delivered on behalf
of each of the Company and the Loan Originator by a duly authorized officer of
the Company or the Loan Originator, as the case may be.
(b) A copy of each of the following Basic Documents, executed
and delivered be each party thereto other than the Note Purchaser, certified
(with respect to documents to which the Note Purchaser is not a party) by a duly
authorized officer of the Company as being true and correct copies of the
originals thereof:
(1) The Custodial Agreement;
(2) The Facility Administration Agreement; and the
Agreement of Depository Bank referred to therein;
(3) The Loan Purchase and Contribution Agreement;
(4) The Sale and Servicing Agreement;
(5) The Issuer Administration Agreement;
(6) The Amended and Restated Master Disposition
Agreement; and
(7) That certain Guaranty Agreement executed by H&R
Block Corporation in favor of the Note Purchaser with respect to Wet
Funded Loans.
(c) Opinions of counsel (A) with respect to certain
bankruptcy, non-consolidation and "true sale" matters, (B) to the effect that
the Note Purchaser will have a first perfected security interest in the
Promissory Notes and the Mortgages and that portion of the other Collateral in
which a security interest may be perfected by filing, (C) that the Secured Notes
will be treated as indebtedness of the Company, and (D) with respect to such
other matters the Note Purchaser may reasonably require.
(d) A certificate by a duly authorized officer of the Owner
Trustee of the Company ("Owner Trustee") relating to: (A) copies of the Trust
Agreement (including all amendments, supplements, and modifications thereto),
and (B) the authority of the Owner Trustee to execute and deliver on behalf of
the Company each of the Basic Documents to which the Company is or is to become
a party.
(e) A certificate of the Loan Originator by a duly authorized
officer of the Loan Originator relating to: (A) a copy of the resolutions of the
Loan Originator's board of directors authorizing the Loan Originator's
execution, delivery and performance of the Basic Documents to which the Loan
Originator is or is to become a
36
party and the transactions contemplated thereby, in form and substance
satisfactory to the Note Purchaser, which certificate shall state that the
resolutions have not been amended, modified, revoked, or rescinded; (B) copies
of the Articles of Incorporation and bylaws of the Loan Originator (including
any and all amendments, supplements, and modifications thereto); and (C) all
permits, licenses, approvals and consents required in connection with the
execution, delivery and performance by each of the Company, OOMC and OOLWC, and
the validity and enforceability against each such Person, of each of the Basic
Documents to which such Person is or is to become a party having been obtained
and being in full force and effect, without having been amended, modified,
revoked or rescinded.
(f) A certificate of OOLWC relating to: (A) a copy of the
resolutions of OOLWC's board of directors authorizing OOLWC's execution,
delivery and performance of the Basic Documents to which OOLWC is or is to
become a party and the transactions contemplated thereby, in form and substance
satisfactory to the Note Purchaser, which certificate shall state that the
resolutions have not been amended, modified, revoked, or rescinded; and (B)
copies of the Articles of Incorporation and bylaws of OOLWC (including any and
all amendments, supplements, and modifications thereto).
(ii) On each Advance Date, all of the following documents, each
(except as otherwise provided below) in form and substance reasonably
satisfactory to the Note Purchaser:
(a) The Secured Note relating to the Advance to be made
thereon, substantially in the form of Exhibit A to the Facility Administration
Agreement, executed and delivered on behalf of the Company by a duly authorized
officer of the Facility Administrator.
(b) A Collateral Schedule satisfactory to the Note Purchaser
in its sole discretion.
(c) A copy of the Trust Receipt issued by the Custodian with
respect to the Loans identified on the Collateral Schedule.
(d) If requested by the Note Purchaser, copies, certified as
being true and correct copies of the originals, each Basic Document not
specifically required to be delivered as a condition precedent to such Advance.
(e) A release of each Lien, if any, existing with respect to
any Loan (other than a Wet Funded Loan) being Pledged on such Advance Date
(other than the Lien in favor of the Note Purchaser created hereby), duly
executed by or on behalf of the holder of such Lien.
(f) A copy of a direction from the Company addressed to and
acknowledged by the Servicer (it being understood that, pursuant to the Sale and
Servicing Agreement, the Servicer shall service and administer each Loan being
added to the Collateral) stating that after the Servicer is notified in writing
by the Note Purchaser
37
that an Event of Default has occurred and is continuing, the Servicer shall no
longer accept any instructions from the Company that involve any material
modification of any Loan, whether by way of amendment, consent, forbearance, or
otherwise, unless the direction is in writing and consented to in writing by the
Note Purchaser.
(g) To the extent not previously delivered to the Note
Purchaser, a copy of each agreement with a service provider that the Company is
required to obtain pursuant to Section 7.1(k).
(h) With respect to any Advance for which the Borrowing Base
includes any Wet Funded Loan:
(x) at least one Business Day prior to the related
Advance Date, the Note Purchaser shall have received notice of the
Estimated Note Issuance Proceeds;
(y) on or prior to the related Advance Date, the Note
Purchaser shall have received the related Wet Funding Schedule.
(i) A certificate from the Company stating that it has not
experienced any material adverse change or material adverse event since April 1,
2000.
Section 6.2 Conditions Precedent to all Advances and Substitutions.
The making of any Advance or the substitution of any Collateral is
subject (in addition to (i) the satisfaction of the applicable conditions
precedent set forth in Section 6.1 and, (ii) in the case of a substitution of
Collateral, the satisfaction of the conditions set forth in Section 6.3) to the
satisfaction, on or before the relevant Advance Date or date of such
substitution of Collateral, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company and OOMC in this Agreement shall be true and
correct in all material respects on that date, both before and after giving
effect to the Advance or the substitution, as though made on that date.
(b) No Default; No Interruption of Funding Period. Before and after
giving effect to the Advance or the substitution, no Default or Event of Default
shall have occurred and be continuing; the Funding Period under the Sale and
Servicing Agreement shall be in effect; and no default or event of default shall
have occurred and be continuing under either the Greenwich Facility or the B of
A Facility (as defined in the Disposition Agreement).
(c) Certificates. Both immediately prior to each Advance and also
after giving effect thereto and to the intended use of the proceeds thereof, the
representations and warranties made by the Company in each of the Basic
Documents, shall be true, correct and complete on and as of the date of the
making of such Advance in all material respects with the same force and effect
as if made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a
38
specific date, as of such specific date). The Note Purchaser shall have received
a certificate signed by a Designated Agent of the Company certifying as to the
truth, accuracy and completeness of the above, which certificate shall
specifically include a statement that the Company is in compliance with all
governmental licenses and authorizations and, if relevant under applicable law,
is qualified to do business and in good standing in all required jurisdictions.
(d) No Violation. The consummation of the transactions contemplated
hereby and by the other Basic Documents shall not violate or conflict with, nor
involve the Note Purchaser in a violation of, any applicable law, rule,
regulation or order.
(e) Due Diligence Fees and Other Expenses. To the extent billed, the
due diligence fees related to such Advance or substitution and the legal fees
and other "out-of-pocket" expenses of the Note Purchaser in connection with the
purchase of the related Secured Note (for which the Company shall be billed
quarterly) shall have been paid in full (subject to any previously agreed upon
maximum) in cash, as specified in Section 8.3.
(f) Information. All information provided by the Company to the Note
Purchaser concerning each of the Loans to be Pledged on such Advance Date or
date of substitution shall be true and correct in all material respects as of
such Advance Date or date of substitution.
(g) Proceedings. All corporate and legal proceedings and all
instruments in connection with such Advance Date or date of substitution, or
otherwise in connection with this Agreement and the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to the Note
Purchaser, and the Note Purchaser shall have received from the Company copies of
all documents (including records of corporate proceedings) relevant to the
transactions herein contemplated as the Note Purchaser may reasonably have
requested. Such documents shall include, in addition to the documents listed in
Section 6.1, a certificate of the Secretary or Assistant Secretary of the
Company certifying the names and signatures of the officers authorized on its
behalf to execute this Agreement and any other documents to be delivered by it
hereunder on such Advance Date or date of substitution.
(h) Servicing Reports. The Note Purchaser shall have received the
most recent available standard servicing or loan reports in summary form, if
any, with respect to all of the Pledged Loans.
(i) Due Diligence. The Note Purchaser or its designee shall have
been authorized by the Company, the Immediate Transferor, OOLWC and OOMC, as may
be appropriate, to perform both (i) its standard loan review of each pool of
Loans to be Pledged, which may entail a loan-by-loan review, at the discretion
of the Note Purchaser, and (ii) prior to the initial Advance Date, or at the
discretion of the Note Purchaser, a detailed review of OOMC's underwriting and
servicing procedures, template legal documents and other relevant materials.
39
(j) Limitations. The initial Principal Amount of the Secured Note
relating to the Advance, when added to the aggregate Principal Amount of all
issued and outstanding Secured Notes, shall not exceed either (i) the Commitment
Amount, or (ii) the Borrowing Base, and the Loans to be purchased with the
proceeds of such Advance shall not, when aggregated with all other Pledged
Loans, cause any of the Applicable Limitations to be exceeded.
(k) Servicing. The Servicer (i) shall not be in material default of
its servicing, administrative or other obligations under the Sale and Servicing
Agreement, and (ii) shall be an Eligible Servicer (as defined therein).
Section 6.3 Additional Collateral.
No pledge of additional or substitute Loans shall be accepted unless
the Company shall have delivered to the Custodian the related Custodial Loan
File in accordance with the Custodial Agreement and the Custodian shall have
delivered a replacement Trust Receipt, and amended the Collateral Schedule, with
respect to each of the Custodial Loan Files (or, if applicable, Promissory
Notes) delivered.
