Exhibit 10.2
GMAC Residential Funding
SECOND AMENDED AND RESTATED WAREHOUSING
CREDIT AND SECURITY AGREEMENT
BETWEEN
FINANCIAL INSTITUTIONAL PARTNERS MORTGAGE CORPORATION,
a Delaware corporation
AND
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
Dated as of August 31, 2002
TABLE OF CONTENTS
1. THE CREDIT .................................................................. 1-1
1.1. The Warehousing Commitment ............................................. 1-1
1.2. Expiration of Warehousing Commitment ................................... 1-1
1.3. Warehousing Note and Sublimit Note ..................................... 1-1
2. PROCEDURES FOR OBTAINING ADVANCES ........................................... 2-1
2.1. Warehousing Advances ................................................... 2-1
2.2. Bridge Loan Advances ................................................... 2-1
3. INTEREST, PRINCIPAL AND FEES ................................................ 3-1
3.1. Interest ............................................................... 3-1
3.2. Interest Limitation .................................................... 3-2
3.3. Principal Payments ..................................................... 3-2
3.4. Non-Usage Fees ......................................................... 3-4
3.5. Loan Package Fees ...................................................... 3-4
3.6. Facility Fees .......................................................... 3-5
3.7. Miscellaneous Fees and Charges ......................................... 3-5
3.8. Overdraft Advances ..................................................... 3-5
3.9. Method of Making Payments .............................................. 3-5
4. COLLATERAL .................................................................. 4-1
4.1. Grant of Security Interest ............................................. 4-1
4.2. Maintenance of Collateral Records ...................................... 4-2
4.3. Release of Security Interest in Pledged Loans and Pledged Securities ... 4-2
4.4. Collection and Servicing Rights ........................................ 4-3
4.5. Return of Collateral at End of Warehousing Commitment .................. 4-4
4.6. Delivery of Collateral Documents ....................................... 4-4
5. CONDITIONS PRECEDENT ........................................................ 5-1
5.1. Initial Advance ........................................................ 5-1
5.2. Each Advance ........................................................... 5-2
5.3. Force Majeure .......................................................... 5-2
6. GENERAL REPRESENTATIONS AND WARRANTIES ...................................... 6-1
6.1. Place of Business ...................................................... 6-1
6.2. Organization; Good Standing; Subsidiaries .............................. 6-1
6.3. Authorization and Enforceability ....................................... 6-1
6.4. Approvals .............................................................. 6-1
6.5. Financial Condition .................................................... 6-2
6.6. Litigation ............................................................. 6-2
6.7. Compliance with Laws ................................................... 6-2
6.8. Regulation U ........................................................... 6-2
6.9. Investment Company Act ................................................. 6-3
6.10. Payment of Taxes ...................................................... 6-3
6.11. Agreements ............................................................ 6-3
6.12. Title to Properties ................................................... 6-3
6.13. ERISA ................................................................. 6-3
6.14. No Retiree Benefits ................................................... 6-4
6.15. Assumed Names ......................................................... 6-4
6.16. Servicing ............................................................. 6-4
7. AFFIRMATIVE COVENANTS ....................................................... 7-1
7.1. Payment of Obligations ............................................. 7-1
7.2. Financial Statements ............................................... 7-1
7.3. Other Borrower Reports ............................................. 7-1
7.4. Maintenance of Existence; Conduct of Business ...................... 7-2
7.5. Compliance with Applicable Laws .................................... 7-2
7.6. Inspection of Properties and Books; Operational Reviews ............ 7-2
7.7. Notice ............................................................. 7-3
7.8. Payment of Debt, Taxes and Other Obligations ....................... 7-3
7.9. Insurance .......................................................... 7-3
7.10. Closing Instructions ............................................... 7-3
7.11. Subordination of Certain Indebtedness .............................. 7-4
7.12. Other Loan Obligations ............................................. 7-4
7.13. ERISA .............................................................. 7-4
7.14. Use of Proceeds of Warehousing Advances ............................ 7-4
8. NEGATIVE COVENANTS ....................................................... 8-1
8.1. Contingent Liabilities ............................................. 8-1
8.2. Pledge of Servicing Contracts ...................................... 8-1
8.3. Restrictions on Fundamental Changes ................................ 8-1
8.4. Subsidiaries ....................................................... 8-1
8.5. Deferral of Subordinated Debt ...................................... 8-1
8.6. Accounting Changes ................................................. 8-2
8.7. Leverage Ratio ..................................................... 8-2
8.8. Minimum Tangible Net Worth ......................................... 8-2
8.9. Liquidity Ratio .................................................... 8-2
8.10. Dividends and Distributions ........................................ 8-2
8.11. Transactions with Affiliates ....................................... 8-2
8.12. Recourse Servicing Contracts ....................................... 8-2
8.13. Gestation Agreements ............................................... 8-3
9. SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS
CONCERNING COLLATERAL .............................................. 9-1
9.1. Special Representations and Warranties Concerning Collateral ....... 9-1
9.2. Special Affirmative Covenants Concerning Collateral ................ 9-3
9.3. Special Negative Covenants Concerning Collateral ................... 9-3
9.4. Special Representations and Warranties Concerning Commercial
Mortgage Loans .................................................... 9-4
9.5. Special Representations and Warranties Concerning Bridge Mortgage
Loans ............................................................. 9-4
10. DEFAULTS; REMEDIES ....................................................... 10-1
10.1. Events of Default .................................................. 10-1
10.2. Remedies ........................................................... 10-2
10.3. Application of Proceeds ............................................ 10-5
10.4. Lender Appointed Attorney-in-Fact .................................. 10-5
10.5. Right of Set-Off ................................................. 10-5
11. MISCELLANEOUS ............................................................ 11-1
11.1. Notices ............................................................ 11-1
11.2. Reimbursement Of Expenses; Indemnity ............................... 11-1
11.3. Financial Information .............................................. 11-2
11.4. Terms Binding Upon Successors; Survival of Representations ......... 11-2
11.5. Assignment ......................................................... 11-2
11.6. Amendments ......................................................... 11-2
11.7. Governing Law ...................................................... 11-2
11.8. Participations ..................................................... 11-2
11.9. Relationship of the Parties ........................................ 11-3
11.10. Severability ...................................................... 11-3
11.11. Consent to Credit References ....................................... 11-3
11.12. Counterparts ....................................................... 11-3
11.13. Entire Agreement ................................................... 11-3
11.14. Consent to Jurisdiction ............................................ 11-4
11.15. Waiver of Jury Trial ............................................... 11-4
11.16. Waiver of Punitive, Consequential, Special or Indirect Damages ..... 11-4
11.17. Waiver of Events of Default Under Existing Agreement ............... 11-5
12. DEFINITIONS ................................................................ 12-1
12.1. Defined Terms ...................................................... 12-1
12.2. Other Definitional Provisions; Terms of Construction ............... 12-10
EXHIBITS
Exhibit A Request for Advance
Exhibit B Procedures and Documentation for Warehousing Mortgage Loans
Exhibit C Schedule of Servicing Portfolio
Exhibit D Subsidiaries
Exhibit E Compliance Certificate
Exhibit F Lines of Credit
Exhibit G Assumed Names
Exhibit H Eligible Loans and Other Assets
Exhibit I Collateral Operations Fee Schedule
SECOND AMENDED AND RESTATED WAREHOUSING
CREDIT AND SECURITY AGREEMENT
SECOND AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY AGREEMENT, dated as
of August 31, 2002 between FINANCIAL INSTITUTIONAL PARTNERS MORTGAGE
CORPORATION, a Delaware corporation ("Borrower"), and RESIDENTIAL FUNDING
CORPORATION, a Delaware corporation ("Lender").
A. Borrower has requested certain financing from Lender.
B. Borrower has asked Lender to amend and restate the Existing Agreement (as
defined below) and to set forth the terms and conditions upon which Lender
will provide certain financing to Borrower.
C. Lender has agreed to amend and restate the Existing Agreement to provide
that financing to Borrower subject to the terms and conditions of this
Agreement.
D. Subject to Borrower's satisfaction of the conditions set forth in Article
5, the "Closing Date" for the transactions contemplated by this Agreement
is August 31, 2002.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. THE CREDIT
1.1. The Warehousing Commitment
On the terms and subject to the conditions and limitations of this Agreement,
including Exhibit H, Lender agrees to make Warehousing Advances to Borrower from
the Closing Date to the Business Day immediately preceding the Warehousing
Maturity Date, during which period Borrower may borrow, repay and reborrow in
accordance with the provisions of this Agreement. The total aggregate principal
amount of all Warehousing Advances outstanding at any one time may not exceed
the Warehousing Commitment Amount. While a Default or Event of Default exists,
Lender may refuse to make any additional Warehousing Advances to Borrower.
Effective as of the Closing Date, all outstanding loans made under the Existing
Agreement are deemed to be Warehousing Advances made under this Agreement. All
Warehousing Advances under this Agreement constitute a single indebtedness, and
all of the Collateral is security for the Warehousing Note and Sublimit Note and
for the performance of all of the Obligations.
1.2. Expiration of Warehousing Commitment
The Warehousing Commitment expires on the earlier of ("Warehousing Maturity
Date"): (a) August 31, 2003, as such date may be extended in writing by Lender,
in its sole discretion, or and (b) the date the Warehousing Commitment is
terminated and the Warehousing Advances become due and payable under Section
10.2.
1.3. Warehousing Note and Sublimit Note
Warehousing Advances, other than Warehousing Advances against Bridge Mortgage
Loans, are evidenced by Borrower's warehousing promissory note, payable to
Lender on the form prescribed
Page 1-1
by Lender ("Warehousing Note") and Warehousing Advances made against Bridge
Mortgage Loans are evidenced by Borrower's sublimit promissory note, payable to
Lender on the form prescribed by Lender ("Sublimit Note"). The terms
"Warehousing Note " and "Sublimit Note" as used in this Agreement include all
amendments, restatements, renewals or replacements of the original Warehousing
Note and Sublimit Note and all substitutions for it. All terms and provisions of
the Warehousing Note and Sublimit Note are incorporated into this Agreement.
End of Article 1
Page 1-2
2. PROCEDURES FOR OBTAINING ADVANCES
2.1. Warehousing Advances
To obtain a Warehousing Advance under this Agreement, Borrower must deliver to
Lender a completed and signed request for a Warehousing Advance on the then
current form approved by Lender ("Warehousing Advance Request"), not later than
1 Business Day before the Business Day on which Borrower desires the Warehousing
Advance. Subject to the delivery of a Warehousing Advance Request and the
satisfaction of the conditions set forth in Sections 5.1 and 5.2, Borrower may
obtain a Warehousing Advance under this Agreement upon compliance with the
procedures set forth in this Section and in the applicable Exhibit B, including
delivery to Lender of all required Collateral Documents. Lender's current form
of Warehousing Advance Request is set forth in Exhibit A. Upon not less than 3
Business Days' prior Notice to Borrower, Lender may modify its form of
Warehousing Advance Request, and any other Exhibit or document referred to in
this Section to conform to current legal requirements or Lender practices and,
as so modified, those Exhibits and documents will become part of this Agreement.
2.2. Bridge Loan Advances
If Borrower seeks a Warehousing Advance against a Bridge Mortgage Loan, Borrower
must deliver to Lender a request for approval ("Bridge Loan Approval Request")
substantially in the form of Exhibit A-MF/BR no later than 10 Business Days
before the Business Day on which Borrower desires the Warehousing Advance. The
Bridge Loan Approval Request must be accompanied by the Credit Underwriting
Documents. Within 5 Business Days after receipt of a Bridge Loan Approval
Request, the Credit Underwriting Documents and any other supporting documents
that Lender may request, Lender may, in its sole discretion, approve the
Warehousing Advance by returning the Bridge Loan Approval Request executed by
Lender. After a Warehousing Advance against a Bridge Mortgage Loan has been
approved by Lender, Borrower must submit a Warehousing Advance Request for
funding that Warehousing Advance under Section 2.1. Upon not less than 3
Business Days' prior Notice to Borrower, Lender may modify its form of Bridge
Loan Approval Request and any other Exhibit referred to in this Section to
conform to current legal requirements or Lender practices and, as so modified,
those Exhibits will become part of this Agreement.
End of Article 2
Page 2-1
3. INTEREST, PRINCIPAL AND FEES
3.1. Interest
3.1(a) Except as provided in Sections 3.1(d) and 3.1(e), Borrower must pay
interest on the unpaid amount of each Warehousing Advance from the date
the Warehousing Advance is made until it is paid in full at the Interest
Rate specified in Exhibit H.
3.1(b) As long as no Default or Event of Default exists, Borrower is entitled
to receive a benefit in the form of an "Earnings Credit" on the portion
of the Eligible Balances maintained in time deposit accounts with a
Designated Bank, and Borrower is entitled to receive a benefit in the
form of an "Earnings Allowance" on the portion of the Eligible Balances
maintained in demand deposit accounts with a Designated Bank. Any
Earnings Allowance will be used first and any Earnings Credit will be
used second as a credit against Miscellaneous Fees and Charges
(including Designated Bank Charges), and against other fees payable to
Lender under this Agreement, including Non-Usage Fees, and Loan Package
Fees, and may be used, at Lender's option, to reduce accrued interest.
Any Earnings Allowance not used during the month in which the benefit
was received will be accumulated and must be used within 6 months of the
month in which the benefit was received. As long as no Default or Event
of Default exists, any Earnings Credit not used during the month in
which the benefit was received will be used to provide a cash benefit to
Borrower. Any Earnings Credit retained by Lender as a result of a
Default or Event of Default will be applied to the payment of Borrower's
Obligations in the order Lender determines in its sole discretion. The
Earnings Credit and the Earnings Allowance for any month will be
determined by Lender in its sole discretion and Lender's determination
of those amounts is conclusive and binding absent manifest error. In no
event will the benefit received by Borrower exceed the Depository
Benefit.
Either party to this Agreement may terminate the benefits provided for
in this Section effective immediately upon Notice to the other party, if
the terminating party determines (which determination is conclusive and
binding on the other party, absent manifest error) at any time that any
applicable law, rule, regulation, order or decree or any interpretation
or administration of such law, rule, regulation, order or decree by any
governmental authority charged with its interpretation or
administration, or compliance by such party with any request or
directive (whether or not having the force of law) of any such
authority, makes it unlawful or impossible for the party sending the
Notice to continue to offer or receive the benefits provided for in this
Section. No Notice is required for a termination of benefits as a result
of a Default or Event of Default.
3.1(c) Lender computes interest on the basis of the actual number of days
elapsed in a year of 360 days. Borrower must pay interest monthly in
arrears, not later than 9 days after the date of Lender's invoice or, if
applicable, 2 days after the date of Lender's account analysis
statement, commencing with the first month following the Closing Date
and on the Warehousing Maturity Date.
3.1(d) If, for any reason, (1) Borrower repays a Warehousing Advance on the
same day that it was made by Lender or (2) Borrower instructs Lender not
to make a previously requested Warehousing Advance, Borrower agrees to
pay to Lender an administrative fee equal to 1 day of interest on that
Advance at the rate of 1-1/2% per annum. Borrower must pay all
administrative fees within 9 days after the date of Lender's invoice or,
if applicable, within 2 days after the date of Lender's account analysis
statement.
Page 3-1
3.1 (e) After an Event of Default occurs and upon Notice to Borrower by Lender,
the unpaid amount of each Warehousing Advance will bear interest at the
Default Rate until paid in full.
3.1 (f) Lender will adjust the rates of interest provided for in this Agreement
as of the effective date of each change in the applicable index.
Lender's determination of such rates of interest as of any date of
determination are conclusive and binding, absent manifest error.
3.2. Interest Limitation
Lender does not intend, by reason of this Agreement, the Warehousing Note, the
Sublimit Note or any other Loan Document, to receive interest in excess of the
amount permitted by applicable law. If Lender receives any interest in excess of
the amount permitted by applicable law, whether by reason of acceleration of the
maturity of this Agreement, the Warehousing Note, the Sublimit Note, or
otherwise, Lender will apply the excess to the unpaid principal balance of the
Warehousing Advances and not to the payment of interest. If all Warehousing
Advances have been paid in full and the Warehousing Commitment has expired or
has been terminated, Lender will remit any excess to Borrower. This Section
controls every other provision of all agreements between Borrower and Lender and
is binding upon and available to any subsequent holder of the Warehousing Note
or Sublimit Note.
3.3. Principal Payments
3.3 (a) Borrower must pay Lender the outstanding principal amount of all
Warehousing Advances on the Warehousing Maturity Date.
3.3 (b) Except as provided in Section 3.1(d), Borrower may prepay any portion
of the Warehousing Advances without premium or penalty at any time.
3.3 (c) Upon telephonic or written Notice to Borrower by Lender, Borrower must
pay to Lender, and Borrower authorizes Lender to cause the Funding Bank
to charge Borrower's Operating Account for, the amount of any
outstanding Warehousing Advance against a specific Pledged Asset upon
the earliest occurrence of any of the following events:
(1) For any Pledged Loan, the Warehouse Period elapses.
(2) For any Pledged Loan, the Shipped Period elapses.
(3) On the date a Warehousing Advance was made if the Pledged Loan to
be funded by that Warehousing Advance is not closed and funded.
(4) One (1) Business Day elapses from the date a Warehousing Advance
was made against a Pledged Loan, without receipt of the Collateral
Documents relating to that Pledged Loan required to be delivered on
that date, or such Collateral Documents, upon examination by
Lender, are found not to be in compliance with the requirements of
this Agreement or the related Purchase Commitment.
(5) Ten (10) Business Days elapse without the return of a Collateral
Document delivered by Lender to Borrower under a Trust Receipt for
correction or completion.
(6) On the date on which a Pledged Loan is determined to have been
originated based on untrue, incomplete or inaccurate information or
otherwise to be subject
Page 3-2
to fraud, whether or not Borrower had knowledge of the
misrepresentation, incomplete or incorrect information or fraud,
on the date on which Borrower knows, has reason to know, or
receives Notice from Lender, that (A) one or more of the
representations and warranties set forth in Article 9 were
inaccurate or incomplete in any material respect on any date when
made or deemed made, or (B) Borrower has failed to perform or
comply with any covenant, term or condition applicable to it set
forth in Article 9.
(7) On the date the Pledged Loan or a Lien prior to the Mortgage
securing repayment of the Pledged Loan is defaulted and remains in
default for a period of 60 days or more.
(8) On the mandatory delivery date of the related Purchase Commitment
if the specific Pledged Loan has not been delivered under the
Purchase Commitment prior to such mandatory delivery date, or on
the date the related Purchase Commitment expires or is terminated.
(9) Three (3) Business Days after the date a Pledged Mortgage is
rejected for purchase by an Investor unless another Purchase
Commitment is provided within that 3 Business Day period.
(10) Upon the sale, other disposition or prepayment of any Pledged
Asset or, with respect to a Pledged Loan included in an Eligible
Mortgage Pool, upon the sale or other disposition of the related
Agency Security.
(11) With respect to any Pledged Loan, any of the Collateral Documents,
upon examination by Lender, are found not to be in compliance with
the requirements of this Agreement or the related Purchase
Commitment.
(12) Three (3) Business Days after the mandatory delivery date of the
related Purchase Commitment if the specific Pledged Loan or the
Pledged Security backed by that Pledged Loan has not been
delivered under the Purchase Commitment prior to such mandatory
delivery date, or on the date the related Purchase Commitment
expires or is terminated, unless, in each case, the Pledged Loan
or Pledged Security is eligible for delivery to another Investor
under a comparable Purchase Commitment.
3.3(d) In addition to the payments required pursuant to Sections 3.3(a) and
3.3(c), if the principal amount of any Pledged Loan is prepaid in whole
or in part while a Warehousing Advance is outstanding against the
Pledged Loan, Borrower must pay to Lender, without the necessity of
prior demand or Notice from Lender, and Borrower authorizes Lender to
cause the Funding Bank to charge Borrower's Operating Account for, the
amount of the prepayment, to be applied against the Warehousing Advance.
3.3(e) The proceeds of the sale or other disposition of Pledged Assets must be
paid directly by the Investor to the Cash Collateral Account. Borrower
must give Notice to Lender in writing or by telephone followed promptly
by written Notice) of the Pledged Assets for which proceeds have been
received. Upon receipt of Borrower's Notice, Lender will apply any
proceeds deposited into the Cash Collateral Account to the payment of
the Warehousing Advances related to the Pledged Assets identified by
Borrower in its Notice, and those Pledged Assets will be considered to
have been redeemed from pledge. Lender is entitled to rely upon
Borrower's affirmation that deposits in the Cash Collateral Account
represent payments from Investors for the purchase of the Pledged Assets
specified by Borrower in its Notice. If the payment from an Investor for
the purchase of Pledged Assets is less than the outstanding Warehousing
Advances
Page 3-3
against the Pledged Assets identified by Borrower in its Notice,
Borrower must pay to Lender, and Borrower authorizes Lender to cause the
Funding Bank to charge Borrower's Operating Account in an amount equal
to that deficiency. As long as no Default or Event of Default exists,
Lender will return to Borrower any excess payment from an Investor for
Pledged Assets.
3.3 (f) Lender reserves the right to revalue any Pledged Loan. Borrower must
pay to Lender, without the necessity of prior demand or Notice from
Lender, and Borrower authorizes Lender to cause the Funding Bank to
charge Borrower's Operating Account for, any amount required after any
such revaluation to reduce the principal amount of the Warehousing
Advance outstanding against the revalued Pledged Loan to an amount equal
to the Advance Rate for the applicable type of Eligible Loan multiplied
by the Fair Market Value of the Mortgage Loan.
3.3 (g) Borrower must give Lender not less than 1 Business Day's Notice of any
payment of proceeds of Pledged Assets or any other payment on the
Obligations if the amount of the payment exceeds $20,000,000. If Lender
is unable to reinvest that payment as a result of Borrower's failure to
provide such Notice, Borrower must pay to Lender an administrative fee
equal to 1 day of interest on the amount of that payment at a rate of
1-1/2% per annum. Administrative and other fees are due and payable in
the same manner as interest is due and payable under this Agreement.
3.4. Non-Usage Fees
At the end of each Calendar Quarter during the term of this Agreement, Lender
will determine the average usage of the Warehousing Commitment by calculating
the arithmetic daily average of the Warehousing Advances outstanding during such
Calendar Quarter ("Used Portion"). Lender will then subtract the Used Portion
from the arithmetic daily average of the Warehousing Commitment Amount during
such Calendar Quarter, and the result, if positive, will be known as the "Unused
Portion." Borrower must pay to Lender a fee ("Non-Usage Fee") in the amount of
0.25% per annum of the Unused Portion during such Calendar Quarter. The
Non-Usage Fee is payable quarterly, in arrears. Lender computes the Non-Usage
Fee on the basis of the actual number of days in each Calendar Quarter and a
year of 360 days. Borrower must pay the Non-Usage Fee within 9 days after the
date of Lender's invoice or, if applicable, within 2 days after the date of
Lender's account analysis statement. If the date set forth in clause (a) of the
definition of Warehousing Maturity Date occurs on a day other than the last day
of a Calendar Quarter, Borrower must pay the prorated portion of the Non-Usage
Fee due from the beginning of the then current Calendar Quarter to and including
that date. Borrower is not entitled to a reduction in the amount of the Non-
Usage Fee if (a) the Warehousing Commitment Amount is reduced or (b) the
Warehousing Commitment is terminated at the request of Borrower or as a result
of an Event of Default. If the Warehousing Commitment terminates at the request
of Borrower or as a result of an Event of Default, Borrower must pay, on the
date of termination, a Non-Usage Fee in the amount of 0.25% per annum of the
Warehousing Commitment Amount in effect immediately prior to the date of
termination, for the period from the date of termination to and including the
date set forth in clause (a) of the definition of Warehousing Maturity Date.
Lender's determination of the Non-Usage Fee for any period is conclusive and
binding, absent manifest error.
3.5. Loan Package Fees
At the time of each Warehousing Advance against an Eligible Loan, Borrower will
incur a loan package fee ("Loan Package Fee"). Borrower must pay all Loan
Package Fees in the amount set forth in Exhibit H within 9 days after the date
of Lender's invoice or, if applicable, within 2 days after the date of Lender's
account analysis statement.
Page 3-4
3.6. Facility Fees
The Borrower agrees to pay the Lender a "Facility Fee" in the amount of 3% of
the net income of the Borrower (calculated before giving effect to the payment
of such fee or any management fees) for each Calendar Quarter. Such Facility Fee
shall be paid quarterly in arrears within 45 days or, for the final Calendar
Quarter of any year, 90 days, of the end of each Calendar Quarter, based on the
Borrower's net income (without giving effect to the payment of any Facility Fee)
as shown in the Borrower's financial statements for such Calendar Quarter,
delivered pursuant to Section 7.2(a) or (for the final Calendar Quarter of any
year) Section 7.2(b).
3.7. Miscellaneous Fees and Charges
Borrower must reimburse Lender for all Miscellaneous Fees and Charges. Borrower
must pay all Miscellaneous Fees and Charges within 9 days after the date of
Lender's invoice or, if applicable, within 2 days after the date of Lender's
account analysis statement.
3.8. Overdraft Advances
If, under the authorization given by Borrower in the Funding Bank Agreement or
pursuant to this Agreement, Lender debits Borrower's Operating Account or
directs the Funding Bank to honor an item presented against the Operating
Account and that debit or direction results in an overdraft, Lender may make an
additional Warehousing Advance to fund that overdraft ("Overdraft Advance").
Borrower must pay (a) the outstanding amount of any Overdraft Advance, within 1
Business Day after the date of the Overdraft Advance, and (b) interest on the
amount of the Overdraft Advance, at a rate per annum equal to the Bank One Prime
Rate plus 2%, within 9 days after the date of Lender's invoice or, if
applicable, within 2 days after the date of Lender's account analysis statement.
3.9. Method of Making Payments
3.9 (a) Unless otherwise specified in this Agreement, Borrower must make all
payments under this Agreement to Lender by the close of business on the
date when due unless the date is not a Business Day. If the due date is
not a Business Day, payment is due on, and interest will accrue to, the
next Business Day. Borrower must make all payments in United States
dollars in immediately available funds transferred by wire to accounts
designated by Lender.
3.9 (b) Borrower authorizes Lender to cause the Funding Bank to charge
Borrower's Operating Account for any interest or fees due and payable to
Lender on the 9th day after the date of Lender's invoice or, if
applicable, on the 2nd day after the date of Lender's account analysis
statement, without the necessity of prior demand or Notice from Lender.
3.9 (c) While a Default or Event of Default exists, Borrower authorizes Lender
to cause the Funding Bank to charge Borrower's Operating Account for any
Obligations due and payable to Lender, without the necessity of prior
demand or Notice from Lender.
End of Article 3
Page 3-5
4. COLLATERAL
4.1. Grant of Security Interest
As security for the payment of the Warehousing Note and Sublimit Note and for
the performance of all of Borrower's Obligations, Borrower grants a security
interest to Lender in all of Borrower's right, title and interest in and to the
following described property ("Collateral"):
4.1 (a) All amounts advanced by Lender to or for the account of Borrower under
this Agreement to fund a Mortgage Loan until that Mortgage Loan is
closed and those funds disbursed.
4.1 (b) All Mortgage Loans, including all Mortgage Notes, Mortgages and Security
Agreements evidencing or securing those Mortgage Loans, that are
delivered or caused to be delivered to Lender (including delivery to a
third party on behalf of Lender), or that otherwise come into the
possession, custody or control of Lender or in respect of which Lender
has made a Warehousing Advance under this Agreement (collectively,
"Pledged Loans").
4.1 (c) All Mortgage-backed Securities that are created in whole or in part on
the basis of Pledged Loans or that are delivered or caused to be
delivered to Lender or that otherwise come into the possession, custody
or control of Lender or that are registered by book-entry in the name of
Lender (including registration in the name of a third party on behalf of
Lender), in each case for the purpose of pledge, or in respect of which
an Advance has been made by Lender under this Agreement (collectively,
"Pledged Securities").
4.1 (d) All private mortgage insurance and all commitments issued by the FHA to
insure or guarantee any Mortgage Loans included in the Pledged Loans;
all Purchase Commitments held by Borrower covering Pledged Loans or
Pledged Securities or proposed permanent Pledged Loans, and all proceeds
from the sale of Pledged Loans or Pledged Securities to Investors
pursuant to those Purchase Commitments; and all personal property,
contract rights, servicing rights or contracts and servicing fees and
income or other proceeds, amounts and payments payable to Borrower as
compensation or reimbursement, accounts, payments, intangibles and
general intangibles of every kind relating to Pledged Loans, Pledged
Securities, Purchase Commitments, FHA commitments, private mortgage
insurance and commitments, and all other documents or instruments
relating to Pledged Loans and Pledged Securities, including any interest
of Borrower in any fire, casualty or hazard insurance policies and any
awards made by any public body or decreed by any court of competent
jurisdiction for a taking or for degradation of value in any eminent
domain proceeding as the same relate to Pledged Loans.
4.1 (e) All escrow accounts, documents, instruments, files, surveys,
certificates, correspondence, appraisals, computer programs, tapes,
discs, cards, accounting records (including all information, records,
tapes, data, programs, discs and cards necessary or helpful in the
administration or servicing of the Collateral) and other information and
data of Borrower relating to the Collateral.
4.1 (f) All cash, whether now existing or acquired after the date of this
Agreement, delivered to or otherwise in the possession of Lender, the
Funding Bank or Lender's agent, bailee or custodian or designated on the
books and records of Borrower as assigned and pledged to Lender,
including all cash deposited in the Cash Collateral Account and the Wire
Disbursement Account.
Page 4-1
4.1 (g) All Hedging Arrangements related to the Collateral ("Pledged Hedging
Arrangements") and Borrower's accounts in which those Hedging
Arrangements are held ("Pledged Hedging Accounts"), including all
rights to payment arising under the Pledged Hedging Arrangements and
the Pledged Hedging Accounts, except that Lender's security interest in
the Pledged Hedging Arrangements and Pledged Hedging Accounts applies
only to benefits, including rights to payment, related to the
Collateral.
4.1 (h) All cash and non-cash proceeds of the Collateral, including all
dividends, distributions and other rights in connection with, and all
additions to, modifications of and replacements for, the Collateral, and
all products and proceeds of the Collateral, together with whatever is
receivable or received when the Collateral or proceeds of Collateral are
sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including all rights to payment
with respect to any cause of action affecting or relating to the
Collateral or proceeds of Collateral.
4.2. Maintenance of Collateral Records
As long as the Warehousing Commitment is outstanding or there remain any
Obligations to be paid or performed under this Agreement or under any other Loan
Document, Borrower must preserve and maintain, at its chief executive office and
principal place of business or in a regional office approved by Lender, or in
the office of a computer service bureau engaged by Borrower and approved by
Lender and, upon request, make available to Lender the originals, or copies in
any case where the originals have been delivered to Lender or to an Investor, of
the Mortgage Notes, Mortgages and Security Agreements included in Pledged Loans,
Mortgage-backed Securities delivered to Lender as Pledged Securities, Purchase
Commitments, and all related Mortgage Loan documents and instruments, and all
files, surveys, certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records and other information and data relating
to the Collateral.
4.3. Release of Security Interest in Pledged Loans and Pledged Securities
4.3 (a) Except as provided in Section 4.3 (b), Lender will release its security
interest in the Pledged Loans only against payment to Lender of the
Release Amount in connection with those Pledged Loans. If Pledged Loans
are transferred to a pool custodian or an Investor for inclusion in a
Mortgage Pool and Lender's security interest in the Pledged Loans
included in the Mortgage Pool is not released before the issuance of the
related Mortgage-backed Security, then that Mortgage-backed Security,
when issued, is a Pledged Security, Lender's security interest continues
in the Pledged Loans backing that Pledged Security and Lender is
entitled to possession of the Pledged Security in the manner provided in
this Agreement.
4.3 (b) If Pledged Loans are transferred to an Approved Custodian and included
in an Eligible Mortgage Pool, Lender's security interest in the Pledged
Loans included in the Eligible Mortgage Pool will be released upon the
delivery of the Agency Security to Lender (including delivery to or
registration in the name of a third party on behalf of Lender) and that
Agency Security is a Pledged Security. Lender's security interest in
that Pledged Security will be released only against payment to Lender of
the Release Amount in connection with the Mortgage Loans backing that
Pledged Security.
4.3 (c) Lender has the exclusive right to possession of all Pledged Securities
or, if Pledged Securities are issued in book-entry form or issued in
certificated form and delivered to a clearing corporation (as that term
is defined in the Uniform Commercial Code of Minnesota) or its nominee,
Lender has the right to have the Pledged Securities registered in the
name of a securities intermediary (as that term is defined in the
Uniform Commercial Code of Minnesota) in an account containing only
customer securities and
Page 4-2
credited to an account of Lender. Lender has no duty or obligation to
deliver Pledged Securities to an Investor or to credit Pledged
Securities to the account of an Investor or an Investor's designee
except against payment for those Pledged Securities. Borrower
acknowledges that Lender may enter into one or more standing
arrangements with securities intermediaries with respect to Pledged
Securities issued in book entry form or issued in certificated form and
delivered to a clearing corporation or its designee, under which the
Pledged Securities are registered in the name of the securities
intermediary, and Borrower agrees, upon request of Lender, to execute
and deliver to those securities intermediaries Borrower's written
concurrence in any such standing arrangements.