ARTICLE VII
COVENANTS
Section 7.1 Affirmative Covenants.
Until (i) the Commitment Term has ended, (ii) all Obligations have
been paid in full and (iii) all other obligations of the Company under the Basic
Documents have been performed in full, the Company, covenants and agrees that it
will do all of the following:
(a) Existence; Conduct of Business. Continue to engage in the
business now conducted by it and preserve and maintain in full force and effect
its existence and all permits, licenses, approvals, consents, rights,
privileges, and franchises necessary or desirable in the conduct or transaction
of its business or the ownership of its properties.
(b) Taxes. Pay and discharge, or cause the Servicer to pay and
discharge, all taxes, levies, liens, and other charges on its assets and on the
Collateral that, in each case, in any manner would create any lien or charge
upon the Collateral.
(c) Laws. Comply in all material respects with all laws, ordinances,
rules, and regulations of any federal, state, municipal, or other public
authority having jurisdiction over the Company or any of its assets.
(d) Name and Locations. Advise the Note Purchaser in writing at
least thirty (30) days prior to the opening of any new chief executive office or
the closing of any such office and of any change in the Company's name or the
places where the books and records pertaining to the Collateral are kept.
40
(e) Records. Maintain records with respect to the Collateral and the
conduct and operation of its business in conformity with general standards in
the subprime mortgage loan servicing industry and with no less a degree of
prudence than if the Collateral were held by the Company for its own account,
and furnish the Note Purchaser, upon reasonable request by the Note Purchaser,
with information with respect to the Collateral.
(f) Reports. Provide, or cause the Servicer to provide, to the Note
Purchaser a magnetic tape, floppy disk or electronic transmission, as the Note
Purchaser shall elect from time to time, containing the Servicer's standard
monthly remittance report, which report shall be in substantially the form
required under the Sale and Servicing Agreement .
(g) Pay Obligations. Pay, discharge, or otherwise satisfy before
they become delinquent all material obligations of whatever nature, except when
(i) the failure to pay, discharge or satisfy such obligations before they become
delinquent is consistent with Accepted Servicing Practices or (ii) the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and the Company has established adequate reserves with respect
thereto and no liens have attached to any portion of the Collateral.
(h) Notices. Promptly, and in any event within one Business Day of
the occurrence thereof, notify the Note Purchaser in writing of (i) the
occurrence of any event of default by any Person under any indenture, mortgage,
deed of trust, agreement, or other instrument or contractual obligation to which
the Company or any Affiliate of the Company is a party or by which its
properties may be bound or affected, if such occurrence could reasonably be
expected to have a Material Adverse Effect, or (ii) the occurrence of any
Default or Event of Default.
(i) Ownership of Company. At all times be wholly-owned (i) directly,
by OOLWC, and (ii) indirectly, by OOMC.
(j) Financial Statements. Furnish or cause to be furnished to the
Note Purchaser:
(i) Within 90 days after the last day of each fiscal year of
OOMC, consolidated and consolidating statements of income (and, in the
case of the consolidated statement, sources and uses of funds) for OOMC
for such year and consolidated and consolidating balance sheets for OOMC
as of the end of such year, presented fairly in all material respects in
accordance with GAAP and accompanied by (A) an unqualified report of a
firm of independent certified public accountants of nationally recognized
standing and (B) a copy of any management letter issued by such certified
public accountants in connection with the preparation of their report; and
(ii) Within 45 days after the last day of each fiscal quarter
of OOMC, (A) unaudited consolidated and consolidating statements of income
for
41
OOMC for such quarter, and unaudited consolidated and consolidating
balance sheets for OOMC as of the end of such quarter, and (B) a
certificate of a Responsible Officer of OOMC stating that such financial
statements are presented fairly in all material respects and in accordance
with GAAP, subject to year-end audit adjustments, and further certifying
that neither OOMC nor any of its Subsidiaries is in default under the
terms and conditions of the Basic Documents or any other material
agreement evidencing or securing any indebtedness of such Person.
(k) Sale and Servicing Agreement. Cause the Pledged Loans to be
serviced and administered by the Servicer (including any Subservicers) in
substantial compliance with Accepted Servicing Practices and, at all times,
enforce the obligations of the Servicer (including any Subservicers) under the
Sale and Servicing Agreement.
(l) Collections. Cause each of its agents (including the Servicer)
to agree to hold in trust and to deposit, in accordance with its normal and
customary practices and procedures, all Collections received from time to time
in respect of the Pledged Loans (net of Servicing Fees and ancillary amounts
that are payable to the Servicer under the Sale and Servicing Agreement) to the
Collection Account maintained pursuant to the Facility Administration Agreement
or to such other account or accounts as may be specified and maintained by the
Note Purchaser or its designee from time to time.
(m) Certain Agreements. Comply in all material respects with the
terms of both the Custodial Agreement and the Facility Administration Agreement.
(n) Material Modifications. Except as otherwise permitted in the
Sale and Servicing Agreement, agree to any material modification of any Pledged
Loan only with the prior written consent of the Note Purchaser.
(o) Custodial Loan Files. Deliver all Custodial Loan Files to the
Custodian as provided in the Custodial Agreement.
(p) Bankruptcy Petitions. Cause each service provider engaged by the
Company that is an Affiliate of the Company to agree and covenant that such
service provider shall not, prior to a date which is one year and one day after
the payment in full of all Obligations (i) petition or otherwise invoke,
directly or indirectly, the process of any Governmental Authority for the
purpose of (A) commencing or sustaining a case against the Company under any
federal or state bankruptcy, insolvency or similar law or (B) appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Company or any substantial part of its property or (C)
ordering the winding up or liquidation of the affairs of the Company, or (ii)
acquiesce to any of the foregoing.
(q) Purpose. Use the funds derived from issuing and selling the
Secured Notes solely to purchase Loans and other Collateral from the Immediate
Transferor.
42
(r) Inspections. Permit representatives of the Note Purchaser, at
the Note Purchaser's expense (except as otherwise provided herein with respect
to any due diligence activities undertaken by or for the Note Purchaser) at any
reasonable time prior to the occurrence of an Event of Default and at the
Company's expense at any time thereafter, to (i) visit and inspect any of the
Company's properties and examine and make copies of or abstracts from any of its
books and records in any way relating to the Collateral or to the Company's
compliance with the provisions of this Agreement or any other Basic Document at
any reasonable time and as often as may reasonably be desired by the Note
Purchaser (but, prior to the occurrence of any Default or Event of Default, only
upon not less than five Business Days' prior notice), and (ii) discuss the
business, operations, properties, assets and financial and other condition of
the Company with the Company's officers and employees of the Company and with
its independent certified public accountants (it being agreed that the Company
shall cause such officers, employees and accountants to be available for such
purposes and to cooperate fully with such representatives); provided, however,
that the results of any such visit, inspection, examination, discussion or
audit, to the extent such results are proprietary and non-public, shall be kept
confidential by the Note Purchaser and its Affiliates except (x) as may be
required by law or regulation or by any governmental agency or regulatory body
having authority over the Note Purchaser or its Affiliates, (y) to the extent
that such information may be communicated to the legal counsel, auditors and
other advisers of the Note Purchaser or its Affiliates, and (z) in connection
with any legal or other proceedings for the enforcement of any right, remedy,
power or privilege of the Note Purchaser under any Basic Document or for the
protection of the Note Purchaser's interests thereunder.
(s) ERISA. Promptly give the Note Purchaser written notice upon
becoming aware that the Company is not in compliance in all material respects
with ERISA or that any Lien exists on any of the Pledged Loans under ERISA.
(t) Company's Books and Records. Keep proper books of record and
account in which full, true and correct entries in conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in relation
to its business and activities.
(u) Bringdown Certificates, Etc. Supply the Note Purchaser with
bring-down good standing certificates, legal opinions, officer's certificates
and similar such items, promptly upon the Note Purchaser's reasonable request.
The Note Purchaser will not, however, request such items more frequently than
once in any period of 90 consecutive days unless either a Default or an Event of
Default shall have occurred and be continuing.
(v) Recordings and Filings. Within ten (10) days of the initial
Advance Date, file all material instruments and documents (including UCC-1
financing statements and continuation statements) required to be filed to create
in favor of the Note Purchaser a perfected Lien with respect to the Collateral
shall have been duly prepared (and, if applicable executed or acknowledged) by
the Company and delivered to the Note Purchaser in the proper form for filing in
each office in each relevant jurisdiction.
43
Section 7.2 Negative Covenants.
Until (i) the Commitment Term has ended, (ii) all Obligations have
been paid in full and (iii) all other obligations of the Company under the Basic
Documents have been performed in full, the Company covenants and agrees that it
will not:
(a) Liens. Create, incur, assume, or suffer to exist, any Lien with
respect to any of the Collateral whether now owned or existing or hereafter
acquired or arising, other than liens in favor of the Note Purchaser, or permit
any financing statement (except any financing statements in favor of the Note
Purchaser) or assignment (except for any assignments in favor of the Note
Purchaser) to be on file in any public office with respect thereto.
(b) Dispositions. Sell, lease, license, transfer, assign, convey,
dispose of, alienate, terminate or relinquish any of the Company's right, title
or interest in or to the Collateral, except as specifically provided herein.
(c) Mergers. Either (i) merge with or into or consolidate with any
other Person, regardless of whether the Company is the surviving entity in such
merger or consolidation, or transfer all or substantially all of its assets to
any other Person to accomplish a similar purpose, or (ii) wind up, liquidate, or
dissolve, or (iii) agree to do any of the foregoing.
(d) Amendments. Without obtaining the prior written approval of the
Note Purchaser in each case, either (i) amend, supplement or otherwise modify
(or agree to amend, supplement or otherwise modify) the Company's charter,
bylaws or other organizational documents (unless such amendment, supplement or
other modification cannot reasonably be expected to have a Material Adverse
Effect) or (ii) amend, supplement or otherwise modify (or agree to amend,
supplement or otherwise modify, or, to the extent its consent is required
therefor, consent to any amendment or supplement to or modification of) the Sale
and Servicing Agreement or any other Basic Document, or any other document,
instrument or agreement in any way relating to the transactions contemplated
hereunder or thereunder.
(e) Structural Changes. Change its name, chief executive office, or
location where its books and records are kept with respect to the Collateral, on
less than thirty (30) days' prior written notice to the Note Purchaser; or.,
except with the Note Purchaser's prior written consent, change its structure or
ownership.
(f) Underwriting Standards. Prior to pledging the affected Loans
hereunder, approve any proposed amendments, supplements or other modifications
to the Underwriting Standards that are material in nature without first
providing the Note Purchaser with a copy of such proposed modifications;
provided that if, within 15 Business Days after receipt of a copy thereof, the
Note Purchaser informs the Company that it disapproves of one or more of such
proposed modifications, "Underwriting Standards" shall mean, for purposes of
this Agreement and the other Basic Documents, the Underwriting Standards
previously in effect, modified only to the extent of such
44
modifications as have not been disapproved by the Note Purchaser pursuant to
this Subsection 7.2(f).
(g) Use of Proceeds. Use the proceeds of the Advances made pursuant
to this Agreement, directly or indirectly, for the purpose of purchasing or
carrying any margin stock or for the purpose of reducing or retiring any debt
which was originally incurred to purchase or carry margin stock or for any other
purpose which might constitute the Advances under this Agreement as being
"purpose credit" within the meaning of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(h) Other Debts. Incur or otherwise become liable for any debt
obligation for money borrowed (other than debt arising under this Agreement), or
for any other (i.e., debt arising for reasons other than money borrowed)
material debt obligations other than amounts owed to the Immediate Transferor in
consideration of assets purchased by the Company under the Sale and Servicing
Agreement or pursuant to the Disposition Agreement), without first obtaining the
specific written consent of the Note Purchaser (which consent may be given or
withheld in the Note Purchaser's sole discretion).
(i) Unauthorized Assignment. Attempt to assign this Agreement or any
rights hereunder without first obtaining the specific written consent of the
Note Purchaser (which consent may be given or withheld in the Note Purchaser's
sole discretion).
ARTICLE VIII
INDEMNIFICATION AND REIMBURSEMENT
Section 8.1 Indemnification.
(a) The Company hereby covenants and agrees to indemnify, defend and
hold harmless the Note Purchaser and its assignees hereunder from and against
any and all loss, liability, damage, judgment, claim, deficiency, or expense
(including interest, penalties, reasonable attorneys', expert witnesses' and
consultants' fees and disbursements and amounts paid in settlement) to which the
Note Purchaser or any such assignee may become subject insofar as such loss,
liability, damage, judgment, claim, deficiency, or expense arises out of or is
based upon (i) a breach by the Company of its representations, warranties and
covenants contained herein or in any other Basic Document or (ii) any
information certified in any schedule or certificate delivered by the Company
hereunder or in connection with this Agreement or the other Basic Documents
being untrue in any material respect at any time, in each case, except to the
extent provided in Section 5.1 with respect to any breach of the representations
and warranties set forth on Exhibit B or in Section 4.1(m) (or in Section 4.1(k)
or 4.2(h), to the extent that Section 4.1(k) or 4.2(h) applies to the
representations and warranties set forth on
45
Exhibit B or in Section 4.1(m)) and except to the extent that such loss,
liability, damage, judgment, claim, deficiency, or expense is the result of the
indemnified party's own negligence, willful misfeasance or bad faith.
(b) OOMC hereby covenants and agrees to indemnify, defend and hold
harmless the Note Purchaser and its assignees hereunder from and against any and
all loss, liability, damage, judgment, claim, deficiency, or expense (including
interest, penalties, reasonable attorneys', expert witnesses' and consultants'
fees and disbursements and amounts paid in settlement) to which the Note
Purchaser or any such assignee may become subject insofar as such loss,
liability, damage, judgment, claim, deficiency, or expense arises out of or is
based upon (i) a breach by OOMC of its representations, warranties and covenants
contained herein or in any other Basic Document or (ii) any information
certified in any schedule or certificate delivered by OOMC hereunder or in
connection with this Agreement or the other Basic Documents being untrue in any
material respect at any time, in each case, except to the extent provided in
Section 5.1 with respect to any breach of the representations and warranties set
forth on Exhibit B or in Section 4.1(m) (or in Section 4.1(k) or 4.2(h), to the
extent that Section 4.1(k) or 4.2(h) applies to the representations and
warranties set forth on Exhibit B or in Section 4.1(m)) and except to the extent
that such loss, liability, damage, judgment, claim, deficiency, or expense is
the result of the indemnified party's own negligence, willful misfeasance or bad
faith.
Section 8.2 Taxes and Other Governmental Charges.
Any tax, fee, governmental charge or other liability (excluding any
tax liability arising from the receipt by the Note Purchaser of interest income
on any Advance) incurred by the Note Purchaser as a result of the Note
Purchaser's status as the Note Purchaser under this Agreement or beneficial
holder or secured party with respect to the Collateral shall be borne, jointly
and severally, by the Company. Until the Commitment Term has ended and all of
the Obligations have been paid in full, the Company and OOMC jointly and
severally agree to indemnify and defend and hold the Note Purchaser harmless
from and against any tax, fee, governmental charge or other liability inuring to
the Note Purchaser as a result of the Note Purchaser's status as the Note
Purchaser under this Agreement or beneficial holder or secured party with
respect to the Collateral (except any tax liability arising from the receipt by
the Note Purchaser of interest income on any Advance). The Company and OOMC
jointly and severally agree to indemnify and defend and hold harmless the Note
Purchaser from and against all liabilities and expenses to which the Note
Purchaser may become subject relating to any fees, taxes or liability to any
third party resulting from any action taken or omitted by or upon instructions
of the Company or OOMC with respect to the Collateral.
Section 8.3 Reimbursement of Expenses.
The Company and OOMC hereby jointly and severally covenant and agree
to pay (or to reimburse the Note Purchaser promptly upon demand therefor) all
reasonable out-of-pocket costs and expenses of the Note Purchaser incident to
this Agreement and the other Basic Documents and the transactions contemplated
hereunder
46
and thereunder, including (i) all reasonable fees, expenses and disbursements of
the Note Purchaser's counsel incurred in connection with negotiation, drafting
and subsequent administration of this Agreement and the other Basic Documents
and the transactions contemplated hereunder and thereunder, provided that the
Company and OOMC shall not be required to pay or reimburse under this clause (i)
in respect of the negotiation and drafting of the Basic Documents any amount in
excess of $75,000, (ii) the costs and expenses of any due diligence conducted by
the Note Purchaser in connection with this Agreement and the other Basic
Documents and the transactions contemplated hereunder and thereunder, including
the cost of any third-party contract underwriter acceptable to the Note
Purchaser (such costs and expenses of due diligence not to exceed $7,500 per any
calendar month in connection with the Note Purchaser's ongoing due diligence
activities hereunder; (iii) all fees and charges of the Custodian under the
Custodial Agreement, including those fees relating to the Custodian's review of
the Custodial Loan Files relating to the Pledged Loans; (iv) all fees and
charges of the Facility Administrator under the Facility Administration
Agreement; and (v) all costs incurred by the Note Purchaser in connection with
the perfection of any Lien with respect to the Collateral granted by the Company
hereunder, including the costs of filing UCC-1 financing statements and any
other necessary or appropriate documents. In addition, the Company and OOMC,
jointly and severally, shall pay (or reimburse the Note Purchaser promptly upon
demand therefor) all reasonable costs and expenses (including reasonable
attorneys', expert witnesses' and consultants' fees and disbursements) of the
Note Purchaser incident to the enforcement of the Note Purchaser's rights,
remedies, powers or privileges or the Company's or OOMC's obligations hereunder
or under any Secured Note or any other Basic Document or to the protection of
the Note Purchaser's interests hereunder or thereunder, whether by judicial
proceedings or otherwise, including in connection with bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceedings involving
the Company.
Section 8.4 Survival.
The obligations of the Company and OOMC under this Article VIII
shall be effective and enforceable whether or not any Secured Note is
outstanding hereunder and, in all events, shall survive the execution, delivery,
performance and termination of this Agreement.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.1 Events of Default.
Each of the following shall constitute an "Event of Default" with
respect to all of the issued and outstanding Secured Notes, whether it occurs
voluntarily or involuntarily, by operation of law or otherwise:
(a) Nonperformance. Any failure (i) to pay the interest due and
payable on any Secured Note on any Payment Date or other relevant date
(including the
47
Redemption Date), (ii) to pay any principal or other amount due and payable
under any Secured Note on any Payment Date or other relevant date (including the
Redemption Date), (iii) to pay the Minimum Usage Fee as and when provided in the
Pricing Side Letter, (iv) to pay any other amount due under this Agreement or
(v) to perform or observe any other provision of this Agreement (other than one
specifically addressed in any other provision of this Section 9.1), which
failure shall, (x) in the case of clause (i), (ii) or (iii) above, continue for
more than one Business Day after oral (including telephonic) or written notice
of such failure to the Company by the Note Purchaser or any Noteholder, or (y)
in the case of clause (iv) or (v), continue for more than thirty (30) days after
written notice of such failure to the Company by the Note Purchaser or any
Noteholder.