4.3 (d) If no Default or Event of Default occurs, Borrower may redeem a Pledged
Loan or Pledged Security from Lender's security interest by notifying
Lender of its intention to redeem the Pledged Loan or Pledged Security
from pledge and either (1) paying, or causing an Investor to pay, to
Lender, for application as a prepayment on the principal balance of the
Warehousing Note and Sublimit Note, the Release Amount in connection
with the Pledged Loan or the Pledged Loans backing that Pledged
Security, or (2) delivering substitute Collateral that, in addition to
being acceptable to Lender in its sole discretion, will, when included
with the remaining Collateral, result in a Warehousing Collateral Value
of all Collateral held by Lender that is at least equal to the aggregate
outstanding Warehousing Advances.
4.3 (e) After a Default or Event of Default occurs, Lender may, with no
liability to Borrower or any Person, continue to release its security
interest in any Pledged Loan or Pledged Security against payment of the
Release Amount for that Pledged Loan or for the Pledged Loans backing
that Pledged Security.
4.3 (f) The amount to be paid by Borrower to obtain the release of Lender's
security interest in a Pledged Loan ("Release Amount") will be (1) in
connection with the sale of a Pledged Loan by Borrower, the payment
required in any bailee letter pursuant to which Lender ships that
Pledged Loan to an Investor, Approved Custodian, pool custodian or other
party, (2) in connection with the sale of a Pledged Loan by Lender while
an Event of Default exists, the amount paid to Lender in a commercially
reasonable disposition of that Pledged Loan and (3) otherwise, until an
Event of Default occurs, the principal amount of the Warehousing Advance
outstanding against the Pledged Loan.
4.4. Collection and Servicing Rights
4.4 (a) If no Event of Default exists, Borrower may service and receive and
collect directly all sums payable to Borrower in respect of the
Collateral other than proceeds of any Purchase Commitment or proceeds of
the sale of any Collateral. All proceeds of any Purchase Commitment or
any other sale of Collateral must be paid directly to the Cash
Collateral Account for application as provided in this Agreement.
4.4 (b) After an Event of Default, Lender or its designee is entitled to service
and receive and collect all sums payable to Borrower in respect of the
Collateral, and in such case (1) Lender or its designee in its
discretion may, in its own name, in the name of Borrower or otherwise,
demand, sue for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral, but Lender has no obligation to do so, (2) Borrower must, if
Lender requests it to do so, hold in trust for the benefit of Lender and
immediately pay to Lender at its office designated by Notice, all
amounts received by Borrower upon or in respect of any of the
Collateral, advising Lender as to the source of those funds and (3) all
amounts so received and collected by Lender will be held by it as part
of the Collateral.
Page 4-3
4.5. Return of Collateral at End of Warehousing Commitment
If (a) the Warehousing Commitment has expired or been terminated, and (b) no
Warehousing Advances, interest or other Obligations are outstanding and unpaid,
Lender will release its security interest and will deliver all Collateral in its
possession to Borrower at Borrower's expense. Borrower's acknowledgement or
receipt for any Collateral released or delivered to Borrower under any provision
of this Agreement is a complete and full acquittance for the Collateral so
returned, and Lender is discharged from any liability or responsibility for that
Collateral.
4.6. Delivery of Collateral Documents
4.6 (a) Lender may deliver documents relating to the Collateral to Borrower for
correction or completion under a Trust Receipt.
4.6 (b) If no Default or Event of Default exists, upon delivery by Borrower to
Lender of shipping instructions pursuant to the applicable Exhibit B,
Lender will deliver the Mortgage Notes evidencing Pledged Loans or
Pledged Securities, together with all related loan documents and pool
documents previously received by Lender under the requirements of the
applicable Exhibit B, to the designated Investor or Approved Custodian
or to another party designated by Borrower and acceptable to Lender in
its sole discretion.
4.6 (c) If a Default or Event of Default exists, Lender may, without liability
to Borrower or any other Person, continue to deliver Pledged Loans or
Pledged Securities, together with all related loan documents and pool
documents in Lender's possession, to the applicable Investor, or
Approved Custodian or to another party acceptable to Lender in its sole
discretion.
End of Article 4
Page 4-4
5. CONDITIONS PRECEDENT
5.1. Initial Advance
The effectiveness of this Agreement, including Lender's obligation to make the
initial Warehousing Advance, is subject to the satisfaction, in the sole
discretion of Lender, of the following conditions precedent:
5.1 (a) Lender must receive the following, all of which must be satisfactory in
form and content to Lender, in its sole discretion:
(1) The Warehousing Note, the Sublimit Note and this Agreement duly
executed by Borrower.
(2) Borrower's articles or certificate of incorporation, together
with all amendments, as certified by the Secretary of State of
Delaware, Borrower's bylaws, together with all amendments,
certified by the corporate secretary or assistant secretary of
Borrower, or a certificate of Borrower stating that there has
been no change in either Borrower's articles or certificate of
incorporation or bylaws since those delivered in connection with
the Existing Agreement, and certificates of good standing dated
within 30 days of the date of this Agreement, together with a
certification from the Franchise Tax Board or other state tax
authority stating that Borrower is in good standing with the
Franchise Tax Board or such state tax authority, if applicable.
(3) A resolution of the board of directors of Borrower authorizing
the execution, delivery and performance of this Agreement and the
other Loan Documents, each Warehousing Advance Request and all
other agreements, instruments or documents to be delivered by
Borrower under this Agreement.
(4) A certificate as to the incumbency and authenticity of the
signatures of the officers of Borrower executing this Agreement
and the other Loan Documents, and of the officers and employees
of Borrower delivering each Warehousing Advance Request and all
other agreements, instruments or documents to be delivered under
this Agreement (Lender being entitled to rely on that certificate
until a new incumbency certificate has been furnished to Lender).
(5) Assumed Name Certificates dated within 30 days of the date of
this Agreement for any assumed name used by Borrower in the
conduct of its business.
(6) A favorable written opinion of counsel to Borrower, addressed to
Lender and dated as of the date of this Agreement, covering such
matters as Lender may reasonably request.
(7) Uniform Commercial Code, tax lien and judgment searches of the
appropriate public records for Borrower that do not disclose the
existence of any prior Lien on the Collateral other than in favor
of Lender or as permitted under this Agreement.
(8) Copies of Borrower's errors and omissions insurance policy or
mortgage impairment insurance policy, and blanket bond coverage
policy, or certificates in lieu of policies, showing compliance
by Borrower as of the date of this Agreement with the provisions
of Section 7.9.
Page 5-1
(9) Receipt by Lender of any fees due on the date of this Agreement.
5.1 (b) If Borrower is indebted to any of its directors, officers, shareholders
or Affiliates, as of the date of this Agreement, which indebtedness has
a term of more than 1 year or is in excess of $25,000, the Person to
whom Borrower is indebted must have executed a Subordination of Debt
Agreement, on the form prescribed by Lender; and Lender must have
received an executed copy of that Subordination of Debt Agreement,
certified by the corporate secretary or assistant secretary of Borrower
to be true and complete and in full force and effect as of the date of
the Warehousing Advance.
5.1 (c) Borrower must not have incurred any material liabilities, direct or
contingent, other than in the ordinary course of its business, since the
Audited Statement Date.
5.2. Each Advance
The effectiveness of this Agreement, including Lender's obligation to make the
initial and each subsequent Warehousing Advance is subject to the satisfaction,
in the sole discretion of Lender, as of the date of each Warehousing Advance, of
the following additional conditions precedent:
5.2 (a) Borrower must have delivered to Lender the Warehousing Advance Request
and Collateral Documents required by, and must have satisfied the
procedures set forth in, Article 2 and the Exhibits described in that
Article. All items delivered to Lender must be satisfactory to Lender in
form and content, and Lender may reject any item that does not satisfy
the requirements of this Agreement or of the related Purchase
Commitment.
5.2 (b) Lender must have received evidence satisfactory to it as to the making
or continuation of any book entry or the due filing and recording in all
appropriate offices of all financing statements and other instruments
necessary to perfect the security interest of Lender in the Collateral
under the Uniform Commercial Code or other applicable law.
5.2 (c) The representations and warranties of Borrower contained in Article 6
and Article 9 must be accurate and complete in all material respects as
if made on and as of the date of each Warehousing Advance.
5.2 (d) Borrower must have performed all agreements to be performed by it under
this Agreement, and after giving effect to the requested Warehousing
Advance, no Default or Event of Default may exist under this Agreement.
Delivery of a Warehousing Advance Request by Borrower will be deemed a
representation by Borrower that all conditions set forth in this Section have
been satisfied as of the date of the Warehousing Advance.
5.3. Force Majeure
Notwithstanding Borrower's satisfaction of the conditions set forth in this
Agreement, Lender has no obligation to make a Warehousing Advance if Lender is
prevented from obtaining the funds necessary to make a Warehousing Advance, or
is otherwise prevented from making a Warehousing Advance as a result of any fire
or other casualty, failure of power, strike, lockout or other labor trouble,
banking moratorium, embargo, sabotage, confiscation, condemnation, riot, civil
disturbance, insurrection, act of terrorism, war or other activity of armed
forces, act of God or other similar reason beyond the control of Lender. Lender
will make the requested Warehousing Advance as soon as reasonably possible
following the occurrence of such an event.
End of Article 5
Page 5-2
6. GENERAL REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, as of the date of this Agreement and
as of the date of each Warehousing Advance Request and the making of each
Warehousing Advance, that:
6.1. Place of Business
Borrower's chief executive office and principal place of business is One
Venture, Suite 300, Irvine, CA, 92618.
6.2. Organization; Good Standing; Subsidiaries
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has the full legal power and
authority to own its property and to carry on its business as currently
conducted. Borrower is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction in which the transaction of its
business makes qualification necessary, except in jurisdictions, if any, where a
failure to be in good standing has no material adverse effect on Borrower's
business, operations, assets or financial condition as a whole. For the purposes
of this Agreement, good standing includes qualification for all licenses and
payment of all taxes required in the jurisdiction of its incorporation and in
each jurisdiction in which Borrower transacts business. Borrower has no
Subsidiaries except as set forth on Exhibit D, which sets forth with respect to
each Subsidiary, its name, address, jurisdiction of organization, each state in
which it is qualified to do business, and the percentage ownership of its
capital stock by Borrower. Each of Borrower's Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, and has the full legal power and authority to own its property and
to carry on its business as currently conducted.
6.3. Authorization and Enforceability
Borrower has the power and authority to execute, deliver and perform this
Agreement, the Warehousing Note, the Sublimit Note and other Loan Documents to
which Borrower is party and to make the borrowings under this Agreement. The
execution, delivery and performance by Borrower of this Agreement, the
Warehousing Note, the Sublimit Note and the other Loan Documents to which
Borrower is party and the making of the borrowings under this Agreement, the
Warehousing Note and the Sublimit Note, have been duly and validly authorized by
all necessary corporate action on the part of Borrower (none of which actions
has been modified or rescinded, and all of which actions are in full force and
effect) and do not and will not (a) conflict with or violate any provision of
law, of any judgments binding upon Borrower, or of the articles of incorporation
or by-laws of Borrower, or (b) conflict with or result in a breach of,
constitute a default or require any consent under, or result in or require the
acceleration of any indebtedness of Borrower under any agreement, instrument or
indenture to which Borrower is a party or by which Borrower or its property may
be bound or affected, or result in the creation of any Lien upon any property or
assets of Borrower (other than the Lien on the Collateral granted under this
Agreement). This Agreement, the Warehousing Note, the Sublimit Note and the
other Loan Documents constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other such laws affecting the enforcement
of creditors' rights.
6.4. Approvals
The execution and delivery of this Agreement, the Warehousing Note, the Sublimit
Note and the other Loan Documents and the performance of Borrower's obligations
under this Agreement, the Warehousing Note, the Sublimit Note and the other Loan
Documents and the validity and
Page 6-1
enforceability of this Agreement, the Warehousing Note, the Sublimit Note and
the other Loan Documents do not require any license, consent, approval or other
action of any state or federal agency or governmental or regulatory authority
other than those that have been obtained and, remain in full force and effect.
6.5. Financial Condition
The balance sheet of Borrower (and, if applicable, Borrower's Subsidiaries, on a
consolidated basis) as of each Statement Date, and the related statements of
income, cash flows and changes in stockholders' equity for the fiscal period
ended on each Statement Date, furnished to Lender, fairly present the financial
condition of Borrower (and, if applicable, Borrower's Subsidiaries) as at that
Statement Date and the results of its operations for the fiscal period ended on
that Statement Date. Borrower had, on each Statement Date, no known material
liabilities, direct or indirect, fixed or contingent, matured or unmatured, or
liabilities for taxes, long-term leases or unusual forward or long-term
commitments not disclosed by, or reserved against in, those financial
statements, and at the present time there are no material unrealized or
anticipated losses from any loan, advances or other commitments of Borrower
except as previously disclosed to Lender in writing. Those financial statements
were prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved. Since the Audited Statement Date, there has been no
material adverse change in the business, operations, assets or financial
condition of Borrower (and, if applicable, Borrower's Subsidiaries), nor is
Borrower aware of any state of facts that (with or without notice or lapse of
time or both) would or could result in any such material adverse change.
6.6. Litigation
There are no actions, claims, suits or proceedings pending or, to Borrower's
knowledge, threatened or reasonably anticipated against or affecting Borrower or
any Subsidiary of Borrower in any court or before any arbitrator or before any
government commission, board, bureau or other administrative agency that, if
adversely determined, may reasonably be expected to result in a material adverse
change in Borrower's business, operations, assets or financial condition as a
whole, or that would affect the validity or enforceability of this Agreement,
the Warehousing Note, the Sublimit Note or any other Loan Document.
6.7. Compliance with Laws
Neither Borrower nor any Subsidiary of Borrower is in violation of any provision
of any law, or of any judgment, award, rule, regulation, order, decree, writ or
injunction of any court or public regulatory body or authority that could result
in a material adverse change in Borrower's business, operations, assets or
financial condition as a whole or that would affect the validity or
enforceability of this Agreement, the Warehousing Note, the Sublimit Note or any
other Loan Document.
6.8. Regulation U
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock, and no part of the proceeds of any Warehousing Advance made under
this Agreement will be used to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any Margin Stock.
Page 6-2
6.9. Investment Company Act
Borrower is not an "investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act.
6.10. Payment of Taxes
Borrower and each of its Subsidiaries has filed or caused to be filed all
federal, state and local income, excise, property and other tax returns that are
required to be filed with respect to the operations of Borrower and its
Subsidiaries, all such returns are true and correct and Borrower and each of its
Subsidiaries has paid or caused to be paid all taxes shown on those returns or
on any assessment, to the extent that those taxes have become due, including all
FICA payments and withholding taxes, if appropriate. The amounts reserved as a
liability for income and other taxes payable in the financial statements
described in Section 6.5 are sufficient for payment of all unpaid federal, state
and local income, excise, property and other taxes, whether or not disputed, of
Borrower and its Subsidiaries accrued for or applicable to the period and on the
dates of those financial statements and all years and periods prior to those
financial statements and for which Borrower and its Subsidiaries may be liable
in their own right or as transferee of the assets of, or as successor to, any
other Person. No tax Liens have been filed and no material claims are being
asserted against Borrower, any Subsidiary of Borrower or any property of
Borrower or any Subsidiary of Borrower with respect to any taxes, fees or
charges.
6.11. Agreements
Neither Borrower nor any Subsidiary of Borrower is a party to any agreement,
instrument or indenture or subject to any restriction materially and adversely
affecting its business, operations, assets or financial condition, except as
disclosed in the financial statements described in Section 6.5. Neither Borrower
nor any Subsidiary of Borrower is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement, instrument, or indenture which default could result in a material
adverse change in Borrower's business, operations, properties or financial
condition as a whole. No holder of any indebtedness of Borrower or of any of its
Subsidiaries has given notice of any asserted default under that indebtedness,
and no liquidation or dissolution of Borrower or of any of its Subsidiaries and
no receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to Borrower or of any of its Subsidiaries or any of its or
their properties is pending, or to the knowledge of Borrower, threatened.
6.12. Title to Properties
Borrower and each Subsidiary of Borrower has good, valid, insurable and (in the
case of real property) marketable title to all of its properties and assets
(whether real or personal, tangible or intangible) reflected on the financial
statements described in Section 6.5, except for those properties and assets that
Borrower has disposed of since the date of those financial statements either in
the ordinary course of business or because they were no longer used or useful in
the conduct of Borrower's or the Subsidiary's business. All of Borrower's
properties and assets are free and clear of all Liens except as disclosed in
Borrower's financial statements.