(b) Failure to Maintain Security. The Noteholders shall cease to
have a first priority perfected Lien with respect to the Collateral or any
material portion thereof.
(c) Failure of OOMC to Maintain Requisite Financial Condition. (i)
At any time during this Agreement, OOMC shall fail to (A) possess sufficient net
capital and liquid assets (or ability to access the same) to satisfy its debts
and other obligations as they become due in the normal course of business, (B)
maintain a minimum of Tangible Net Worth of $425 million as of any day, (C)
maintain a minimum Net Income of $1.00 for each quarter and the three (3)
quarters preceding such quarter; and (D) maintain a ratio of 1.0 or greater at
any time pursuant to the Capital Adequacy Test, attached as Exhibit E hereto; or
(ii) at any time during the Commitment Term, (A) maintain a minimum balance of
cash or cash equivalents, not subject to any Liens, of $20 million or maintain a
liquidity facility with Block Financial in an amount not less than $150,000,000,
and (B) have a Non-Warehouse Leverage Ratio of no more than 0.5x.
(d) Act of Insolvency. The occurrence of an Act of Insolvency
involving the Company or any Affiliate of the Company.
(e) Other Creditors. The Company shall enter into any agreement,
other than this Agreement and the other Basic Documents, to borrow money from
any Person, or shall incur any other material debt obligation to any Person for
a reason other than money borrowed, and other than amounts owed to the Immediate
Transferor in consideration of assets purchased by the Company under the Asset
Purchaser Agreement, in each case without first obtaining the specific written
consent of the Note Purchaser (which consent may be given or withheld in the
Note Purchaser's sole discretion).
(f) Immediate Transferor, OOLWC or OOMC Defaults. Either of the
following shall occur: (i) the Immediate Transferor, OOLWC or OOMC shall default
under any of the Basic Documents to which it is a party, any applicable grace
period set forth thereon shall have expired, and such default, in the Note
Purchaser's good faith business judgment, is likely to have a Material Adverse
Effect; or (ii) any recourse debt (as distinguished from asset-backed debt other
than secured and warehouse debt that is recourse debt) on which the Immediate
Transferor, OOLWC, OOMC or any Affiliate of OOMC is accelerated by the lender(s)
thereunder as a result of the occurrence of any
48
event of default thereunder and such acceleration, in the Note Purchaser's
commercially reasonable business judgment, is likely to have a Material Adverse
Effect; provided that any waiver of such event of default by the lender(s)
thereunder shall automatically constitute a waiver of the corresponding Event of
Default hereunder.
(g) Merger or Consolidation. The Company shall cease to be wholly
owned by OOLWC, or indirectly wholly-owned by OOMC, as required by Section
7.1(i), or shall take any action prohibited by Section 7.2(c), or a Change in
Control shall occur, in any such case, without the prior written consent of the
Note Purchaser.
(h) Final Judgment. A final, non-appealable judgment by any
competent court in the United States for the payment of money in an amount in
excess of $3,000 is rendered against the Company, and the same remains
undischarged and unpaid for a period of sixty (60) days during which execution
of the judgment is not effectively stayed.
(i) Breach of Representation. Any representation or warranty (other
than one set forth on Exhibit B or in Section 4.1(m) (or in Section 4.1(k) or
4.2(h), to the extent that Section 4.1(k) or 4.2(h) applies to the
representations and warranties set forth on Exhibit B or in Section 4.1(m)) made
by the Company or OOMC herein shall have been incorrect or untrue in any respect
when made or repeated (or deemed made or repeated), and the condition resulting
in that representation or warranty having been incorrect or untrue shall
continue unremedied for thirty (30) days after written notice of the condition
to the Company or OOMC by the Note Purchaser.
(j) Breach of Covenant. The Company, the Immediate Transferor, OOLWC
or OOMC (in any capacity) shall breach in any material respect any covenant made
by it in any other Basic Document, such breach shall continue unremedied for
thirty (30) days after written notice of the condition to the Company, the
Immediate Transferor, OOLWC or OOMC (as the case may be) by the Note Purchaser,
and such breach, in the Note Purchaser's good faith business judgment, is likely
to have a Material Adverse Effect;
(k) Repurchase or Cure Obligation. The Company and OOMC shall fail
to satisfy their obligations set forth in Section 5.1.
(l) Reserved.
(m) Impairment of Rights. Except with the prior written consent of
the Note Purchaser, any Affiliate Transfer Agreement or Transfer Agreement is
amended, supplemented or modified in any respect that has, or could reasonably
be expected to have, a Material Adverse Effect, including, without limitation,
any such occurrence that adversely affects the Company's, or the Note
Purchaser's, right to enforce any or all of the remedies under the Sale and
Servicing Agreement, any Affiliate Transfer Agreement or any Transfer Agreement
in respect of a breach of the representations and warranties of the transferor
thereunder with respect to any Loan.
49
(n) Election by OOLWC Not to Effect any Minimum Margin Contribution.
There shall occur any event provided to constitute an Event of Default in
Section 2.11.
ARTICLE X
REMEDIES
Section 10.1 Acceleration; Action Regarding Collateral.
Upon the occurrence of any Event of Default, the Note Purchaser,
without demand of performance or other demand or notice (except as specifically
provided herein) of any kind to the Company or any other Person, all of which
are hereby expressly waived, may (in addition to exercising any other right,
remedy, power or privilege it may have in respect of such occurrence, under this
Agreement, any other Basic Document, under applicable law or otherwise): (i)
declare the Obligations to be immediately due and payable, and the Obligations
shall forthwith be immediately due and payable and the Commitment Term shall
terminate; provided that, upon the occurrence of an Event of Default described
in Section 9.1(d), the Obligations shall automatically and immediately become
due and payable and the Commitment Term shall terminate; and (ii) forthwith
apply (or cause to be applied) the cash, if any, then held by it as part of the
Collateral to the payment of any of the Obligations. If no cash is being held as
part of the Collateral or the cash so applied is not sufficient to pay in full
all the Obligations, the Note Purchaser may thereafter collect, receive,
appropriate, retain, and realize upon (or cause to be collected, received,
appropriated, retained, and realized upon) any of the Collateral. Upon the
occurrence of an Event of Default, the Note Purchaser may forthwith do, or cause
to be done, any of the following: sell, assign, give an option or options to
purchase, contract to sell, or otherwise dispose of and deliver any of the
Collateral in one or more parcels at such public or private sale or sales, at
such place or places, at such price or prices, and upon such other terms and
conditions, as the Note Purchaser may deem best. The Note Purchaser shall in any
event act, and cause the Facility Administrator, in its capacity as collateral
agent and secured party for the benefit and on behalf of the Note Purchaser, to
act, in all respects in a commercially reasonable manner. Such dispositions may
be for cash or on credit or for future delivery without assumption of any credit
risk. In any such disposition the Note Purchaser may purchase all or any part of
the Collateral. In any such disposition the Note Purchaser may deliver, assign,
and transfer to the transferee (or cause to be so delivered, assigned, and
transferred) the Collateral so sold. Each transferee, upon any such disposition,
shall hold the property so disposed of absolutely free from any claim or right
of the Company any kind, including any equity or rights of redemption. The
Company agrees that the Note Purchaser need give (or cause to be given) only
such notice of the time and place of any public or private sale (including any
adjourned private sale) or other intended disposition as may be required by
market conditions and standards of commercial reasonableness and that the Note
Purchaser need not in any event give more than five (5) Business Days' notice
that the sale or other disposition is to take place.
50
The Note Purchaser shall not be obligated to consummate (or cause to
be consummated) any sale pursuant to any notice of sale. The Note Purchaser may,
without notice or publication, adjourn any public or private sale, or cause it
to be adjourned, from time to time by announcement at the time and place fixed
for the sale. The sale may then be made at any time or place to which it was
adjourned. If any of the Collateral is sold on credit or for future delivery,
the Collateral so sold may be retained by the Note Purchaser or the Facility
Administrator until the selling price is paid by the purchaser. Neither the Note
Purchaser nor the Facility Administrator shall incur any liability if the
purchaser fails to take up and pay for the Collateral so sold and, in that case,
the Collateral may again be sold upon appropriate notice. The Note Purchaser
may, instead of exercising the power of sale (or causing it to be exercised),
proceed by a suit at law or in equity to foreclose its Lien and sell (or cause
to be sold) any of the Collateral under a judgment or decree of a court of
competent jurisdiction.
Section 10.2 Deficiency.
If the proceeds of sale, collection, foreclosure, or other
realization on the Collateral are insufficient to cover the costs and expenses
of such realizing on the Collateral and the payment in full of the Obligations,
the Company shall remain liable for any deficiency.
Section 10.3 Private Sale.
The Note Purchaser shall incur no liability as a result of the sale
of any of the Collateral at any private sale. The Note Purchaser shall in any
event act, and cause the Facility Administrator, in its capacity as collateral
agent and secured party for the benefit and on behalf of the Note Purchaser, to
act, in a commercially reasonable manner. The Company hereby waives (a) any
claims against the Facility Administrator, the Note Purchaser or any other
Noteholder arising because the price at which the Collateral may have been sold
at a private sale was less than the price that might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
the Note Purchaser accepts (or causes to be accepted) the first offer received
and does not offer (or cause to be offered) the Collateral to more than one
offeree and (b) all rights of redemption, stay, or appraisal that it has under
any rule of law or (to the extent permitted) statute, whether now existing or
hereafter adopted.
Section 10.4 Default Rate of Interest.
To the extent permitted by applicable law, interest shall accrue at
the Default Rate on any amounts owing by the Company hereunder from the date the
Company becomes liable for such amounts hereunder (or, in the case of principal
of or interest on any Secured Note, from the date such amount first becomes due
and payable hereunder) until such amounts are (i) paid in full by the Company or
(ii) satisfied in full by the exercise of the Note Purchaser's rights hereunder.
51
Section 10.5 Application of Proceeds.
The proceeds of any sale or other realization of any of the
Collateral, and any other cash at the time held by the Note Purchaser (itself or
through its custodians, bailees or agents, including the Facility Administrator)
under this Agreement, shall be applied by the Note Purchaser in the following
order of priority:
First, to the payment of the costs and expenses of the sale
and all expenses (including the reasonable fees and expenses of counsel,
expert witnesses and consultants), liabilities, and advances made or
incurred by the Note Purchaser in connection therewith.
Second, to the payment of all accrued interest under any
Secured Note due or past due.
Third, to the payment of principal upon all of any Secured
Note due or past due.
Fourth, to the payment of all other amounts owing under this
Agreement.
Fifth, to the payment of all other amounts owed by the Company
or any Affiliate of the Company to the Note Purchaser or any Affiliate of
the Note Purchaser under any of the other Basic Documents.
Sixth, to the payment to the Company, or to such other Person
as a court of competent jurisdiction may direct, of any surplus then
remaining from the proceeds and other cash.
Section 10.6 Payments on Collateral to the Company.
Upon the occurrence of an Event of Default, all rights of the
Company to receive any payments from the Collateral that it would otherwise be
authorized to receive shall cease, and those rights shall become vested in the
Facility Administrator, as collateral agent and secured party for the benefit
and on behalf of the Note Purchaser. The Facility Administrator shall then have
the sole right to receive and hold those payments. Any payments that are
received by the Company contrary to these provisions shall be received in trust
for the benefit of the Note Purchaser, shall be segregated from other funds of
the Company, and shall be promptly paid to, or in accordance with the
instructions of, the Note Purchaser.
Section 10.7 Cross-Collateralization; Right of Set-Off.
The Note Purchaser may, in its sole discretion upon the occurrence
of an Event of Default, proceed against any assets held by it or on its behalf
under this Agreement or any other agreement between the Note Purchaser and the
Company and shall have a right of set-off against any amounts owed by the Note
Purchaser to the Company under this Agreement or any other agreement between the
Note Purchaser and
52
the Company. In addition, the Note Purchaser may, in its sole discretion upon
the occurrence and during the continuation of an event of default under any
other agreement between the Note Purchaser and the Company, proceed against any
Collateral (or cause it to be proceeded against) and shall have a right of
set-off against any amounts owed by the Note Purchaser to the Company under this
Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Amendment.
None of the Basic Documents, including this Agreement, the Sale and
Servicing Agreement, the Facility Administration Agreement, the Loan Purchase
and Contribution Agreement, the Disposition Agreement, the Custodial Agreement
and the Company Administration Agreement, may be modified, supplemented or
amended without the prior written consent of the Note Purchaser, which consent
may be granted or withheld in the sole discretion of the Note Purchaser.
Section 11.2 Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to the conflicts
of law principles thereof. With respect to all legal proceedings arising out of
or relating to this Agreement or any other Basic Document or the transactions
contemplated hereby or thereby, each party hereto irrevocably submits to the
non-exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan, City of New York, and
each party hereto irrevocably waives any objection that it may have at any time
to the laying of venue of any suit, action or proceeding arising out of or
relating hereto or to any other Basic Document, or the transactions contemplated
hereby or thereby, brought in any such court, irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in any inconvenient forum and further irrevocably waives the right to object,
with respect to such claim, suit, action or proceeding brought in any such
court, that such court does not have jurisdiction over such party, provided that
service of process is made by any lawful means. Nothing in this Section 11.2
shall affect the right of the Note Purchaser or its assignees to bring any other
action or proceeding against the Company or OOMC, or the property of either of
them, in the courts of other jurisdictions.
Section 11.3 Notices.
All demands, notices and communications to a party hereunder or in
connection herewith shall be in writing and shall be deemed to have been duly
given if personally delivered, or sent by overnight courier, transmitted by
facsimile or mailed by registered or certified mail, return receipt requested,
to, such party at the relevant address or facsimile number set forth below (or
at such other address or facsimile number as such
53
party may designate from time to time by written notice in accordance with this
Section 11.3):
If to the Company:
Option One Owner Trust 2002-3
c/o Wilmington Trust Company as Owner Trustee
One Rodney Square North
1100 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Telephone: (302) 636-4144
Facsimile: (302) 651-8882
with a copy to:
OOMC at its address set forth herein
If to OOMC:
Option One Mortgage Corporation
3 Ada
Irvine, CA 92618
Attention: Chief Financial Officer
Telephone: (949) 790-7504
Facsimile: (949) 790-7540
E-mail: bill.oneill@oomc.com
with a copy to:
Option One Loan Warehouse Corporation
3 Ada
Irvine, CA 92618
Attention: Assistant Treasurer
Telephone: (949) 790-3600 ext. 32527
Facsimile: (949) 790-7514
E-mail: Jason.Forsyth@oomc.com
If to the Note Purchaser:
UBS Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019
54
Attention: Robert Carpenter
George A. Mangiaracina
Telephone: (212) 713-2000
Facsimile: (212) 713-9607
Any such notice, demand or other communication shall be deemed to have been duly
given when received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt) if received or delivered prior to 1:30 p.m.
local time and, if received or delivered after such time, shall be deemed to
have been received on the next Business Day.
Section 11.4 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Agreement shall, for any reason whatsoever, be held invalid under any
applicable law, then such covenants, agreements, provisions, or terms shall be
ineffective to the extent of such invalidity and shall in no way affect the
validity or enforceability of the remainder of that provision or the other
provisions of this Agreement.
Section 11.5 No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of
the Company, the Note Purchaser or any assignee of the Note Purchaser, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. Except as expressly
provided otherwise in this Agreement, the rights, remedies, powers and
privileges herein provided are cumulative and shall be in addition to any
rights, remedies, powers and privilege provided by applicable law or otherwise,
and the assertion or employment of any right, remedy, power or privilege
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right, remedy, power or privilege. In
addition to the rights, remedies, powers and privileges granted to the Note
Purchaser under this Agreement or any Secured Note, the Note Purchaser shall
have all of the rights, remedies, powers and privileges of a secured party under
the UCC (except as expressly provided otherwise in this Agreement).
Section 11.6 Termination.
If (a) all Obligations shall have been paid in full (including
payment of the Minimum Usage Fee set forth in the Pricing Side Letter) and (b)
the parties hereto acknowledge in writing their mutual intent to terminate the
Commitment Term and this Agreement, then the Commitment Term and this Agreement
shall terminate and the Note Purchaser shall release its Lien with respect to
the Collateral and return any remaining Collateral to the Company. Upon the
request of the Company, the Note Purchaser shall then execute termination
statements and any other documents the Company reasonably requests that are
necessary to make clear upon the public record the termination of the Note
Purchaser's Liens. Notwithstanding the foregoing or any other provision hereof,
the
55
obligations of the Company under Sections 8.1, 8.2 and 8.3 shall survive the
termination or other cancellation of this Agreement.
Section 11.7 Assignment.
Neither this Agreement nor any rights or other obligations under
this Agreement may be assigned or delegated by the Company without prior written
consent of the Note Purchaser, and any attempted such assignment or delegation
shall be void. The Note Purchaser may assign any and all of its rights
hereunder, without the consent of the Company, in connection with any assignment
by the Note Purchaser of an interest in any Secured Note. If, in accordance with
the preceding sentence, the Note Purchaser assigns any or all of its rights
hereunder to a third party (other than an Affiliate of the Note Purchaser), the
Note Purchaser shall provide written notice thereof to the Company.
Section 11.8 Binding Effect; Third-Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Each of
the Noteholders other than the Note Purchaser shall be deemed to be an express
third-party beneficiary of this Agreement and shall be entitled to enforce the
terms hereof as if it were a party hereto.
Section 11.9 Merger and Integration.
This Agreement and the other Basic Documents set forth the entire
understanding of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agreement and the
other Basic Documents.
Section 11.10 No Petition.
Neither the Company nor the Note Purchaser shall petition or
otherwise invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Company or the Note
Purchaser under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Company or the Note Purchaser or any substantial
part of their respective property, or ordering the winding up or liquidation of
the affairs of the Company or the Note Purchaser.
Section 11.11 Cooperation
The Company agrees to cooperate and to cause its Affiliates
(including the Servicer) to cooperate with the Note Purchaser, consistent with
the terms hereof, to the extent necessary or appropriate to effectuate any sale
or financing of any of the Secured Notes by the Note Purchaser, including by
making available or providing access (as appropriate) to the Note Purchaser or
its designee the Custodial Loan Files and Servicing Records relating to the
Pledged Loans (subject to the confidentiality requirements of any applicable
consumer protection and other laws or regulations).
56
Section 11.12 Resales of Secured Notes
The Note Purchaser understands that the Secured Note has not been,
and will not be, registered under the Securities Act or any state securities
laws, and may not be sold except as permitted in the following sentence. The
Note Purchaser agrees that if it should sell any Secured Note it will do so only
(a) to the Company or an Affiliate of the Company or (b) to a Qualified
Institutional Buyer that, prior to such sale, delivers to the Facility
Administrator and the Company a signed letter, substantially in the form of
Exhibit C to the Facility Administration Agreement, and only if, after giving
effect thereto, no more than 100 Persons would hold any interest in the Secured
Notes; and the Note Purchaser further agrees to provide to any Person purchasing
a Secured Note from it a notice advising such purchaser that resales of the
Secured Notes are restricted as stated herein.