6.13. ERISA
Each Plan is in compliance with all applicable requirements of ERISA and the
Internal Revenue Code and with all material applicable rulings and regulations
issued under the provisions of ERISA and the Internal Revenue Code setting forth
those requirements, except where any failure to comply would not result in a
material loss to Borrower or any ERISA Affiliate. All of the minimum funding
standards or other contribution obligations applicable to each Plan have been
Page 6-3
satisfied. No Plan is a defined-benefit pension plan subject to Title IV of
ERISA, and there is no Multiemployer Plan.
6.14. No Retiree Benefits
Except as required under Section 4980B of the Internal Revenue Code, Section 601
of ERISA or applicable state law, neither Borrower nor, if applicable, any
Subsidiary is obligated to provide post-retirement medical or insurance benefits
with respect to employees or former employees.
6.15. Assumed Names
Borrower does not originate Mortgage Loans or otherwise conduct business under
any names other than its legal name and the assumed names set forth on Exhibit
G. Borrower has made all filings and taken all other action as may be required
under the laws of any jurisdiction in which it originates Mortgage Loans or
otherwise conducts business under any assumed name. Borrower's use of the
assumed names set forth on Exhibit G does not conflict with any other Person's
legal rights to any such name, nor otherwise give rise to any liability by
Borrower to any other Person. Borrower may amend Exhibit G to add or delete any
assumed names used by Borrower to conduct business. An amendment to Exhibit G to
add an assumed name is not effective until Borrower has delivered to Lender an
assumed name certificate in the jurisdictions in which the assumed name is to be
used, which must be satisfactory in form and content to Lender, in its sole
discretion. In connection with any amendment to delete a name from Exhibit G,
Borrower represents and warrants that it has ceased using that assumed name in
all jurisdictions.
6.16. Servicing
Exhibit C is a true and complete list of Borrower's Servicing Portfolio. All of
Borrower's Servicing Contracts are in full force and effect, and are
unencumbered by Liens other than Liens disclosed in Exhibit C. No default or
event that, with notice or lapse of time or both, would become a default, exists
under any of Borrower's Servicing Contracts.
End of Article 6
Page 6-4
7. AFFIRMATIVE COVENANTS
As long as the Warehousing Commitment is outstanding or there remain any
Obligations to be paid or performed under this Agreement or under any other Loan
Document, Borrower must:
7.1. Payment of Obligations
Punctually pay or cause to be paid all Obligations, including the Obligations
payable under this Agreement, under the Warehousing Note and the Sublimit Note,
in accordance with their terms.
7.2. Financial Statements
Deliver to Lender:
7.2 (a) As soon as available and in any event within 30 days after the end of
each Calendar Quarter, including the last month of Borrower's fiscal
year, an interim statement of income of Borrower (and, if applicable,
Borrower's Subsidiaries, on a consolidated basis) for the immediately
preceding Calendar Quarter and for the period from the beginning of the
fiscal year to the end of that Calendar Quarter, and the related balance
sheet as at the end of the immediately preceding Calendar Quarter, all
in reasonable detail, subject, however, to year-end audit adjustments.
7.2 (b) As soon as available and in any event within 90 days after the end of
each fiscal year of Borrower, fiscal year-end statements of income,
changes in stockholders' equity and cash flow of Parent (and Parent's
Subsidiaries, on a consolidated and consolidating basis) for that year,
and the related balance sheet as of the end of that year (setting forth
in comparative form the corresponding figures for the preceding fiscal
year), all in reasonable detail and accompanied by (1) an opinion as to
those financial statements in form and prepared by independent certified
public accountants of recognized standing acceptable to Lender and (2)
any management letters, management reports or other supplementary
comments or reports delivered by those accountants to Parent or its
board of directors.
7.2 (c) Together with each delivery of financial statements required by this
Section, a Compliance Certificate substantially in the form of
Exhibit E.
7.3. Other Borrower Reports
Deliver to Lender:
7.3 (a) If Borrower has a Servicing Portfolio, then as soon as available and in
any event within 30 days after the end of each month, a consolidated
report ("Servicing Portfolio Report") as of the end of the month, as to
all Mortgage Loans the servicing rights to which are owned by Borrower
(specified by investor type, recourse and non-recourse) regardless of
whether the Mortgage Loans are Pledged Loans. The Servicing Portfolio
Report must indicate which Mortgage Loans (1) are current and in good
standing, (2) are more than 30, 60 or 90 days past due, (3) are the
subject of pending bankruptcy or foreclosure proceedings, or (4) have
been converted (through foreclosure or other proceedings in lieu of
foreclosure) into real estate owned by Borrower.
7.3 (b) As soon as available and in any event within 30 days after the end of
each month, a consolidated loan production report as of the end of that
month, presenting the total dollar volume and the number of Mortgage
Loans originated and closed or purchased
Page 7-1
during that month and for the fiscal year-to-date, specified by
property type and loan type.
7.3 (c) On or before the 15th Business Day of each month, a status report with
respect to each Bridge Mortgage Loan pledged under this Agreement as of
the end of the prior month, in form and substance satisfactory to
Lender.
7.3 (d) A copy of any material change to the Underwriting Guidelines, not fewer
than 3 Business Days prior to the effective date of that change.
7.3 (e) As soon as available and in any event within 30 days after the end of
each Calendar Quarter, a copy of all changes to the Underwriting
Guidelines, and if there have been no changes, a statement to that
effect.
7.3 (f) Other reports in respect of Pledged Assets, including copies of purchase
confirmations issued by Investors purchasing Pledged Loans from
Borrower, in such detail and at such times as Lender in its discretion
may reasonably request.
7.3 (g) Copies of all regular or periodic financial and other reports, if any,
which Borrower or Commercial Capital Bank shall file with the Securities
and Exchange Commission or any governmental agency successor thereto.
7.3 (h) Copies of all periodic reports on the condition of Parent provided to
the Office of Thrift Supervision or any other governmental agency.
7.4. Maintenance of Existence; Conduct of Business
Preserve and maintain its corporate existence in good standing and all of its
rights, privileges, licenses and franchises necessary or desirable in the normal
conduct of its business, conduct its business in an orderly and efficient
manner; and make no material change in the nature or character of its business
or engage in any business in which it was not engaged on the date of this
Agreement.
7.5. Compliance with Applicable Laws
Comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, a breach of which could result in a
material adverse change in Borrower's business, operations, assets, or financial
condition as a whole or on the enforceability of this Agreement, the Warehousing
Note, the Sublimit Note, any other Loan Document or any Collateral, except where
contested in good faith and by appropriate proceedings.
7.6. Inspection of Properties and Books; Operational Reviews
Permit Lender or any Participant (and their authorized representatives) to
discuss the business, operations, assets and financial condition of Borrower and
its Subsidiaries with Borrower's officers, agents and employees, and to examine
and make copies or extracts of Borrower's and its Subsidiaries' books of
account, all at such reasonable times as Lender or any Participant may request.
Provide its accountants with a copy of this Agreement promptly after its
execution and authorize and instruct them to answer candidly all questions that
the officers of Lender or any Participant or any authorized representatives of
Lender or any Participant may address to them in reference to the financial
condition or affairs of Borrower and its Subsidiaries. Borrower may have its
representatives in attendance at any meetings held between the officers or other
representatives of Lender or any Participant and Borrower's accountants under
this authorization. Permit Lender or any Participant (and their authorized
representatives) access to Borrower's
Page 7-2
premises and records for the purpose of conducting a review of Borrower's
general mortgage business methods, policies and procedures, auditing its loan
files and reviewing the financial and operational aspects of Borrower's
business.
7.7. Notice
Give prompt Notice to Lender of (a) any action, suit or proceeding instituted by
or against Borrower or any of its Subsidiaries in any federal or state court or
before any commission or other regulatory body (federal, state or local,
domestic or foreign), which action, suit or proceeding has at issue in excess of
$100,000, or any such proceedings threatened against Borrower or any of its
Subsidiaries in a writing containing the details of that action, suit or
proceeding; (b) the filing, recording or assessment of any federal, state or
local tax Lien against Borrower, or any of its assets or any of its
Subsidiaries; (c) an Event of Default; (d) a Default that continues for more
than 4 days; (e) within 2 Business Days after the termination of any Purchase
Commitment held by Borrower covering a Mortgage Loan (whether or not such
Mortgage Loan is a Pledged Loan); (f) the transfer, loss, nonrenewal or
termination of any Servicing Contracts to which Borrower is a party, or which is
held for the benefit of Borrower, and the reason for that transfer, loss,
nonrenewal or termination; (g) any Prohibited Transaction with respect to any
Plan, specifying the nature of the Prohibited Transaction and what action
Borrower proposes to take with respect to it; and (h) any other action, event or
condition of any nature that could lead to or result in a material adverse
change in the business, operations, assets or financial condition of Borrower or
any of its Subsidiaries.
7.8. Payment of Debt, Taxes and Other Obligations
Pay, perform and discharge, or cause to be paid, performed and discharged, all
of the obligations and indebtedness of Borrower and its Subsidiaries, all taxes,
assessments and governmental charges or levies imposed upon Borrower or its
Subsidiaries or upon their respective income, receipts or properties before
those taxes, assessments and governmental charges or levies become past due, and
all lawful claims for labor, materials and supplies or otherwise that, if
unpaid, could become a Lien or charge upon any of their respective properties or
assets. Borrower and its Subsidiaries are not required to pay, however, any
taxes, assessments and governmental charges or levies or claims for labor,
materials or supplies for which Borrower or its Subsidiaries have obtained an
adequate bond or insurance or that are being contested in good faith and by
proper proceedings that are being reasonably and diligently pursued and for
which proper reserves have been created.
7.9. Insurance
Maintain blanket bond coverage and errors and omissions insurance or mortgage
impairment insurance, with such companies and in such amounts as satisfy
prevailing requirements applicable to a lender originating Non-Agency Mortgage
Loans, Commercial Mortgage Loans and Bridge Mortgage Loans for sale in the
secondary market, and liability insurance and fire and other hazard insurance on
its properties, in each case with responsible insurance companies acceptable to
Lender, in such amounts and against such risks as is customarily carried by
similar businesses operating in the same location. Within 30 days after Notice
from Lender, obtain such additional insurance as Lender may reasonably require,
all at the sole expense of Borrower. Copies of such policies must be furnished
to Lender without charge upon request of Lender.
7.10. Closing Instructions
Indemnify and hold Lender harmless from and against any loss, including
reasonable attorneys' fees and costs, attributable to the failure of any title
insurance company, agent or attorney to comply with Borrower's disbursement or
instruction letter relating to any Mortgage Loan. Lender
Page 7-3
has the right to pre-approve Borrower's choice of title insurance company, agent
or attorney and Borrower's disbursement or instruction letter to them in any
case in which Borrower intends to obtain a Warehousing Advance against the
Mortgage Loan to be created at settlement or to pledge that Mortgage Loan as
Collateral under this Agreement.
7.11. Subordination of Certain Indebtedness
Cause any indebtedness of Borrower to any shareholder, director, officer or
Affiliate of Borrower, to be subordinated to the Obligations by the execution
and delivery to Lender of a Subordination of Debt Agreement, on the form
prescribed by Lender, certified by the corporate secretary of Borrower to be
true and complete and in full force and effect.
7.12. Other Loan Obligations
Perform all material obligations under the terms of each loan agreement, note,
mortgage, security agreement or debt instrument by which Borrower is bound or to
which any of its property is subject, and promptly notify Lender in writing of a
declared default under or the termination, cancellation, reduction or nonrenewal
of any of its other lines of credit or agreements with any other lender. Exhibit
F is a true and complete list of all such lines of credit or agreements as of
the date of this Agreement. Borrower must give Lender at least 30 days Notice
before entering into any additional lines of credit or agreements.
7.13. ERISA
Maintain (and, if applicable, cause each ERISA Affiliate to maintain) each Plan
in compliance with all material applicable requirements of ERISA and of the
Internal Revenue Code and with all applicable rulings and regulations issued
under the provisions of ERISA and of the Internal Revenue Code, and not (and, if
applicable, not permit any ERISA Affiliate to), (a) engage in any transaction in
connection with which Borrower or any ERISA Affiliate would be subject to either
a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Internal Revenue Code, in either case in an amount exceeding
$25,000 or (b) fail to make full payment when due of all amounts that, under the
provisions of any Plan, Borrower or any ERISA Affiliate is required to pay as
contributions to that Plan, or permit to exist any accumulated funding
deficiency (as such term is defined in Section 302 of ERISA and Section 412 of
the Internal Revenue Code), whether or not waived, with respect to any Plan in
an aggregate amount exceeding $25,000.
7.14. Use of Proceeds of Warehousing Advances
Use the proceeds of each Warehousing Advance solely for the purpose of funding
Eligible Loans and against the pledge of those Eligible Loans as Collateral.
End of Article 7
Page 7-4
8. NEGATIVE COVENANTS
As long as the Warehousing Commitment is outstanding or there remain any
Obligations to be paid or performed, Borrower must not, either directly or
indirectly, without the prior written consent of Lender:
8.1. Contingent Liabilities
Assume, guarantee, endorse or otherwise become contingently liable for the
obligation of any Person except by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business, and except for
obligations arising in connection with the sale of Mortgage Loans with recourse
in the ordinary course of Borrower's business.
8.2. Pledge of Servicing Contracts
Pledge or grant a security interest in any existing or future Servicing
Contracts of Borrower other than to Lender, or omit to take any action required
to keep all of Borrower's Servicing Contracts in full force and effect.
8.3. Restrictions on Fundamental Changes
8.3 (a) Consolidate, merge or enter into any analogous reorganization or
transaction with any Person.
8.3 (b) Amend or otherwise modify Borrower's articles of incorporation or
by-laws.
8.3 (c) Liquidate, wind up or dissolve (or suffer any liquidation or
dissolution).
8.3 (d) Cease actively to engage in the business of originating or acquiring
Mortgage Loans or make any other material change in the nature or scope
of the business in which Borrower engages as of the date of this
Agreement.
8.3 (e) Sell, assign, lease, convey, transfer or otherwise dispose of (whether
in one transaction or a series of transactions) all or any substantial
part of Borrower's business or assets, whether now owned or acquired
after the Closing Date, other than, in the ordinary course of business
and to the extent not otherwise prohibited by this Agreement, sales of
(1) Mortgage Loans, (2) Mortgage-backed Securities and (3) Servicing
Contracts.
8.3 (f) Acquire by purchase or in any other transaction all or substantially all
of the business or property of, or stock or other ownership interests
of, any Person.
8.3 (g) Permit any Subsidiary of Borrower to do or take any of the foregoing
actions.
8.4. Subsidiaries
Form or acquire, or permit any Subsidiary of Borrower to form or acquire, any
Person that would thereby become a Subsidiary.
8.5. Deferral of Subordinated Debt
Pay any Subordinated Debt of Borrower in advance of its stated maturity or,
after a Default or Event of Default under this Agreement has occurred, make any
payment of any kind on any
Page 8-1
Subordinated Debt of Borrower until all of the Obligations have been paid and
performed in full and any applicable preference period has expired.
8.6. Accounting Changes
Make, or permit any Subsidiary of Borrower to make, any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change its fiscal year or the fiscal year of any Subsidiary of Borrower.
8.7. Leverage Ratio
Permit Borrower's Leverage Ratio at any time to exceed 25 to 1.
8.8. Minimum Tangible Net Worth
Permit Borrower's Tangible Net Worth at any time to be less than $4,000,000.
8.9. Liquidity Ratio
Permit Borrower's Liquidity Ratio (expressed as a percentage) at any time to be
less than 30%.
8.10. Dividends and Distributions
Declare or pay any dividends or otherwise declare or make any distribution to
Borrower's shareholders (including any purchase or redemption of stock) unless
(a) both before and after giving effect thereto, no Default or Event of Default
will exist, and (b) if the sum of such dividends and distributions and any
management fees paid to or on behalf of any Affiliates would not exceed 75% of
Borrower's net income in any fiscal year, calculated after giving effect to
payment of the Facility Fee but before giving effect to such management fees;
provided, however, that the 75% limitation will be increased to 100% of net
income if Borrower's Tangible Net Worth would exceed $5,000,000 after giving
effect to such dividend.
8.11. Transactions with Affiliates
Directly or indirectly (a) make any loan, advance, extension of credit or
capital contribution in excess of $400,000 in any fiscal year, to any of
Borrower's Affiliates, (b) sell, transfer, pledge or assign any of its assets to
or on behalf of those Affiliates, except for sales of Mortgage Loans to Parent
and its Subsidiaries, (c) merge or consolidate with or purchase or acquire
assets from those Affiliates, or (d) pay management fees if the sum of such
management fees and any dividends declared or paid, or other distributions made
would exceed 75% of the Borrower's net income in any fiscal year, calculated
after giving effect to payment of the Facility Fee but before giving effect to
such management fees, to or on behalf of those Affiliates; provided, however,
that the 75% limitation will be increased to 100% of net income if Borrower's
Tangible Net Worth would exceed $5,000,000 after giving effect to such dividend.