Section 11.13 Qualified Institutional Buyer.
The Note Purchaser hereby represents and warrants that it is a
Qualified Institutional Buyer that has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Secured Notes, and that the Note Purchaser is
able to bear the economic risk of such investment.
Section 11.14 Time.
Unless the context clearly requires otherwise, all references to
time contained in this Agreement shall be deemed to be local time in New York,
New York on the applicable day.
Section 11.15 Headings
The headings and captions contained herein are for convenience only
and shall not control or affect the meaning or interpretation of any provision
hereof.
Section 11.16 Exhibits
The schedules and exhibits referred to herein shall constitute a
part of this Agreement and are incorporated into this Agreement for all
purposes.
Section 11.17 Counterparts
This Agreement may be executed in two or more counterparts,
including telecopy transmission thereof (and by different parties on separate
counterparts), each of which shall be an original, but all of which together
shall constitute one and the same instrument. Signatures may be exchanged by
facsimile, and each party hereto agrees to be bound by its own facsimile
signature and to accept the facsimile signature of the other party.
57
Section 11.18 No Recourse to Owner Trustee
It is expressly understood and agreed by the parties hereto that (a)
this Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally, but solely as Owner Trustee of Option One Owner
Trust 2002-3, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein made
on the part of the Company is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Company, (c) nothing herein contained shall
be construed as creating any liability on Wilmington Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Company or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Company under this Agreement or any other related
documents.
58
IN WITNESS WHEREOF, the Company, the Note Purchaser and OOMC each
have caused this Agreement to be duly executed by their respective officers as
of the day and year first above written.
OPTION ONE OWNER TRUST 2002-3
as the Company
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Owner Trustee
By: /s/ Dorri Wolhar
--------------------------------
Name: Dorri E. Wolhar
Title: Financial Services Officer
UBS REAL ESTATE SECURITIES INC.
as the Note Purchaser
By: /s/ Robert Carpenter
--------------------------------
Name: Robert Carpenter
Title: Executive Director
By: /s/ George A. Mangiaracina
--------------------------------
Name: George A. Mangiaracina
Title: Managing Director
OPTION ONE MORTGAGE CORPORATION
as the Loan Originator
By: /s/ C. R. Fulton
--------------------------------
Name: Charles R. Fulton
Title: Vice President
SCHEDULE I
COLLATERAL SCHEDULE
[Please see Tab 1 (Schedule A)]
EXHIBIT A
[RESERVED]
EXHIBIT B
REPRESENTATIONS AND WARRANTIES
REGARDING THE LOANS
OOMC and the Company hereby jointly and severally represent and
warrants to the Note Purchaser that, as to each Loan, as of the related Advance
Date financing the Company's acquisition of such Loan:
(a) The information set forth on the Collateral Schedule with
respect to such Loan is true and correct in all material respects.
(b) Except as otherwise indicated on the Collateral Schedule, all
monthly payments due on such Loan prior to such Advance Date have been made.
Neither the Loan Originator, any Immediate Transferor nor the Company has
advanced funds, or induced, solicited or knowingly received any advance of funds
from a Person other than the Mortgagor thereunder, directly or indirectly, for
the payment of any amount required to be paid in respect of such Loan. As of
such Advance Date, no payment due under such Loan is delinquent for 30 or more
days. No payment under such Loan has been 30 days delinquent more than once
during the twelve months immediately preceding such Advance Date, and no payment
under such Loan has ever been 60 or more days delinquent.
(c) At the origination of such Loan, all outstanding taxes,
governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents previously due and owing with
respect to the related Mortgaged Property had been paid, or an escrow of funds
had been established in an amount sufficient to pay for every such item that
remained unpaid and that had been assessed but was not yet due and payable. As
of such Advance Date, all taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments or ground rents that
previously became due and owing with respect to such Mortgaged Property have
been paid, or an escrow of funds had been established in an amount sufficient to
pay for every such item that remained unpaid and that had been assessed but was
not yet due and payable.
(d) The related Mortgage and Promissory Note, and any other Loan
Document ("Other Loan Document") contain the entire agreement of the parties and
all obligations of the Loan Originator or the Company under the related Loan. No
terms of the related Promissory Note, Mortgage or Other Loan Document, if any,
have been impaired, waived, altered or modified in any respect, except by
written instruments, recorded in the applicable public recording office if
necessary to maintain the lien priority of the Mortgage, that have been
delivered to the Custodian. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required by
the related policy, and has been disclosed to the Note Purchaser in writing. No
Mortgagor has been released, in whole or in part, except in connection with an
assumption or partial release agreement approved by the title insurer, to the
extent
required by the policy, and which assumption agreement has been delivered to the
Custodian and the terms of which have been disclosed to the Note Purchaser in
writing.
(e) None of the related Promissory Note, Mortgage or any Other Loan
Document is subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury, nor will the operation of any of the
terms of such Promissory Note, Mortgage or Other Loan Document, or the exercise
of any right thereunder, render such Mortgage unenforceable, in whole or in
part, or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto.
(f) All improvements on the related Mortgaged Property are insured
by a generally acceptable insurer against loss by fire and hazards of extended
coverage, pursuant to insurance policies conforming to the requirements of the
Sale and Servicing Agreement, including that the coverage thereunder be for not
less than the lesser of (a) the outstanding principal balance of such Loan and
(b) the lesser of the maximum insurable value of such Mortgaged Property and the
minimum amount required to compensate for damage or loss to such improvements.
All such insurance policies contain a standard mortgagee clause naming the Loan
Originator, its successors and assigns as mortgagee and all premiums thereon
have been paid. If the Mortgaged Property securing such Loan is in an area
identified in the Federal Register by the Federal Emergency Management Agency as
having special flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Flood Insurance Administration is
in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (i) the
original outstanding principal balance of such Loan, (ii) the minimum amount
required to compensate for damage or loss on a replacement cost basis or (iii)
the maximum amount of insurance that is available with respect to such Mortgaged
Property under the Flood Disaster Protection Act of 1973. The related Mortgage
obligates the Mortgagor thereunder to maintain all such insurance at the
Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor. Such Loan does not provide for primary mortgage insurance.
(g) Any and all requirements of any federal, state or local law
including, without limitation, usury, truth in lending, real estate settlement
procedures, consumer credit protection, equal credit opportunity or disclosure
laws applicable to the origination and servicing of such Loan have been complied
with, and consummation of the transactions contemplated hereby with respect to
such Loan will not involve the violation of any such laws.
(h) The related Mortgage has not been satisfied, canceled,
subordinated or rescinded, in whole or in part, and the related Mortgaged
Property has not been released from the lien of such Mortgage, in whole or in
part, nor has any instrument been executed that would effect any such
satisfaction, cancellation, subordination, rescission or release. The related
Promissory Note is not and has not been
B-2
secured by any Lien except for the Lien of such Mortgage on the Mortgaged
Property and the Lien of any Other Loan Document.
(i) The Mortgage securing such Loan is a valid, existing and
enforceable first or second Lien (as indicated on the Collateral Schedule with
respect thereto) on and in the Mortgaged Property, including all improvements
thereon, subject only to (i) the lien of current real property taxes and
assessments not yet due, (ii) covenants, conditions and restrictions, rights of
way, easements and other matters of public record as of the date of recording of
such Mortgage, all such exceptions appearing of record being acceptable to
mortgage lending institutions generally and specifically referred to in the
lender's policy of title insurance delivered to the originator of such Loan, and
specifically reflected in the appraisal made in connection with the origination
of such Loan, (iii) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the security intended to
be provided by such Mortgage, and (iv) if such Loan is a second-lien loan, the
prior lien of another lender. Any Other Loan Document establishes and creates a
valid, existing and enforceable first or second lien and first or second
priority security interest on the property described therein, and the Company
has full right to Grant a Lien on and in such Other Loan Document to the Note
Purchaser. The Lien of Other Loan Documents affects only property incidental to
the related Mortgaged Property, and there is no pledged account or other
material security securing the related Mortgagor's obligations other than the
Mortgaged Property. The related Mortgaged Property was not, as of the date of
origination of such Loan, subject to a mortgage, deed of trust, deed to secure
debt or other security instrument creating a lien subordinate to the lien of the
related Mortgage.
(j) The Promissory Note, the related Mortgage and each Other Loan
Document are genuine, and each is the legal, valid and binding obligation of the
maker thereof, enforceable in accordance with its terms.
(k) All parties to the related Promissory Note, Mortgage or any
Other Loan Document had legal capacity to enter into the Loan and to execute and
deliver such Promissory Note, Mortgage or Other Loan Document, as applicable,
and each of such Promissory Note, Mortgage and Other Loan Document has been duly
and properly executed by such parties.
(l) The proceeds of such Loan have been fully disbursed to or for
the account of the related Mortgagor and there is no obligation on the part of
the mortgagee thereunder to advance additional funds thereunder. Any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing such Loan and the recording or
filing of the Mortgage and any Other Loan Document have been paid, and such
Mortgagor is not entitled to any refund of any amounts paid or due to the
mortgagee pursuant to such Promissory Note, Mortgage or Other Loan Document. Any
principal advances made to such Mortgagor prior to the Advance Date have been
consolidated with the outstanding principal amount secured by such Mortgage and
Other Loan Documents, and the secured principal amount, as consolidated, bears a
single interest rate and single repayment term. The Lien of such
B-3
Mortgage securing the consolidated principal amount is expressly insured as
having first or second lien priority, as applicable, by a title insurance
policy, an endorsement to the policy insuring the mortgagee's consolidated
interest or by other title evidence acceptable to Fannie Mae and Freddie Mac.