8.12. Recourse Servicing Contracts
Acquire or enter into Servicing Contracts under which Borrower must repurchase
or indemnify the holder of the Mortgage Loans as a result of defaults on the
Mortgage Loans at any time during the term of those Mortgage Loans.
Page 8-2
8.13. Gestation Agreements
Directly or indirectly sell or finance a Mortgage Loan under any Gestation
Agreement if the Mortgage Loan is or was previously pledged to Lender as
Collateral under this Agreement.
End of Article 8
Page 8-3
9. SPECIAL REPRESENTATIONS, WARRANTIES AND COVENANTS CONCERNING COLLATERAL
9.1. Special Representations and Warranties Concerning Collateral
Borrower represents and warrants to Lender, as of the date of this Agreement and
as of the date of each Warehousing Advance Request and the making of each
Warehousing Advance, that:
9.1 (a) Borrower has not selected the Collateral in a manner so as to affect
adversely Lender's interests.
9.1 (b) Borrower is the legal and equitable owner and holder, free and clear of
all Liens (other than Liens granted under this Agreement), of the
Pledged Loans and the Pledged Securities. All Pledged Loans, Pledged
Securities and related Purchase Commitments have been duly authorized
and validly issued to Borrower, and all of the foregoing items of
Collateral comply with all of the requirements of this Agreement, and
have been and will continue to be validly pledged or assigned to Lender,
subject to no other Liens.
9.1 (c) Borrower has, and will continue to have, the full right, power and
authority to pledge the Collateral pledged and to be pledged by it under
this Agreement.
9.1 (d) Each Mortgage Loan and each related document included in the Pledged
Loans (1) has been duly executed and delivered by the parties to that
Mortgage Loan and that related document, (2) has been made in compliance
with all applicable laws, rules and regulations (including all laws,
rules and regulations relating to usury), (3) is and will continue to be
a legal, valid and binding obligation, enforceable in accordance with
its terms, without setoff, counterclaim or defense in favor of the
mortgagor under the Mortgage Loan or any other obligor on the Mortgage
Note and (4) has not been modified, amended or any requirements of which
waived, except in a writing that is part of the Collateral Documents.
9.1 (e) Each Pledged Loan is secured by a Mortgage on real property located in
one of the states of the United States or the District of Columbia.
9.1 (f) Unless Third Party Originated Loans are permitted, each Pledged Loan has
been closed or will be closed and funded with the Warehousing Advance
made against it.
9.1 (g) Each Mortgage Loan has been fully advanced in the face amount of its
Mortgage Note.
9.1 (h) Each First Mortgage is a first Lien on the premises described in that
Mortgage.
9.1 (i) Each First Mortgage Loan has or will have a title insurance policy, in
ALTA form or equivalent, from a recognized title insurance company,
insuring the priority of the Lien of the Mortgage and meeting the usual
requirements of Investors purchasing those Mortgage Loans.
9.1 (j) Each Mortgage Loan has been evaluated or appraised in accordance with
Title XI of FIRREA.
9.1 (k) The Mortgage Note for each Pledged Loan is (1) payable or endorsed to
the order of Borrower, (2) an "instrument" within the meaning of Article
9 of the Uniform Commercial Code of all applicable jurisdictions and (3)
is denominated and payable in United States dollars.
Page 9-1
9.1 (l) No default has existed for 60 days or more under any Mortgage Loan
included in the Pledged Loans.
9.1 (m) No party to a Mortgage Loan or any related document is in violation of
any applicable law, rule or regulation that would impair the
collectibility of the Mortgage Loan or the performance by the mortgagor
or any other obligor of its obligations under the Mortgage Note or any
related document.
9.1 (n) All fire and casualty policies covering the premises encumbered by each
Mortgage included in the Pledged Loans (1) name and will continue to
name Borrower and its successors and assigns as the insured under a
standard mortgagee clause, (2) are and will continue to be in full force
and effect and (3) afford and will continue to afford insurance against
fire and such other risks as are usually insured against in the broad
form of extended coverage insurance generally available.
9.1 (o) Pledged Loans secured by premises located in a special flood hazard area
designated as such by the Director of the Federal Emergency Management
Agency are and will continue to be covered by special flood insurance
under the National Flood Insurance Program.
9.1 (p) Each Pledged Loan against which a Warehousing Advance is made on the
basis of a Purchase Commitment meets all of the requirements of that
Purchase Commitment, and each Pledged Security against which a
Warehousing Advance is outstanding meets all of the requirements of the
related Purchase Commitment.
9.1 (q) Pledged Loans that are intended to be exchanged for Agency Securities
comply or, prior to the issuance of the Agency Securities will comply,
with the requirements of any governmental instrumentality, department or
agency issuing or guaranteeing the Agency Securities.
9.1 (r) Pledged Loans that are intended to be used in the formation of
Mortgage-backed Securities (other than Agency Securities) comply with
the requirements of the issuer of the Mortgage-backed Securities (or its
sponsor) and of the Rating Agencies.
9.1 (s) None of the Pledged Loans is a graduated payment Mortgage Loan or has a
shared appreciation or other contingent interest feature, and each
Pledged Loan provides for periodic payments of all accrued interest on
the Mortgage Loan on at least a monthly basis.
9.1 (t) Except in the case of Bridge Mortgage Loans, Borrower nor any of
Borrower's Affiliates has any ownership interest, right to acquire any
ownership interest or equivalent economic interest in any Multifamily
Property or Health Care Facility or Commercial Property securing a
Mortgage Loan or the mortgagor under the Mortgage Loan or any other
obligor on the Mortgage Note.
9.1 (u) The original assignments of Mortgage and of UCC financing statements
delivered to Lender for each Pledged Loan are in recordable form and
comply with all applicable laws and regulations governing the filing and
recording of such documents.
9.1 (v) Each Pledged Loan has been underwritten in accordance with the
Underwriting Guidelines.
Page 9-2
9.2. Special Affirmative Covenants Concerning Collateral
As long as the Warehousing Commitment is outstanding or there remain any
Obligations to be paid or performed under this Agreement or under any other Loan
Document, Borrower must:
9.2 (a) Warrant and defend the right, title and interest of Lender in and to the
Collateral against the claims and demands of all Persons.
9.2 (b) Service or cause to be serviced all Pledged Loans in accordance with the
standard requirements of the issuers of Purchase Commitments covering
them, including taking all actions necessary to enforce the obligations
of the obligors under such Mortgage Loans. Service or cause to be
serviced all Mortgage Loans backing Pledged Securities in accordance
with applicable governmental requirements and requirements of issuers of
Purchase Commitments covering them. Hold all escrow funds collected in
respect of Pledged Loans and Mortgage Loans backing Pledged Securities
in trust, without commingling the same with non-custodial funds, and
apply them for the purposes for which those funds were collected.
9.2 (c) Execute and deliver to Lender with respect to the Collateral those
further instruments of sale, pledge, assignment or transfer, and those
powers of attorney, as required by Lender, and do and perform all
matters and things necessary or desirable to be done or observed, for
the purpose of effectively creating, maintaining and preserving the
security and benefits intended to be afforded Lender under this
Agreement.
9.2 (d) Notify Lender within 2 Business Days of any default under, or of the
termination of, any Purchase Commitment relating to any Pledged Loan,
Eligible Mortgage Pool, or Pledged Security.
9.2 (e) Promptly comply in all respects with the terms and conditions of all
Purchase Commitments, and all extensions, renewals and modifications or
substitutions of or to all Purchase Commitments. Deliver or cause to be
delivered to the Investor the Pledged Loans and Pledged Securities to be
sold under each Purchase Commitment not later than the mandatory
delivery date of the Pledged Loans or Pledged Securities under the
Purchase Commitment.
9.2 (f) Review the Underwriting Guidelines periodically to confirm that those
policies and procedures are being complied with in all material respects
and are adequate to meet Borrower's business objectives.
9.3. Special Negative Covenants Concerning Collateral
As long as the Warehousing Commitment is outstanding or there remain any
Obligations to be paid or performed, Borrower must not, either directly or
indirectly, without the prior written consent of Lender:
9.3 (a) Amend or modify, or waive any of the terms and conditions of, or settle
or compromise any claim in respect of, any Pledged Loans or Pledged
Securities.
9.3 (b) Sell, transfer or assign, or grant any option with respect to, or pledge
(except under this Agreement and, with respect to each Pledged Loan or
Pledged Security, the related Purchase Commitment) any of the Collateral
or any interest in any of the Collateral.
9.3 (c) Make any compromise, adjustment or settlement in respect of any of the
Collateral or accept other than cash in payment or liquidation of the
Collateral.
Page 9-3
9.3 (d) Make any material change in the Underwriting Guidelines and procedures
without providing Notice of that change to Lender pursuant to
9.4. Special Representations and Warranties Concerning Commercial Mortgage
Loans
Borrower represents and warrants to Lender, as of the date of this Agreement and
as of the date of each Warehousing Advance Request and the making of each
Warehousing Advance, that:
9.4 (a) The principal amount of each Commercial Mortgage Loan does not exceed
$5,000,000.
9.4 (b) The Loan-to-Value Ratio of each Commercial Mortgage Loan does not exceed
80%.
9.4 (c) Each Commercial Mortgage Loan is a permanent First Mortgage Loan.
9.4 (d) The projected Property Debt Service Coverage Ratio for the related
Commercial Property for the 12-month period beginning on the anticipated
closing date of each Commercial Mortgage Loan equals or exceeds 1.20 to
1.00.
9.4 (e) Each Commercial Mortgage Loan has a final maturity of not more than 30
years and provides for monthly payments of principal and interest
sufficient to repay the original principal amount of each Commercial
Mortgage Loan over a period of not more than 30 years (subject to
adjustment in accordance with industry standards in the case of an
adjustable-rate Mortgage Loan).
9.4 (f) None of the Commercial Properties securing a Commercial Mortgage Loan is
a marina, golf course, automobile dealership, funeral home, hotel or
motel, self-storage facility or other type of property developed
specifically for the operations of a particular business.
9.4 (g) The Mortgagor under each Commercial Mortgage Loan is a Single Purpose
Entity, if either: (i) the principal amount of the Commercial Mortgage
Loan exceeds $25,000,000; or (ii) the owners or sponsors of the
mortgagor under the Commercial Mortgage Loan or any other obligor on the
Mortgage Note, or any Person owned or controlled by any of them, have
previously defaulted on Debt or been debtors under the United States
Bankruptcy Code.
9.4 (h) Neither the Borrower nor any of its Affiliates has any ownership
interest, right to acquire any ownership interest, or equivalent
economic interest in the Commercial Property or the Mortgagor under each
Commercial Mortgage Loan.
9.5. Special Representations and Warranties Concerning Bridge Mortgage Loans
Borrower represents and warrants to Lender, as of the date of this Agreement and
as of the date of each Warehousing Advance Request and the making of each
Warehousing Advance, that:
9.5 (a) Each Bridge Mortgage Loan is a Mortgage Loan on Multifamily Property as
to which Borrower has conducted its customary due diligence and review,
including review of the financial condition of the obligor under the
related Mortgage Note and inspection of the improved real property
subject to the Mortgage, and such customary due diligence and review
have not revealed facts that would adversely affect collectibility of
the Bridge Mortgage Loan.
Page 9-4
9.5 (b) Each Bridge Mortgage Loan has been underwritten in accordance with
standards that comply generally with the requirements of major investors
in permanent Mortgage Loans on Multifamily Properties, in the secondary
market or, if applicable, with FHA standards for fully-insured permanent
Mortgage Loans on Multifamily Properties.
9.5 (c) The principal amount of each Bridge Mortgage Loan does not exceed
$5,000,000.
9.5 (d) The Loan-to-Value Ratio of each Bridge Mortgage Loan does not exceed
80%.
9.5 (e) No Bridge Mortgage Loan will be used to repair or rehabilitate the
improvements to the related real property.
9.5 (f) No Bridge Mortgage Loan has a maturity date more than 24 months after
the date of the Warehousing Advance against that Bridge Mortgage Loan.
End of Article 9
Page 9-5
10. DEFAULTS; REMEDIES
10.1. Events of Default
The occurrence of any of the following is an event of default ("Event of
Default"):
10.1 (a) Borrower fails to pay the principal of any Warehousing Advance when
due, whether at stated maturity, by acceleration, or otherwise; or
fails to pay any installment of interest on any Warehousing Advance
within 9 days after the date of Lender's invoice or, if applicable,
within 2 days after the date of Lender's account analysis statement;
or fails to pay, within any applicable grace period, any other amount
due under this Agreement or any other Obligation of Borrower to
Lender.
10.1 (b) Borrower or any of its Subsidiaries fails to pay, or defaults in the
payment of any principal or interest on, any other indebtedness or any
contingent obligation within any applicable grace period; breaches or
defaults with respect to any other material term of any other
indebtedness or of any loan agreement, mortgage, indenture or other
agreement relating to that indebtedness, if the effect of that breach
or default is to cause, or to permit the holder or holders of that
indebtedness (or a trustee on behalf of such holder or holders) to
cause, indebtedness of Borrower or its Subsidiaries in the aggregate
amount of $100,000 or more to become or be declared due before its
stated maturity (upon the giving or receiving of notice, lapse of
time, both, or otherwise).
10.1 (c) Borrower fails to perform or comply with any term or condition
applicable to it contained in Sections 7.4 or 7.14 or in any Section
of Article 8.
10.1 (d) Any representation or warranty made or deemed made by Borrower under
this Agreement, in any other Loan Document or in any written statement
or certificate at any time given by Borrower is inaccurate or
incomplete in any material respect on the date as of which it is made
or deemed made.
10.1 (e) Borrower defaults in the performance of or compliance with any term
contained in this Agreement or any other Loan Document other than
those referred to in Sections 10.1 (a), 10.1 (c) or 10.1 (d) and such
default has not been remedied or waived within 30 days after the
earliest of (1) receipt by Borrower of Notice from Lender of that
default, (2) receipt by Lender of Notice from Borrower of that
default or (3) the date Borrower should have notified Lender of that
default under Section 7.7(c) or 7.7(d).
10.1 (f) An "event of default" (however defined) occurs under any agreement
between Borrower and Lender other than this Agreement and the other
Loan Documents.
10.1 (g) A case (whether voluntary or involuntary) is filed by or against
Borrower or any Subsidiary of Borrower under any applicable
bankruptcy, insolvency or other similar federal or state law; or a
court of competent jurisdiction appoints a receiver (interim or
permanent), liquidator, sequestrator, trustee, custodian or other
officer having similar powers over Borrower or any Subsidiary of
Borrower, or over all or a substantial part of their respective
properties or assets; or Borrower or any Subsidiary of Borrower (1)
consents to the appointment of or possession by a receiver (interim or
permanent), liquidator, sequestrator, trustee, custodian or other
officer having similar powers over Borrower or any Subsidiary of
Borrower , or over all or a substantial part of their respective
properties or assets, (2) makes an assignment for the benefit of
creditors, or (3) fails, or admits in writing its inability, to pay
its debts as those debts become due.
Page 10-1
10.1 (h) Borrower fails to perform any contractual obligation to repurchase
Mortgage Loans, if such obligations in the aggregate exceed $1,000,000.
10.1 (i) Any money judgment, writ or warrant of attachment or similar process
involving in an amount in excess of $100,000 is entered or filed
against Borrower or any of its Subsidiaries or any of their respective
assets and remains undischarged, unvacated, unbonded or unstayed for a
period of 30 days or 5 days before the date of any proposed sale under
that money judgment, writ or warrant of attachment or similar process.
10.1 (j) Any order, judgment or decree decreeing the dissolution of Borrower is
entered and remains undischarged or unstayed for a period of 20 days.
10.1 (k) Borrower purports to disavow the Obligations or contests the validity
or enforceability of any Loan Document.
10.1 (l) Lender's security interest on any portion of the Collateral becomes
unenforceable or otherwise impaired.
10.1 (m) A material adverse change occurs in Borrower's financial condition,
business, properties, operations or prospects, or in Borrower's ability
to repay the Obligations.
10.1 (n) Any Lien for any taxes, assessments or other governmental charges (1)
is filed against Borrower or any of its property, or is otherwise
enforced against Borrower or any of its property, or (2) obtains
priority that is equal to greater than the priority of Lender's
security interest in any of the Collateral.
10.1 (o) David Depillo ceases to be the Vice Chairman and President of Borrower
unless a replacement reasonably satisfactory to Lender has been
appointed within 60 days thereafter.
10.1 (p) Stephen H. Gordon ceases to be the Director and Executive Vice
President of Borrower unless a replacement reasonably satisfactory to
Lender has been appointed within 60 days thereafter.
10.1 (q) Scott F. Kavanaugh ceases to be the Chief Operating Officer of Borrower
unless a replacement reasonably satisfactory to Lender has been
appointed within 60 days thereafter.
10.2. Remedies
10.2 (a) If an Event of Default described in Section 10.1 (g) occurs with
respect to Borrower, the Warehousing Commitment will automatically
terminate and the unpaid principal amount of and accrued interest on
the Warehousing Note, the Sublimit Note and all other Obligations will
automatically become due and payable, without presentment, demand or
other Notice or requirements of any kind, all of which Borrower
expressly waives.
10.2 (b) If any other Event of Default occurs, Lender may, by Notice to
Borrower, terminate the Warehousing Commitment and declare the
Obligations to be immediately due and payable.
10.2 (c) If any Event of Default occurs, Lender may also take any of the
following actions:
(1) Foreclose upon or otherwise enforce its security interest in any
Lien on the Collateral to secure all payments and performance of
the Obligations in any manner permitted by law or provided for
in the Loan Documents.
Page 10-2
(2) Notify all obligors under any of the Collateral that the Collateral
has been assigned to Lender (or to another Person designated by
Lender) and that all payments on that Collateral are to be made
directly to Lender (or such other Person); settle, compromise or
release, in whole or in part, any amounts any obligor or Investor owes
on any of the Collateral on terms acceptable to Lender; enforce
payment and prosecute any action or proceeding involving any of the
Collateral; and where any Collateral is in default, foreclose on and
enforce any Liens securing that Collateral in any manner permitted by
law and sell any property acquired as a result of those enforcement
actions.
(3) Prepare and submit for filing Uniform Commercial Code amendment
statements evidencing the assignment to Lender or its designee of any
Uniform Commercial Code financing statement filed in connection with
any item of Collateral.
(4) Act, or contract with a third party to act, at Borrower's expense, as
servicer or subservicer of Collateral requiring servicing, and perform
all obligations required under any Collateral, including Servicing
Contracts and Purchase Commitments.
(5) Require Borrower to assemble and make available to Lender the
Collateral and all related books and records at a place designated by
Lender.
(6) Enter onto property where any Collateral or related books and records
are located and take possession of those items with or without
judicial process; and obtain access to Borrower's data processing
equipment, computer hardware and software relating to the Collateral
and use all of the foregoing and the information contained in the
foregoing in any manner Lender deems necessary for the purpose of
effectuating its rights under this Agreement and any other Loan
Document.
(7) Before the disposition of the Collateral, prepare it for disposition
in any manner and to the extent Lender deems appropriate.
(8) Exercise all rights and remedies of a secured creditor under the
Uniform Commercial Code of Minnesota or other applicable law,
including selling or otherwise disposing of all or any portion of the
Collateral at one or more public or private sales, whether or not the
Collateral is present at the place of sale, for cash or credit or
future delivery, on terms and conditions and in the manner as Lender
may determine, including sale under any applicable Purchase
Commitment. Borrower waives any right it may have to prior notice of
the sale of all or any portion of the Collateral to the extent allowed
by applicable law. If notice is required under applicable law, Lender
will give Borrower not less than 10 days' notice of any public sale or
of the date after which any private sale may be held. Borrower agrees
that 10 days' notice is reasonable notice. Lender may, without notice
or publication, adjourn any public or private sale one or more times
by announcement at the time and place fixed for the sale, and the sale
may be held at any time or place announced at the adjournment. In the
case of a sale of all or any portion of the Collateral on credit or
for future delivery, the Collateral sold on those terms may be
retained by Lender until the purchaser pays the selling price or takes
possession of the Collateral. Lender has no liability to Borrower if a
purchaser fails to pay for or take possession of Collateral sold on
those terms, and in the case of any such failure, Lender may sell the
Collateral again upon notice complying with this Section.
(9) Instead of or in conjunction with exercising the power of sale
authorized by Section (8), Lender may proceed by suit at law or in
equity to collect all amounts
Page 10-3
due on the Collateral, or to foreclose Lender's Lien on and Sell
all or any portion of the Collateral pursuant to a judgment or
decree of a court of competent jurisdiction.
(10) Proceed against Borrower on the Warehousing Note and the Sublimit
Note.
(11) Retain all excess proceeds from the sale or other disposition of
the Collateral, and apply them to the payment of the Obligations
under Section 10.3.
10.2 (d) Lender will incur no liability as a result of the commercially
reasonable sale or other disposition of all or any portion of the
Collateral at any public or private sale or other disposition. Borrower
waives (to the extent permitted by law) any claims it may have against
Lender arising by reason of the fact that the price at which the
Collateral may have been sold at a private sale was less than the price
that Lender might have obtained at a public sale, or was less than the
aggregate amount of the outstanding Warehousing Advances, accrued and
unpaid interest on those Warehousing Advances, and unpaid fees, even if
Lender accepts the first offer received and does not offer the
Collateral to more than one offeree. Borrower agrees that any sale of
Collateral under the terms of a Purchase Commitment, or any other
disposition of Collateral arranged by Lender, whether before or after
the occurrence of an Event of Default, will be deemed to have been made
in a commercially reasonable manner.
10.2 (e) Borrower acknowledges that Mortgage Loans are collateral of a type that
is the subject of widely distributed standard price quotations and that
Mortgage-backed Securities are collateral of a type that is customarily
sold on a recognized market. Borrower waives any right it may have to
prior notice of the sale of Pledged Securities, and agrees that Lender
may purchase Pledged Loans and Pledged Securities at a private sale of
such Collateral.
10.2 (f) Borrower specifically waives and releases (to the extent permitted by
law) any equity or right of redemption, stay or appraisal that Borrower
has or may have under any rule of law or statute now existing or
adopted after the date of this Agreement, and any right to require
Lender to (1) proceed against any Person, (2) proceed against or
exhaust any of the Collateral or pursue its rights and remedies
against the Collateral in any particular order, or (3) pursue any other
remedy within its power. Lender is not required to take any action to
preserve any rights of Borrower against holders of mortgages having
priority to the Lien of any Mortgage or Security Agreement included in
the Collateral or to preserve Borrower's rights against other prior
parties.
10.2 (g) Lender may, but is not obligated to, advance any sums or do any act or
thing necessary to uphold or enforce the Lien and priority of, or the
security intended to be afforded by, any Mortgage or Security Agreement
included in the Collateral, including payment of delinquent taxes or
assessments and insurance premiums. All advances, charges, costs and
expenses, including reasonable attorneys' fees and disbursements,
incurred or paid by Lender in exercising any right, power or remedy
conferred by this Agreement, or in the enforcement of this Agreement,
together with interest on those amounts at the Default Rate, from the
time paid by Lender until repaid by Borrower, are deemed to be
principal outstanding under this Agreement, the Warehousing Note and
the Sublimit Note.
10.2 (h) No failure or delay on the part of Lender to exercise any right, power
or remedy provided in this Agreement or under any other Loan Document,
at law or in equity, will operate as a waiver of that right, power or
remedy. No single or partial exercise by Lender of any right, power or
remedy provided under this Agreement or any other Loan Document, at law
or in equity, precludes any other or further exercise of that right,
power, or remedy
Page 10-4
by Lender, or Lender's exercise of any other right, power or remedy.
Without limiting the foregoing, Borrower waives all defenses based on
the statute of limitations to the extent permitted by law. The remedies
provided in this Agreement and the other Loan Documents are cumulative
and are not exclusive of any remedies provided at law or in equity.
10.2 (i) Borrower grants Lender a license or other right to use, without charge,
Borrower's computer programs, other programs, labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in advertising for
sale and selling any of the Collateral and Borrower's rights under all
licenses and all other agreements related to the foregoing inure to
Lender's benefit until the Obligations are paid in full.
10.3. Application of Proceeds
Lender may apply the proceeds of any sale, disposition or other enforcement of
Lender's Lien on all or any portion of the Collateral to the payment of the
Obligations in the order Lender determines in its sole discretion. From and
after the indefeasible payment to Lender of all of the Obligations, any
remaining proceeds of the Collateral will be paid to Borrower, or to its
successors or assigns, or as a court of competent jurisdiction may direct. If
the proceeds of any sale, disposition or other enforcement of the Collateral are
insufficient to cover the costs and expenses of that sale, disposition or other
enforcement and payment in full of all Obligations, Borrower is liable for the
deficiency.
10.4. Lender Appointed Attorney-in-Fact
Borrower appoints Lender its attorney-in-fact, with full power of substitution,
for the purpose of carrying out the provisions of this Agreement, the
Warehousing Note, the Sublimit Note and the other Loan Documents and taking any
action and executing any instruments that Lender deems necessary or advisable to
accomplish that purpose. Borrower's appointment of Lender as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing, Lender may give notice of its Lien on the Collateral to any Person,
either in Borrower's name or in its own name, endorse all Pledged Loans or
Pledged Securities payable to the order of Borrower, change or cause to be
changed the book-entry registration or name of subscriber or Investor on any
Pledged Security, prepare and submit for filing Uniform Commercial Code
amendment statements with respect to any Uniform Commercial Code financing
statements filed in connection with any item of Collateral or receive, endorse
and collect all checks made payable to the order of Borrower representing
payment on account of the principal of or interest on, or the proceeds of sale
of, any of the Pledged Loans or Pledged Securities and give full discharge for
those transactions.
10.5. Right of Set-Off
If Borrower defaults in the payment of any Obligation or in the performance of
any of its duties under the Loan Documents, Lender may, without Notice to or
demand on Borrower (which Notice or demand Borrower expressly waives), set-off,
appropriate or apply any property of Borrower held at any time by Lender, or any
indebtedness at any time owed by Lender to or for the account of Borrower,
against the Obligations, whether or not those Obligations have matured.
End of Article 10
Page 10-5
11. MISCELLANEOUS
11.1. Notices
Except where telephonic or facsimile notice is expressly authorized by this
Agreement, all communications required or permitted to be given or made under
this Agreement ("Notices") must be in writing and must be sent by manual
delivery, overnight courier or United States mail (postage prepaid), addressed
as follows (or at such other address as may be designated by it in a Notice to
the other):
If to Borrower: Financial Institutional Partners Mortgage Corporation
One Venture, Suite 300
Irvine, CA 92618
Attention: Stephen Gordon, CEO
Facsimile: (949) 585-0174
If to Lender: Residential Funding Corporation
7501 Wisconsin Avenue
Bethesda, MD 20814
Attention: Richard Hay, Director
Facsimile: (301) 215-7212
All periods of Notice will be measured from the date of delivery if delivered
manually or by facsimile, from the first Business Day after the date of sending
if sent by overnight courier or from 4 days after the date of mailing if sent by
United States mail, except that Notices to Lender under Article 2 and Section
3.3 (e) shall be deemed to have been given only when actually received by
Lender. Borrower authorizes Lender to accept Borrower's bailee pledge
agreements, Warehousing Advance Requests, shipping requests, wire transfer
instructions and security delivery instructions transmitted to Lender by
facsimile and those documents, when transmitted to Lender by facsimile have the
same force and effect as the originals.
11.2. Reimbursement Of Expenses; Indemnity
Borrower must: (a) pay Lender a document production fee in connection with the
preparation and negotiation of this Agreement; (b) pay such additional
documentation production fees as Lender may require and all out-of-pocket costs
and expenses of Lender, including reasonable fees, service charges and
disbursements of counsel to Lender (including allocated costs of internal
counsel), in connection with the amendment, enforcement and administration of
this Agreement, the Warehousing Note, the Sublimit Note and other Loan Documents
and the making, repayment and payment of interest on the Warehousing Advances;
(c) indemnify, pay, and hold harmless Lender and any other holder of the
Warehousing Note, the Sublimit Note from and against, all present and future
stamp, documentary and other similar taxes with respect to the foregoing matters
and save Lender and any other holder of the Warehousing Note and the Sublimit
Note harmless from and against all liabilities with respect to or resulting from
any delay or omission to pay such taxes; and (d) indemnify, pay and hold
harmless Lender and all of its Affiliates, officers, directors, employees or
agents and any subsequent holder of the Warehousing Note and the Sublimit Note
(collectively called the "Indemnitees") from and against all liabilities,
obligations, losses, damages, penalties, judgments, suits, costs, expenses and
disbursements of every kind or nature (including the reasonable fees and
disbursements of counsel to the Indemnitees (including allocated costs of
internal counsel) in connection with any investigative, administrative or
judicial proceeding, whether or not the Indemnitees have been designated as
parties to such proceeding) that may be imposed upon, incurred by or asserted
against such Indemnitees in any manner relating to or arising out of this
Agreement, the Warehousing Note, the Sublimit Note, or
Page 11-1
any other Loan Document or any of the transactions contemplated by this
Agreement, the Warehousing Note, the Sublimit Note and the other Loan Documents
("Indemnified Liabilities"), except that Borrower has no obligation under this
Agreement with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of any such Indemnitees. To the extent that the
undertaking to indemnify, pay and hold harmless as set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, Borrower must contribute the maximum portion that it is permitted to pay
and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them. The
agreement of Borrower contained in this Article survives the expiration or
termination of this Agreement and the payment in full of the Warehousing Note
and Sublimit Note. Attorneys' fees and disbursements incurred in enforcing, or
on appeal from, a judgment under this Agreement are recoverable separately from
and in addition to any other amount included in such judgment, and this clause
is intended to be severable from the other provisions of this Agreement and to
survive and not be merged into such judgment.
11.3. Financial Information
All financial statements and reports furnished to Lender under this Agreement
must be prepared in accordance with GAAP, applied on a basis consistent with
that applied in preparing the financial statements as at the end of and for
Borrower's most recent fiscal year (except to the extent otherwise required to
conform to good accounting practice).
11.4. Terms Binding Upon Successors; Survival of Representations
The terms and provisions of this Agreement are binding upon and inure to the
benefit of Borrower, Lender and their respective successors and assigns. All of
Borrower's representations, warranties, covenants and agreements survive the
making of any Warehousing Advance, and except where a longer period is set forth
in this Agreement, remain effective for as long as the Warehousing Commitment is
outstanding or there remain any Obligations to be paid or performed.
11.5. Assignment
Borrower cannot assign this Agreement. Lender may at any time, without Notice to
or the consent of Borrower, transfer or assign, in whole or in part, its
interest in this Agreement and the Warehousing Note and Sublimit Note along with
Lender's security interest in any of the Collateral, and any assignee of Lender
may enforce this Agreement, the Warehousing Note, the Sublimit Note and its
security interest in the Collateral assigned.
11.6. Amendments
Except as otherwise provided in this Agreement, this Agreement may not be
amended, modified or supplemented unless the amendment, modification or
supplement is set forth in a writing signed by both Borrower and Lender.
11.7. Governing Law
This Agreement and the other Loan Documents are governed by the laws of the
State of Minnesota, without reference to its principles of conflicts of laws.
11.8. Participations
Lender may at any time sell, assign or grant participations in, or otherwise
transfer to any other Person ("Participant"), all or part of the Obligations.
Without limiting Lender's exclusive right to
Page 11-2
collect and enforce the Obligations, Borrower agrees that each participation
will give rise to a debtor-creditor relationship between Borrower and the
Participant, and Borrower authorizes each Participant, upon the occurrence of an
Event of Default, to proceed directly by right of setoff, banker's lien, or
otherwise, against any assets of Borrower that may be held by that Participant.
Borrower authorizes Lender to disclose to prospective and actual Participants
all information in Lender's possession concerning Borrower, this Agreement and
the Collateral.
11.9. Relationship of the Parties
This Agreement provides for the making and repayment of Warehousing Advances by
Lender (in its capacity as a lender) and Borrower (in its capacity as a
borrower), for the payment of interest on those Warehousing Advances and for the
payment of certain fees by Borrower to Lender. The relationship between Lender
and Borrower is limited to that of creditor and secured party on the part of
Lender and of debtor on the part of Borrower. The provisions of this Agreement
and the other Loan Documents for compliance with financial covenants and the
delivery of financial statements and other operating reports are intended solely
for the benefit of Lender to protect its interest as a creditor and secured
party. Nothing in this Agreement creates or may be construed as permitting or
obligating Lender to act as a financial or business advisor or consultant to
Borrower, as permitting or obligating Lender to control Borrower or to conduct
Borrower's operations, as creating any fiduciary obligation on the part of
Lender to Borrower, or as creating any joint venture, agency, partnership or
other relationship between Lender and Borrower other than as explicitly and
specifically stated in the Loan Documents. Borrower acknowledges that it has had
the opportunity to obtain the advice of experienced counsel of its own choice in
connection with the negotiation and execution of the Loan Documents and to
obtain the advice of that counsel with respect to all matters contained in the
Loan Documents, including the waivers of jury trial and of punitive,
consequential, special or indirect damages contained in Sections 11.15 and
11.16, respectively. Borrower further acknowledges that it is experienced with
respect to financial and credit matters and has made its own independent
decisions to apply to Lender for credit and to execute and deliver this
Agreement.