The consolidated principal amount does not exceed the original principal amount
of such Loan.
(m) The related Mortgage was recorded, and all subsequent
assignments of such Mortgage have been recorded in the appropriate jurisdictions
wherein such recordation is necessary to perfect the Lien thereof as against
creditors of OOMC, any Immediate Transferor or the Company. The Company has good
title to, and is the sole legal and beneficial owner of, such Loan free and
clear of any Lien and has full right and authority, subject to no interest or
participation of, or agreement with, any other Person to sell and assign the
same
(n) All Persons that have had any interest in such Loan, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) in compliance with any and all
applicable "doing business" and licensing requirements of the laws of the state
in which the related Mortgaged Property is located.
(o) Such Loan is covered by either (i) an attorney's opinion of
title and abstract of title the form of which is acceptable to Fannie Mae, or
(ii) an ALTA lender's title insurance policy or (iii) a CLTA lender's title
insurance policy or other generally acceptable form of policy of insurance
issued by a title insurer qualified to do business in the jurisdiction in which
the related Mortgaged Property is located, in each case (x) insuring (subject to
the exceptions described in clauses (i), (ii) and (iii) of paragraph (i) above)
the Loan Originator and its successors and assigns (including the Company) as to
the first (or, if applicable, second) lien priority of the related Mortgage in
the original principal amount of such Loan, and (y) bearing, to the extent
applicable, a condominium endorsement, extended coverage endorsement and an
adjustable rate mortgage endorsement insuring against any loss by reason of the
invalidity or unenforceability of the Lien thereof resulting from the provisions
of such Mortgage providing for variations in the monthly payment and mortgage
interest rate in respect thereof. Such lender's title insurance policy further
affirmatively insures ingress and egress to and from such Mortgaged Property,
and against encroachments by or upon such Mortgaged Property or any interest
therein. No claims have been made under such lender's title insurance policy,
and no current or prior holder of the related Mortgage, including the Loan
Originator or the Company, has done, by act or omission, anything that would
impair the coverage of such lender's title insurance policy. The Loan Originator
is the sole insured of such lender's title insurance policy, and such lender's
title insurance policy is in full force and effect as of such Advance Date.
Neither the transfer of such Loan to the Company nor the Pledge of such Loan to
the Note Purchaser will affect the validity or enforceability of such policy.
(p) Except with respect to the permitted delinquencies on certain
Loans as described in paragraph (b) above and on such Collateral Schedule, there
is no (i) material default, breach, violation or event of acceleration existing
under such Loan, or
B-4
(ii) event that, with the giving of notice or the lapse of time, or both, would
constitute a material default, breach, violation or event of acceleration with
respect to such Loan, and neither the Loan Originator nor the Company has waived
any such default, breach, violation or event of acceleration.
(q) There are no mechanics' or similar Liens or claims that have
been filed for work, labor or material (and no rights are outstanding that under
law could give rise to any such Lien) affecting the related Mortgaged Property
that are or may be Liens prior to, or equal or of parity with, the Lien of the
related Mortgage.
(r) All improvements that were considered in determining the
appraised value of the related Mortgaged Property indicated on such Collateral
Schedule lay wholly within the boundaries and building restriction lines of such
Mortgaged Property, and no improvements on adjoining properties to which value
was assigned encroach upon such Mortgaged Property.
(s) Such Loan was originated in material accordance with the
Underwriting Standards in effect as of its origination date. Such Loan was (i)
originated (as the term is used for the purposes of the Secondary Mortgage
Market Enhancement Act) by OOMC or by a savings and loan association, a savings
bank, a commercial bank or similar banking institution that is supervised and
examined by a federal or state authority, or by a mortgagee approved as such by
the Secretary of Housing and Urban Development pursuant to Sections 203 and 211
of the National Housing Act, or (ii) acquired by OOMC directly through loan
brokers or correspondents. If such Loan was not originated directly by OOMC,
such Loan was directly or indirectly purchased by OOMC from the originator of
such Loan pursuant to one or more Transfer Agreements in form and substance (1)
generally similar to a form that has been provided to, and approved by, the Note
Purchaser, and (2) sufficient to vest good title in such Loan in OOMC, free of
all Liens or other encumbrances except for those, if any, created by OOMC.
(t) Principal payments on such Loan commenced no more than two (2)
months after the proceeds of such Loan were disbursed. If such Loan is an
adjustable rate loan, on each interest adjustment date under such Loan, the
mortgage interest rate will be adjusted to equal the index plus the gross
margin, rounded to the nearest (or next highest, as applicable) 0.125%, subject
to the periodic rate cap, the maximum rate and the minimum rate set forth in the
Collateral Schedule. The related Promissory Note is payable on the day of each
month indicated on the Collateral Schedule with respect to such Loan in
self-amortizing monthly installments of principal and interest, with interest
payable in arrears, and requires a monthly payment that is sufficient to fully
amortize the outstanding principal balance of such Loan over its remaining term
and to pay interest at the applicable interest rate. If such Loan is an
adjustable rate loan, the related Promissory Note provides that the monthly
payments will be changed on each adjustment date indicated on such Collateral
Schedule to an amount that will amortize the unpaid principal balance of such
Loan over its remaining term at the mortgage interest rate established on such
adjustment date. If such Loan is a fixed-rate loan and provides for the payment
of a balloon payment, such Loan is fully amortizing over a 30-year period
B-5
and has a 15-year term to maturity. The related Promissory Note does not permit
negative amortization. If such Loan is an adjustable rate loan, the related
Promissory Note does not permit the related Mortgagor to convert such Loan to a
fixed-rate loan.
(u) The origination, collection and servicing practices used by OOMC
or the Company with respect to the related Promissory Note, Mortgage and Other
Loan Documents have been in all respects legal, proper and customary in the
subprime mortgage origination and servicing industry. Such Loan has been
serviced by the Company and any predecessor servicer in accordance with the
terms of the Promissory Note. With respect to escrow deposits and escrow
payments, if any, all such payments are in the possession of, or under the
control of, the Company and there exist no deficiencies in connection therewith
for which customary arrangements for repayment thereof have not been made. No
escrow deposits or escrow payments or other charges or payments due the Company
or any predecessor owner of such Loan have been capitalized under the related
Promissory Note or Mortgage.
(v) The related Mortgaged Property is free of damage and waste such
as would materially and adversely affect the value of such Mortgaged Property as
security for such Loan; and there is no proceeding pending for the total or
partial condemnation of such Mortgaged Property,
(w) The related Promissory Note and Mortgage contain customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against such Mortgaged Property of the
benefits of the security provided thereby, including, (i) if such Mortgage is
designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial
foreclosure. Since the date of origination of such Loan, such Mortgaged Property
has not been subject to any bankruptcy proceeding or foreclosure proceeding and
the related Mortgagor has not filed for protection under applicable bankruptcy
laws. There is no homestead or other exemption available to such Mortgagor that
would interfere with the right to sell such Mortgaged Property at a trustee's
sale or the right to foreclose such Mortgage. Such Mortgagor has not notified
either the Loan Originator or the Company of any relief requested or allowed to
such Mortgagor under the Soldiers and Sailors Civil Relief Act of 1940.
(x) The Custodial Loan File with respect to such Loan contains an
appraisal of the related Mortgaged Property made and signed, prior to the
approval of the application for such Loan, by a qualified appraiser (i) who, at
the time of such appraisal, met the minimum qualifications of Fannie Mae or
Freddie Mac and the requirements of the Loan Originator's appraisal policy and
(ii) who satisfied (and which appraisal was conducted in accordance with) all of
the applicable requirements of the Uniform Standards of Professional Appraisal
Practice in effect at the time of such appraisal and procedures. Such appraiser
had no interest, direct or indirect, in such Mortgaged Property or in any loan
made on the security thereof, and such appraiser's compensation was not affected
by the approval or disapproval of such Loan.
(y) If the related Mortgage constitutes a deed of trust, a trustee,
duly qualified under applicable law to serve as such, has been properly
designated and
B-6
currently so serves and is named in such Mortgage, and no fees or expenses are
or will become payable by the Company to the trustee under such deed of trust,
except in connection with a trustee's sale thereunder after default by the
Mortgagor.
(z) Such Loan contains no (i) provisions pursuant to which any
monthly payment due thereunder is (A) paid or partially paid with funds
deposited in any separate account established by the Loan Originator, the
Company, the related Mortgagor, or anyone on behalf of such Mortgagor, or (B)
paid by any source other than such Mortgagor, or (ii) any other provision, of
like effect, that may constitute a "buydown" provision. Such Loan is not a
graduated payment mortgage loan, and does not have a shared appreciation or
other contingent interest feature.
(aa) If such Loan is an adjustable rate loan, the related Mortgagor
has executed a statement to the effect that such Mortgagor has received all
disclosure materials required by applicable law with respect to the making of
adjustable rate mortgage loans, and such statement is and will remain in the
related Custodial Loan File.
(bb) If such Loan is a refinancing Loan, the related Mortgagor has
received all disclosure and rescission materials required by applicable law with
respect to the making of a refinancing Loan, and evidence of such receipt is and
will remain in the related Custodial Loan File.
(cc) Such Loan was not made (i) in connection with the construction
or rehabilitation of the related Mortgaged Property (except for construction to
permanent financing), or (ii) to facilitate the trade-in or exchange of the
related Mortgaged Property.
(dd) The related Promissory Note, Mortgage and all Other Loan
Documents, together with any other documents required to be delivered with
respect to such Loan pursuant to the Custodial Agreement, have been delivered to
the Custodian, all in compliance with the specific requirements of the Custodial
Agreement.