11.10. Severability
If any provision of this Agreement is declared to be illegal or unenforceable in
any respect, that provision is null and void and of no force and effect to the
extent of the illegality or unenforceability, and does not affect the validity
or enforceability of any other provision of the Agreement.
11.11. Consent to Credit References
Borrower consents to the disclosure of information regarding Borrower and its
Subsidiaries and their relationships with Lender to Persons making credit
inquiries to Lender. This consent is revocable by Borrower at any time upon
Notice to Lender as provided in Section 11.1.
11.12. Counterparts
This Agreement may be executed in any number of counterparts, each of which will
be deemed an original, but all of which together constitute but one and the same
instrument.
11.13. Entire Agreement
This Agreement, the Warehousing Note, the Sublimit Note and the other Loan
Documents represent the final agreement among the parties with respect to their
subject matter, and may not be contradicted by evidence of prior or
contemporaneous oral agreements among the parties.
Page 11-3
There are no oral agreements among the parties with respect to the subject
matter of this Agreement, the Warehousing Note, the Sublimit Note and the other
Loan Documents.
11.14. Consent to Jurisdiction
AT THE OPTION OF LENDER, THIS AGREEMENT, THE WAREHOUSING NOTE, THE SUBLIMIT NOTE
AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY STATE OR FEDERAL COURT
WITHIN THE STATE OF MINNESOTA. BORROWER CONSENTS TO THE JURISDICTION AND VENUE
OF THOSE COURTS, AND WAIVES ANY OBJECTION TO THE JURISDICTION OR VENUE OF THOSE
COURTS, INCLUDING THE OBJECTION THAT VENUE IN THOSE COURTS IS NOT CONVENIENT.
ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE COMMENCED AND INSTITUTED BY SERVICE
OF PROCESS UPON BORROWER BY FIRST CLASS REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO BORROWER AT ITS ADDRESS LAST KNOWN TO LENDER.
BORROWER'S CONSENT AND AGREEMENT UNDER THIS SECTION DOES NOT AFFECT LENDER'S
RIGHT TO ACCOMPLISH SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER
JURISDICTION OR COURT. IN THE EVENT BORROWER COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, LENDER AT ITS OPTION MAY HAVE THE CASE TRANSFERRED TO A STATE OR
FEDERAL COURT WITHIN THE STATE OF MINNESOTA OR, IF A TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, MAY HAVE BORROWER'S ACTION DISMISSED WITHOUT
PREJUDICE.
11.15. Waiver of Jury Trial
BORROWER AND LENDER EACH PROMISES AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY A JURY, AND FULLY WAIVES ANY RIGHT TO TRIAL BY JURY TO
THE EXTENT THAT ANY SUCH RIGHT NOW EXISTS OR ARISES AFTER THE DATE OF THIS
AGREEMENT. THIS WAIVER OF THE RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN,
KNOWINGLY AND VOLUNTARILY, BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS
EACH INSTANCE AND EACH ISSUE FOR WHICH THE RIGHT TO TRIAL BY JURY WOULD
OTHERWISE APPLY. LENDER AND BORROWER ARE EACH AUTHORIZED AND DIRECTED TO SUBMIT
THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE
PARTIES TO THIS AGREEMENT AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF THE RIGHT TO
TRIAL BY JURY. FURTHER, BORROWER AND LENDER EACH CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE OTHER PARTY, INCLUDING THE OTHER PARTY'S COUNSEL,
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF ITS REPRESENTATIVES OR AGENTS
THAT THE OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO TRIAL BY
JURY.
11.16. Waiver of Punitive, Consequential, Special or Indirect Damages
BORROWER WAIVES ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL
OR INDIRECT DAMAGES FROM LENDER OR ANY OF LENDER'S AFFILIATES, OFFICERS,
DIRECTORS, EMPLOYEES OR AGENTS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN
ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY BORROWER AGAINST LENDER
OR ANY OF LENDER'S AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS WITH
RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT. THIS WAIVER OF THE RIGHT TO SEEK PUNITIVE, CONSEQUENTIAL,
SPECIAL OR INDIRECT DAMAGES IS KNOWINGLY AND VOLUNTARILY GIVEN BY
Page 11-4
BORROWER, AND IS INTENDED TO ENCOMPASS EACH INSTANCE AND EACH ISSUE FOR WHICH
THE RIGHT TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES WOULD
OTHERWISE APPLY. LENDER IS AUTHORIZED AND DIRECTED TO SUBMIT THIS AGREEMENT TO
ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES TO THIS
AGREEMENT AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF THE RIGHT TO SEEK PUNITIVE,
CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES.
11.17. Waiver of Events of Default Under Existing Agreement
Lender hereby waives its Default rights with respect to the failure of the
Borrower to comply with the Leverage Ratio requirement set forth in Section 8.7
of the Existing Agreement as of June 30, 2002, that occurred under the Existing
Agreement. This waiver applies only to the specific instance set forth herein.
It is not a waiver of any Default or Event of Default of this Agreement. Lender
reserves all of the rights, powers and remedies presently available to it under
the Loan Documents, including the right to cease making Warehousing Advances to
Borrower and the right to accelerate the Obligations, upon the occurrence of any
Default or Event of Default (a) under this Agreement or (b) under the Existing
Agreement and not disclosed to Lender.
End of Article 11
Page 11-5
12. DEFINITIONS
12.1. Defined Terms
Capitalized terms defined below or elsewhere in this Agreement have the
following meanings or, as applicable, the meanings given to those terms in
Exhibits to this Agreement:
"Advance Rate" means, with respect to any Eligible Loan, the Advance Rate set
forth in Exhibit H for that type of Eligible Loan.
"Affiliate" means, when used with reference to any Person, (a) each Person that,
directly or indirectly, controls, is controlled by or is under common control
with, the Person referred to, (b) each Person that beneficially owns or holds,
directly or indirectly, 5% or more of any class of voting Equity Interests of
the Person referred to, (c) each Person, 5% or more of the voting Equity
Interests of which is beneficially owned or held, directly or indirectly, by the
Person referred to, and (d) each of such Person's officers, directors, joint
venturers and partners. For these purposes, the term "control" (including the
terms "controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of the Person in question.
"Agency Security" means a Mortgage-backed Security issued or guaranteed by
Fannie Mae, Freddie Mac or Ginnie Mae.
"Agreement" means this Second Amended and Restated Warehousing Credit and
Security Agreement, either as originally executed or as it may be amended,
restated, renewed or replaced.
"Appraised Property Value" means with respect to an interest in real property,
the then current fair market value of the real property and any improvements on
it as of recent date determined in accordance with Title XI of FIRREA by a
qualified appraiser who is a member of the American Institute of Real Estate
Appraisers or other group of professional appraisers.
"Approved Custodian" means a pool custodian or other Person that Lender deems
acceptable, in its sole discretion, to hold Mortgage Loans for inclusion in a
Mortgage Pool or to hold Mortgage Loans as agent for an Investor that has issued
a Purchase Commitment for those Mortgage Loans.
"Audited Statement Date" means the date of Borrower's most recent audited
financial statements (and, if applicable, Borrower's Subsidiaries, on a
consolidated basis) delivered to Lender under the Existing Agreement or this
Agreement.
"Bank One" means Bank One, National Association, or any successor bank.
"Bank One Prime Rate" means, as of any date of determination, the highest prime
rate quoted by Bank One and most recently published by Bloomberg L.P. If the
prime rate for Bank One is not quoted or published for any period, then during
that period the term "Bank One Prime Rate" means the highest prime rate
published in the most recent edition of The Wall Street Journal in its regular
column entitled "Money Rates."
"Borrower" has the meaning set forth in the first paragraph of this Agreement.
"Bridge Loan Approval Request" has the meaning set forth in Section 2.2.
Page 12-1
"Bridge Mortgage Loan" has the meaning set forth in Exhibit H.
"Business Day" means any day other than Saturday, Sunday or any other day on
which national banking associations are closed for business.
"Calendar Quarter" means the 3 month period beginning on each January 1, April
1, July 1 or October 1.
"Cash Collateral Account" means a demand deposit account maintained at the
Funding Bank in Lender's name and designated for receipt of the proceeds of the
sale or other disposition of Collateral.
"Closing Date" has the meaning set forth in the Recitals to this Agreement.
"Collateral" has the meaning set forth in Section 4.1.
"Collateral Documents" means, with respect to each Mortgage Loan, (a) the
Mortgage Note, the Mortgage and all other documents including, if applicable,
any Security Agreement, executed in connection with or relating to the Mortgage
Loan; (b) as applicable, the original lender's ALTA Policy of Title Insurance or
its equivalent, documents evidencing the FHA Commitment to Insure, or private
mortgage insurance, the appraisal, the environmental assessment, the engineering
report, certificates of casualty or hazard insurance, credit information on the
maker of the Mortgage Note; (c) any other document listed in Exhibit B; and (d)
any other document that is customarily desired for inspection or transfer
incidental to the purchase of any Mortgage Note by an Investor or that is
customarily executed by the seller of a Mortgage Note to an Investor.
"Commercial Mortgage Loan" has the meaning set forth in Exhibit H.
"Commercial Property" means an improved, income-producing commercial real
property that is not a Multifamily Property or Health Care Facility.
"Committed Purchase Price" means for an Eligible Loan (a) the dollar price as
set forth in the Purchase Commitment or, if the price is not expressed in
dollars, the product of the Mortgage Note Amount multiplied by the price
(expressed as a percentage) as set forth in the Purchase Commitment for the
Eligible Loan, or (b) if the Eligible Loan is to be used to back an Agency
Security, the dollar price as set forth in a Purchase Commitment or, if the
price is not expressed in dollars the product of the Mortgage Note Amount
multiplied by the price (expressed as a percentage) as set forth in the Purchase
Commitment for the Agency Security.
"Compliance Certificate" means a certificate executed on behalf of Borrower by
its chief financial officer or its treasurer or by another officer approved by
Lender, substantially in the form of Exhibit E.
"Credit Underwriting Documents" has the meaning set forth in Exhibit A-MF/BR.
"Debt" means (a) all indebtedness or other obligations of a Person that, in
accordance with GAAP, would be included in determining total liabilities as
shown on the liabilities side of a balance sheet of the Person on the date of
determination, plus (b) all indebtedness or other obligations of the Person for
borrowed money or for the deferred purchase price of property or services. For
purposes of calculating a Person's Debt, Subordinated Debt not due within 1 year
of that date and deferred taxes arising from capitalized excess servicing fees
and capitalized servicing rights may be excluded from a Person's indebtedness.
"Default" means the occurrence of any event or existence of any condition that,
but for the giving of Notice or the lapse of time, would constitute an Event of
Default.
Page 12-2
"Default Rate" means, for any Warehousing Advance, the Interest Rate applicable
to that Warehousing Advance plus 4% per annum. If no Interest Rate is applicable
to a Warehousing Advance, "Default Rate" means, for that Warehousing Advance,
the highest Interest Rate then applicable to any outstanding Warehousing Advance
plus 4% per annum.
"Depository Benefit" means the compensation received by Lender, directly or
indirectly, as a result of Borrower's maintenance of Eligible Balances with a
Designated Bank.
"Designated Bank" means any bank designated by Lender as a Designated Bank, but
only for as long as Lender has an agreement under which Lender receives
Depository Benefits from that bank.
"Designated Bank Charges" means any fees, interest or other charges that would
otherwise be payable to a Designated Bank in connection with Eligible Balances
maintained at the Designated Bank, including deposit insurance premiums, service
charges and any other charges that may be imposed by governmental authorities
from time to time.
"Earnings Allowance " has the meaning set forth in Section 3.1(b).
"Earnings Credit " has the meaning set forth in Section 3.1(b).
"Eligible Balances" means all funds of or maintained by Borrower (and, if
applicable, Borrower's Subsidiaries) in demand deposit or time deposit accounts
at a Designated Bank, minus balances to support float, reserve requirements and
any other reductions that may be imposed by governmental authorities from time
to time.
"Eligible Loan" means a Mortgage Loan that satisfies the conditions and
requirements set forth in Exhibit H.
"Eligible Mortgage Pool" means a Mortgage Pool for which (a) an Approved
Custodian has issued its initial certification, (b) there exists a Purchase
Commitment covering the Agency Security to be issued on the basis of that
certification and (c) the Agency Security will be delivered to Lender.
"Equity Interests" means all shares, interests, participations or other
equivalents, however, designated, of or in a Person (other than a natural
person), whether or not voting, including common stock, membership interests,
warrants, preferred stock, convertible debentures and all agreements,
instruments and documents convertible, in whole or in part, into any one or more
of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974 and all rules
and regulations promulgated under that statute, as amended, and any successor
statute, rules, and regulations.
"ERISA Affiliate" means any trade or business (whether or not incorporated) that
is a member of a group of which Borrower is a member and that is treated as a
single employer under Section 414 of the Internal Revenue Code.
"Event of Default" means any of the conditions or events set forth in Section
10.1.
"Exchange Act" means the Securities Exchange Act of 1934 and all rules and
regulations promulgated under that statute, as amended, and any successor
statute, rules, and regulations.
"Exhibit B" means Exhibit B-MF, Exhibit B-MF/BR, as applicable to the type of
Eligible Loan against which a Warehousing Advance is to be made.
Page 12-3
"Existing Agreement" means the First Amended and Restated Warehousing Credit
and Security Agreement dated as of October 1, 2001, as amended, between Borrower
and Lender.
"Facility Fee" has the meaning set forth in Section 3.6.
"Fair Market Value" means, at any time for an Eligible Loan or a related Agency
Security (if the Eligible Loan is to be used to back an Agency Security) as of
any date of determination, (a) the Committed Purchase Price if the Eligible Loan
is covered by a Purchase Commitment from Fannie Mae or Freddie Mac or the
Eligible Loan is to be exchanged for an Agency Security and that Agency Security
is covered by a Purchase Commitment from an Investor, or (b) otherwise, the
market price for such Eligible Loan or Agency Security, determined by Lender
based on market data for similar Mortgage Loans or Agency Securities and such
other criteria as Lender deems appropriate in its sole discretion.
"Fannie Mae" means Fannie Mae, a corporation created under the laws of the
United States, and any successor corporation or other entity.
"FHA" means the Federal Housing Administration and any successor agency or other
entity.
"FICA" means the Federal Insurance Contributions Act and all rules and
regulations promulgated under that statute, as amended, and any successor
statute, rules and regulations.
"FIRREA" means the Financial Institutions Reform, Recovery and Enforcement Act
of 1989 and all rules and regulations promulgated under that statute, as
amended, and any successor statute, rules, and regulations.
"First Mortgage" means a Mortgage that constitutes a first Lien on the real
property covered by the Mortgage.
"First Mortgage Loan" means a Mortgage Loan secured by a First Mortgage.
"Freddie Mac" means Freddie Mac, a corporation created under the laws of the
United States, and any successor corporation or other entity.
"Funding Bank" means Bank One or any other bank designated by Lender as a
Funding Bank.
"Funding Bank Agreement" means a letter agreement on the form prescribed by
Lender between the Funding Bank and Borrower authorizing Lender's access to the
Operating Account.
"GAAP" means generally accepted accounting principles set forth in opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and in statements and pronouncements of the
Financial Accounting Standards Board, or in opinions, statements or
pronouncements of any other entity approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date
of determination.
"Gestation Agreement" means an agreement under which Borrower agrees to sell or
finance (a) a Mortgage Loan prior to the date of purchase by an Investor or (b)
a Mortgage Pool prior to the date a Mortgage-backed Security backed by the
Mortgage Pool is issued.
"Ginnie Mae" means the Government National Mortgage Association, an agency of
the United States government, and any successor agency or other entity.
"Health Care Facility" means a retirement service center, a board and care
facility, an intermediate care facility, a nursing home or a hospital.
Page 12-4
"Hedging Arrangements" means, with respect to any Person, any agreements or
other arrangements (including interest rate swap agreements, interest rate cap
agreements and forward sale agreements) entered into to protect that Person
against changes in interest rates or the market value of assets.
"HUD" means the Department of Housing and Urban Development, and any successor
agency or other entity.
"Indemnified Liabilities" has the meaning set forth in Section 11.2.
"Indemnitees" has the meaning set forth in Section 11.2.
"Interest Rate" means, for any Warehousing Advance, the floating rate of
interest specified for that Warehousing Advance in Exhibit H.
"Interim Statement Date" means the date of the most recent unaudited financial
statements of Borrower (and, if applicable, Borrower's Subsidiaries, on a
consolidated basis) delivered to Lender under the Existing Agreement or this
Agreement.
"Internal Revenue Code" means the Internal Revenue Code of 1986, Title 26 of the
United States Code, and all rules, regulations and interpretations issued under
those statutory provisions, as amended, and any subsequent or successor federal
income tax law or laws, rules, regulations and interpretations.
"Investment Company Act" means the Investment Company Act of 1940 and all rules
and regulations promulgated under that statute, as amended, and any successor
statute, rules, and regulations.
"Investor" means Fannie Mae, Freddie Mac or a financially responsible private
institution that Lender deems acceptable, in its sole discretion, to issue
Purchase Commitments with respect to a particular category of Eligible Loans.
"Lender" has the meaning set forth in the first paragraph of this Agreement.
"Leverage Ratio" means the ratio of a Person's (and, if applicable, the Person's
Subsidiaries, on a consolidated basis) Debt to Tangible Net Worth. For purposes
of calculating a Person's Leverage Ratio, Debt arising under Hedging
Arrangements, to the extent of assets arising under those Hedging Arrangements,
may be excluded from a Person's Debt.
"LIBOR" means, for each week, the rate of interest per annum that is equal to
the arithmetic mean of the U.S. Dollar London Interbank Offered Rates for 1
month periods of certain U.S. banks as of 11:00 a.m. (London time) on the first
Business Day of each week on which the London Interbank market is open, as
published by Bloomberg L.P. If those interest rates are not offered or published
for any period, then during that period LIBOR means the London Interbank Offered
Rate for 1 month periods as published in The Wall Street Journal in its regular
column entitled "Money Rates" on the first Business Day of each week on which
the London Interbank market is open.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature of such an agreement and any
agreement to give any security interest).
"Liquid Assets" means the following assets owned by a Person as of any date of
determination: (a) unrestricted and unencumbered cash, funds on deposit in any
bank located in the United States, investment grade commercial paper, money
market funds, or marketable securities; and
Page 12-5
(b) the excess, if any, of Mortgage Loans and Mortgage-backed Securities held
for sale (valued in accordance with GAAP) over the outstanding aggregate
principal amount of any Debt against which those Mortgage Loans or
Mortgage-backed Securities are pledged as collateral.
"Liquidity Ratio" means the ratio (expressed as a percentage) of a Person's
(and, if applicable, the Person's Subsidiaries, on a consolidated basis) Liquid
Assets to Tangible Net Worth.
"Loan Documents" means this Agreement, the Notes, any agreement of Borrower
relating to Subordinated Debt, any Security Agreement, if applicable, and each
other document, instrument or agreement executed by Borrower in connection with
any of those documents, instruments and agreements, as originally executed or as
any of the same may be amended, restated, renewed or replaced.
"Loan Package Fee " has the meaning set forth in Section 3.5.
"Loan-to-Value Ratio" means, for any Mortgage Loan, the ratio of (a) the maximum
amount that may be borrowed under the Mortgage Loan (whether or not borrowed) at
the time of origination, plus the Mortgage Note Amounts of all other Mortgage
Loans secured by the related Property, to (b) the Appraised Property Value of
the related Property.
"Margin Stock" has the meaning assigned to that term in Regulation U of the
Board of Governors of the Federal Reserve System, as amended.
"Miscellaneous Fees and Charges" means the miscellaneous fees set forth on
Lender's collateral operations fees schedule (either as originally delivered to
Borrower or as it may be amended, restated, renewed or replaced after the date
of this Agreement) and all miscellaneous disbursements, charges and expenses
incurred by or on behalf of Lender for the handling and administration of
Warehousing Advances and Collateral, including costs for Uniform Commercial
Code, tax lien and judgment searches conducted by Lender, filing fees, charges
for wire transfers and check processing charges, charges for security delivery
fees, charges for overnight delivery of Collateral to Investors, recording fees,
Funding Bank service fees and overdraft charges and Designated Bank Charges.
"Mortgage" means a mortgage or deed of trust on real property that is improved
and substantially completed.
"Mortgage-backed Securities" means securities that are secured or otherwise
backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage Note and secured by a
Mortgage and, if applicable, a Security Agreement.
"Mortgage Note" means a promissory note secured by one or more Mortgages and, if
applicable, one or more Security Agreements.
"Mortgage Note Amount" means, as of any date of determination, the then
outstanding and unpaid principal amount of a Mortgage Note (whether or not an
additional amount is available to be drawn under that Mortgage Note).
"Mortgage Pool" means a pool of one or more Pledged Loans on the basis of which
a Mortgage-backed Security is to be issued.
"Mortgagor" means with respect to a Mortgage Loan, the Person to whom the
Mortgage Loan is made.
Page 12-6
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, to which either Borrower or any ERISA Affiliate of Borrower
has any obligation with respect to its employees.
"Multifamily Property" means real property that contains or that will contain
more than 4 dwelling units.
"Non-Agency Mortgage Loan" has the meaning set forth in Exhibit H.
"Non-Usage Fee" has the meaning set forth in Section 3.4.
"Notes" means the Warehousing Note and the Sublimit Note.
"Notices" has the meaning set forth in Section 11.1.
"Obligations" means all indebtedness, obligations and liabilities of Borrower to
Lender and Lender's Subsidiaries (whether now existing or arising after the date
of this Agreement, voluntary or involuntary, joint or several, direct or
indirect, absolute or contingent, liquidated or unliquidated, or decreased or
extinguished and later increased and however created or incurred), including
Borrower's obligations and liabilities to Lender under the Loan Documents and
disbursements made by Lender for Borrower's account.
"Operating Account" means a demand deposit account maintained at the Funding
Bank in Borrower's name and designated for funding that portion of each Eligible
Loan not funded by a Warehousing Advance made against that Eligible Loan and for
returning any excess payment from an Investor for a Pledged Loan or Pledged
Security.
"Overdraft Advance" has the meaning set forth in Section 3.7.
"Parent" means Commercial Capital Bancorp., Inc., the sole shareholder of
Borrower.
"Participant" has the meaning set forth in Section 11.8.
"Person" means and includes natural persons, corporations, limited liability
companies, limited liability partnerships, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions of those governments.
"Plan" means each employee benefit plan (whether in existence on the date of
this Agreement or established after that date), as that term is defined in
Section 3 of ERISA, maintained for the benefit of directors, officers or
employees of Borrower or any ERISA Affiliate.
"Pledged Assets" means, collectively, Pledged Loans, and Pledged Securities.
"Pledged Hedging Accounts" has the meaning set forth in Section 4.1 (g).
"Pledged Hedging Arrangements" has the meaning set forth in Section 4.1 (g).
"Pledged Loans" has the meaning set forth in Section 4.1 (b).
"Pledged Securities" has the meaning set forth in Section 4.1 (c).
"Prohibited Transaction" has the meanings set forth for such term in Section
4975 of the Internal Revenue Code and Section 406 of ERISA.
Page 12-7
"Projected Net Operating Income" means, with respect to any Commercial Property
securing a Commercial Mortgage Loan, the following amount (determined for the 12
months following the date of the related Warehousing Advance or any other date
of determination):
PNOI = PFOR - VR - NOE,
where "PNOI" means Projected Net Operating Income, "PFOR" means the projected
amount of rent that would be paid by tenants of the Commercial Property assuming
(a) full occupancy of the Commercial Property and (b) an average rental rate
equal to the lower of the actual current average rental rate for the Commercial
Property or the current market rental rate for comparable properties, "VR" means
the projected amount of PFOR that will not be received as a result of rent
concessions with existing tenants and vacancies, assuming a vacancy rate equal
to the greater of (x) the actual current vacancy rate for the Commercial
Property, (y) the current market vacancy rate for comparable properties and (z)
a hypothetical vacancy rate of 5%, and "NOE" means the projected net operating
expenses (i.e., total expenses minus interest expense) for the Commercial
Property.
"Property" means a Multifamily Property or Health Care Facility or Commercial
Property securing a Mortgage Loan.
"Property Debt Service Coverage Ratio" means, for any Commercial Property that
secures a Commercial Mortgage Loan pledged or to be pledged under this
Agreement, the ratio of (a) the Projected Net Operating Income of the Commercial
Property to (b) projected interest expense and scheduled payments in respect of
the Commercial Mortgage Loan for the 12 months following the date of
determination.
"Purchase Commitment" means a written commitment, in form and substance
satisfactory to Lender, issued in favor of Borrower by an Investor under which
that Investor commits to purchase Mortgage Loans or Mortgage-backed Securities.
"Release Amount" has the meaning set forth in Section 4.3 (f).
"RFC Base Rate" means the greater of LIBOR or 2.25% per annum.
"Second Mortgage" means a Mortgage that constitutes a second Lien on the
property covered by the Mortgage.
"Second Mortgage Loan" means a Mortgage Loan secured by a Second Mortgage.
"Security Agreement" means a security agreement or other agreement that creates
a Lien on personal property, including furniture, fixtures and equipment, to
secure repayment of a Mortgage Loan.
"Servicing Contract" means, with respect to any Person, the arrangement, whether
or not in writing, under which that Person has the right to service Mortgage
Loans.
"Servicing Portfolio" means, as to any Person, the unpaid principal balance of
Mortgage Loans serviced by that Person under Servicing Contracts, minus the
principal balance of all Mortgage Loans that are serviced by that Person for
others under subservicing arrangements.
"Shipped Period" means the maximum number of days specified in Exhibit H during
which a Warehousing Advance may remain outstanding against a Pledged Loan that
has been sent to (a) an Investor or a custodian for an Investor for examination
and purchase under a Purchase Commitment, (b) an Approved Custodian for
examination and inclusion in an Eligible Mortgage Pool or (c) a pool custodian
for examination and inclusion in a Mortgage Pool.
Page 12-8
"Single Purpose Entity" means a corporation, limited liability company, limited
liability partnership, or limited partnership the organizational documents of
which provide that such Person (a) was formed or organized solely for the
purpose of owning or operating the Commercial Property securing a Commercial
Mortgage Loan, (b) will not engage in any business other than the ownership,
operation and financing of that Commercial Property, (c) will not own any assets
other than those related to that Commercial Property and its financing, (d) will
not incur any liabilities other than the related Commercial Mortgage Loan and
other liabilities permitted under that Commercial Mortgage Loan, (e) will
maintain its own books, records and accounts separate and apart from those of
any other Person and (f) will hold itself out as being a legal entity separate
and distinct from any other Person.
"Statement Date" means the Audited Statement Date or the Interim Statement Date,
as applicable.
"Sublimit" means the aggregate amount of Warehousing Advances (expressed as a
dollar amount or as a percentage of the Warehousing Commitment Amount) that is
permitted to be outstanding at any one time against a specific type of Eligible
Loan.
"Sublimit Note" has the meaning set forth in Section 1.3.
"Subordinated Debt" means (a) all indebtedness of Borrower for borrowed money
that is effectively subordinated in right of payment to all present and future
Obligations either (1) under a Subordination of Debt Agreement on the form
prescribed by Lender or (2) otherwise on terms acceptable to Lender, and (b)
solely for purposes of Section 8.5, all indebtedness of Borrower that is
required to be subordinated by Sections 5.1 (b) and 7.11.
"Subsidiary" means any corporation, partnership, association or other business
entity in which more than 50% of the shares of stock or other ownership
interests having voting power for the election of directors, managers, trustees
or other Persons performing similar functions is at the time owned or controlled
by any Person either directly or indirectly through one or more Subsidiaries of
that Person.
"Tangible Net Worth" means the excess of a Person's (and, if applicable, the
Person's Subsidiaries, on a consolidated basis) total assets over total
liabilities as of the date of determination, each determined in accordance with
GAAP applied in a manner consistent with the most recent audited financial
statements delivered to Lender under the Existing Agreement, plus Fannie Mae
Loan Loss Reserves and that portion of Subordinated Debt not due within 1 year
of that date. For purposes of calculating a Person's Tangible Net Worth,
advances or loans to shareholders, directors, officers, employees or Affiliates
investments in Affiliates, assets pledged to secure any liabilities not included
in the Debt of the Person, intangible assets, those other assets that would be
deemed by HUD to be non-acceptable in calculating adjusted net worth in
accordance with its requirements in effect as of that date, as those
requirements appear "Consolidated Audit Guide for Audits of HUD Programs," and
other assets Lender deems unacceptable, in its sole discretion, must be excluded
from a Person's total assets.
"Third Party Originated Loan" means a Mortgage Loan originated and funded by a
third party (other than with funds provided by Borrower at closing to purchase
the Mortgage Loan) and subsequently purchased by Borrower.
"Trust Receipt" means a trust receipt in a form approved by and under which
Lender may deliver any document relating to the Collateral to Borrower for
correction or completion.
"Underwriting Fee" has the meaning set forth in Exhibit H.
Page 12-9
"Underwriting Guidelines " means Borrower's policies and procedures for
underwriting Mortgage Loans secured by Multifamily Properties, Health Care
Facilities, Commercial Properties, Mobile Home Parks or Seniors Housing as in
effect on the date of this Agreement, a copy of which has been provided to and
approved by Lender, as the same may be modified from time to time in accordance
with this Agreement.
"Unused Portion" has the meaning set forth in Section 3.4.
"Used Portion" has the meaning set forth in Section 3.4.
"Warehouse Period" means, for any Eligible Loan, the maximum number of days a
Warehousing Advance against that type of Eligible Loan may remain outstanding as
set forth in Exhibit H.
"Warehousing Advance" means a disbursement by Lender to fund the origination or
acquisition of a Mortgage Loan.
"Warehousing Advance Request" has the meaning set forth in Section 2.1.
"Warehousing Collateral Value" means, as of any date of determination, (a) with
respect to any Eligible Loan , the lesser of (1) the amount of any Warehousing
Advance made, or that could be made, against such Eligible Loan under Exhibit H
or (2) an amount equal to the Advance Rate for the applicable type of Eligible
Loan multiplied by the Fair Market Value of such Eligible Loan ; (b) if Eligible
Loans have been exchanged for Agency Securities, the lesser of (1) the amount of
any Warehousing Advances outstanding against the Eligible Loans backing the
Agency Securities or (2) the Fair Market Value of the Agency Securities; and (c)
with respect to cash, the amount of the cash.
"Warehousing Commitment" means the obligation of Lender to make Warehousing
Advances to Borrower under Section 1.1.
"Warehousing Commitment Amount" means $100,000,000.
"Warehousing Maturity Date" has the meaning set forth in Section 1.2.
"Warehousing Note " has the meaning set forth in Section 1.3.
"Wire Disbursement Account" means a demand deposit account maintained at the
Funding Bank in Lender's name for clearing wire transfers requested by Borrower
to fund Warehousing Advances.
12.2. Other Definitional Provisions; Terms of Construction
12.2 (a) Accounting terms not otherwise defined in this Agreement have the
meanings given to those terms under GAAP.
12.2 (b) Defined terms may be used in the singular or the plural, as the context
requires.
12.2 (c) All references to time of day mean the then applicable time in Chicago,
Illinois, unless otherwise expressly provided.
12.2 (d) References to Sections, Exhibits, Schedules and like references are to
Sections, Exhibits, Schedules and the like of this Agreement unless
otherwise expressly provided.
Page 12-10
12.2 (e) The words "include," "includes" and "including" are deemed to be
followed by the phrase "without limitation."
12.2 (f) Unless the context in which it is used otherwise clearly requires, the
word "or" has the inclusive meaning represented by the phrase "and/or."
12.2 (g) All incorporations by reference of provisions from other agreements are
incorporated as if such provisions were fully set forth into this
Agreement, and include all necessary definitions and related provisions
from those other agreements. All provisions from other agreements
incorporated into this Agreement by reference survive any termination
of those other agreements until the Obligations of Borrower under this
Agreement, the Warehousing Note and the Sublimit Note are irrevocably
paid in full and the Warehousing Commitment is terminated.
12.2 (h) All references to the Uniform Commercial Code shall be deemed to be
references to the Uniform Commercial Code in effect on the date of this
Agreement in the applicable jurisdiction.
12.2 (i) Unless the context in which it is used otherwise clearly requires, all
references to days, weeks and months mean calendar days, weeks and
months.
End of Article 12
Page 12-11
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first above written.
FINANCIAL INSTITUTIONAL PARTNERS
MORTGAGE CORPORATION,
a Delaware corporation
By: /s/ Stephen H. Gordon
---------------------------
Its: Chairman/CEO
RESIDENTIAL FUNDING CORPORATION,
a Delaware Corporation
By: /s/ Richard Hay
---------------------------
Its: Director
Page 12-12