(ee) The related Mortgaged Property is lawfully occupied under
applicable law; and all inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of such Mortgaged Property
(including any required certificates of occupancy), have been made by or
obtained from the appropriate authorities.
(ff) No error, omission, misrepresentation, negligence, fraud or
similar occurrence with respect to a Loan has taken place on the part of the
Loan Originator or any of the Loan Originator's employees or other agents, or,
to the best knowledge of OOMC and the Company after due inquiry (including
review of the relevant Loan Documents in accordance with the Underwriting
Standards, it being understood and agreed that this portion of this
representation and warranty shall be deemed to have been breached if the Company
or OOMC knew, or should have known, of such fraud), on the part of any third
person, including, without limitation, the Mortgagor, any appraiser, any builder
or developer, or any other party involved in the origination of such Loan or in
the application of or for any insurance in relation to such Loan.
B-7
(gg) If the Residential Dwelling on the related Mortgaged Property
is a condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development), such condominium or planned unit development
project meets Fannie Mae's eligibility requirements.
(hh) Except as disclosed to the Note Purchaser in writing, the Loan
Originator has made no Loan on the related Mortgaged Property other than such
Loan.
(ii) Such Loan was not intentionally selected by the Loan Originator
in a manner intended to adversely affect the interest of the Company or the Note
Purchaser. The Loan Originator used no selection procedures that identified such
Loan as being less desirable or valuable than other comparable mortgage loans
originated or acquired by the Loan Originator. Such Loans, collectively with the
other Loans included on such Collateral Schedule, is representative of the Loan
Originator's portfolio of fixed rate or adjustable rate mortgage loans, as the
case may be.
(jj) The related Mortgaged Property consists of a parcel of real
property of not more than twenty acres, and is improved with a Residential
Dwelling. Without limiting the foregoing, such Mortgaged Property is not a log
home, earthen home, or underground home. Such Mortgaged Property consists of
either a fee simple estate or a long-term residential lease. If such Loan is
secured by a long term residential lease: (i) the terms of such lease (A)
expressly permit (1) the mortgaging of the leasehold estate, the assignment of
the lease without the lessor's consent (or the lessor's consent has been
obtained and such consent is in the Custodial Loan File relating to such Loan)
and (2) the acquisition by the holder of the related Mortgage of the rights of
the lessee upon foreclosure or assignment in lieu of foreclosure, or (B) provide
the such holder with substantially similar protection; (ii) the terms of such
lease do not (A) allow the termination thereof upon the lessee's default without
the holder of such Mortgage being entitled to receive written notice of, and an
opportunity to cure, such default or (B) prohibit such holder from being insured
under the hazard insurance policy relating to such Mortgaged Property; (iii) the
original term of such lease is not less than 15 years; (iv) the term of such
lease does not terminate earlier than five years after the maturity date of such
Loan; and (v) such Mortgaged Property is located in a jurisdiction in which the
use of leasehold estates for residential properties is a widely accepted
practice.
(kk) The related Mortgage, and, if required by applicable law, the
related Promissory Note, contain a provision for the acceleration of the payment
of the unpaid principal balance of such Loan if such Mortgaged Property is sold
or transferred without the prior written consent of the mortgagee under such
Mortgage, at the option of the mortgagee.
(ll) The prepayment penalty, if any, provided for under the terms of
such Loan is enforceable in accordance with the terms set forth for such Loan in
the Collateral Schedule, subject, however, to the effect of applicable
bankruptcy, insolvency, moratorium and similar proceedings, to general equitable
principles and to limitations that may be imposed in connection with foreclosure
on the related Mortgaged Property under applicable state law.
B-8
(mm) There is only one originally executed Promissory Note not
stamped as a duplicate with respect to such Loan.
(nn) The original executed Promissory Note has not been pledged to
anyone other than Option One Trust 2002-3.
(oo) Each Loan at origination complied in all material respects with
applicable local, state and federal laws, including, without limitation, usury,
equal credit opportunity, real estate settlement procedures, the Truth In
Lending Act of 1968, as amended, and all applicable predatory and abusive
lending laws.
(pp) None of the Loans are subject to the Home Ownership and Equity
Protection Act of 1994, as amended, or any comparable state law; none of the
Loans are "section 32" loans or "high cost" loans as defined by applicable
predatory and abusive lending laws.
(qq) None of the Loans originated in the State of New York are "high
cost" as defined in New York Banking Law Section 6-1.
(rr) No borrower was encouraged or required to select a Loan product
offered by the Loan Originator which is a higher cost product designed for less
creditworthy borrowers, unless at the time of the Loan's origination, such
borrower did not qualify taking into account credit history and debt to income
ratios for a lower cost credit product then offered by the Loan Originator or
any affiliate of the Loan Originator.
(ss) The methodology used in underwriting the extension of credit
for each Loan employs objective mathematical principles which relate the
borrower's income, assets and liabilities to the proposed payment and such
underwriting methodology does not rely on the extent of the borrower's equity in
the collateral as the principal determining factor in approving such credit
extension. Such underwriting methodology confirmed that at the time of
origination (application/approval) the borrower had a reasonable ability to make
timely payments on the Loan.
(tt) With respect to any Loan that contains a provision permitting
imposition of a premium upon a prepayment prior to maturity: (i) prior to the
loan's origination, the borrower agreed to such premium in exchange for a
monetary benefit, including but not limited to a rate or fee reduction, (ii)
prior to the loan's origination, the borrower was offered the option of
obtaining a mortgage loan that did not require payment of such a premium, (iii)
the prepayment premium is disclosed to the borrower in the loan documents
pursuant to applicable state and federal law, and (iv) notwithstanding any state
or federal law to the contrary, the Servicer shall not impose such prepayment
premium in any instance when the mortgage debt is accelerated as the result of
the borrower's default in making the loan payments.
(uu) No borrower was required to purchase any credit life,
disability, accident or health insurance product as a condition of obtaining the
extension of credit. No borrower obtained a prepaid single premium credit life,
disability, accident or health insurance policy in connection with the
origination of the Loan. No proceeds
B-9
from any Loan were used to purchase single premium credit insurance policies as
part of the origination of, or as a condition to closing, such Loan.
(vv) All points and fees related to each Loan were disclosed in
writing to the borrower in accordance with applicable state and federal law and
regulation.
(ww) All fees and charges (including finance charges) and whether or
not financed, assessed, collected or to be collected in connection with the
origination and servicing of each Loan has been disclosed in writing to the
borrower in accordance with applicable state and federal law and regulation.
(xx) The Servicer will transmit full-file credit reporting data for
each Loan pursuant to Fannie Mae Guide Announcement 95-19 and that for each
Loan, Servicer agrees it shall report one of the following statuses each month
as follows: new origination, current, delinquent (30-, 60-, 90-days, etc.),
foreclosed, or charged-off.
(yy) All Prepayment charges are enforceable and were originated in
compliance with all applicable federal, state and local laws.
B-10
EXHIBIT C
FORM OF NOTICE OF BORROWING
___________, 200_
UBS Real Estate Securities Inc.
1285 Avenue of the Americas
New York, New York 10019
Attention: Robert Carpenter
George A. Mangiaracina
Re: Notice of Borrowing
Ladies and Gentlemen:
In accordance with Section 2.4 of the Amended and Restated Note
Purchase Agreement dated as of March 18, 2005 (the "Agreement") among Option One
Owner Trust 2002-3 (the "Company"), UBS Real Estate Securities Inc. (the "Note
Purchaser"), and Option One Mortgage Corporation, the Company hereby gives
notice to the Note Purchaser that the Company desires to obtain an Advance
pursuant to the provisions of the Agreement on [specify proposed Advance Date].
All capitalized terms used herein without definition shall have the meanings
assigned to them in the Agreement.
In connection with this Notice of Borrowing and the proposed
Advance:
1. The Company represents and warrants to the Note Purchaser that,
on the proposed Advance Date, all conditions precedent specified in Sections 6.1
and 6.2 of the Agreement will have been satisfied.
2. Pursuant to Section 2.4 of the Agreement, the Company has
attached hereto the Collateral Schedule listing the Loans (for Wet Funded Loans,
in addition, the related wire instructions) and other Collateral intended to be
financed in whole or in part by the Company with the desired Advance.
3. The Advance should be wired to the following account: [specify
wiring instructions].
Very truly yours,
OPTION ONE OWNER TRUST 2002-3
By: [OPTION ONE MORTGAGE CORPORATION,
ITS AUTHORIZED REPRESENTATIVE]]
By:________________________________
Name:______________________________
Title:_____________________________
C-2
EXHIBIT D
UNDERWRITING STANDARDS
[SEE ATTACHED]
EXHIBIT E
CAPITAL ADEQUACY TEST
*For each field multiply the HRB% by the Balance Sheet Amount for Required
Capital
HRB TEST BALANCE SHEET REQUIRED CAPITAL
-------- ------------- ----------------
Unrestricted Cash and Equivalents 0%
Restricted Cash 0%
Loans Held for Sale 9%
Servicing Advances 10%
Beneficial Interests in trusts 10%
Subprime Mortgage NIM Residual Interest 60%
Real Estate Held for Sale 10%
Furniture and Equipment 0%
Mortgage Servicing Rights 25%
Prepaid Expenses and Other Assets 10%
Accrued interest receivable 10%
Receivable from H&R Block 0%
Intangibles and goodwill 100%
Deferred Tax Assets 10%
Derivative Assets 10%
TOTAL REQUIRED CAPITAL
Total Owners Equity on Balance Sheet Date
Less: Receivables from H&R Block
______________________________
Adjusted Net Worth
Adjusted Net Worth divided by Required Capital = Ratio for Capital Adequacy Test