EXHIBIT 10.22
[EXECUTION COPY]
INTERIM WAREHOUSE AND
SECURITY AGREEMENT
BY AND BETWEEN
PRUDENTIAL SECURITIES CREDIT
CORPORATION,
AS LENDER
AND
WMFC 1997-2, INC.,
AS BORROWER
DATED AS OF NOVEMBER 15, 1996
INTERIM WAREHOUSE AND SECURITY AGREEMENT
INTERIM WAREHOUSE AND SECURITY AGREEMENT, dated as of November 15, 1995 (as
amended or otherwise modified from time to time, this "Agreement") among
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PRUDENTIAL SECURITIES CREDIT CORPORATION, a Delaware corporation, having an
office at ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender"), and
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WMFC 1997-2, INC., a Delaware limited liability company, having its principal
office at ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower").
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WHEREAS, Wilshire Funding Company ("NewCo"), a newly-formed Delaware
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corporation and a subsidiary of Wilshire Financial Services Group Inc. ("WFSG"),
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proposes to continue the loan origination and acquisition business previously
conducted by Wilshire Financing Company, L.L.C. ("Wilshire Financing")
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following the completion of the initial public offering and related debt
offering by WFSG (the "Effective Date"); and
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WHEREAS, the Lender wishes to cease lending to Wilshire Financing on the
Effective Date and wishes to begin lending to WMFC 1997-2, Inc., a subsidiary of
Newco, on the Effective Date;
WHEREAS, the Lender intends to lend and the Borrower intends to borrow up
to $100,000,000 (One Hundred Million dollars) to fund the purchase or
origination by the Borrower of certain fixed and adjustable rate, first lien and
second lien, residential mortgage loans; and
WHEREAS, it is intended that the amount loaned to the Borrower to fund the
purchase or origination by the Borrower of fixed and adjustable rate, second
lien, residential mortgage loans shall at no time exceed $20,000,000 (Twenty
Million dollars); and
WHEREAS, it is intended that the amount loaned to the Borrower to fund its
purchase or origination of mortgage loans under its 80/20 program shall at no
time exceed $20,000,000 (Twenty Million dollars); and
WHEREAS, the Lender's affiliate, Prudential Securities Incorporated ("PSI")
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may act as the sole or lead manager or co-manager on a mortgage-backed
securities issuance (the "First Lien Securitization") collateralized by First
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Lien Mortgage Loans (as defined below) and on a mortgage-backed securities
issuance (the "Second Lien Securitization") collateralized by Second Lien
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Mortgage Loans (as defined below), in each case on the terms and subject to the
conditions set forth in Section 1(e)(ii) below;
An index to the location of the definitions of the defined terms used
herein is set forth in Section 19 hereof.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the parties hereto hereby agree as follows:
Section 1. The Loan.
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(a) Subject to the terms of this Agreement:
(i) On and following the Effective Date, the Lender agrees to
lend to the Borrower up to the Available Amount (as defined below) in one
or more advances in respect of either (x) fixed or adjustable rate, first
lien, residential mortgage loans (such borrowing being the "First Lien
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Loan" and any advances made in respect thereof being the "First Lien
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Advances"), and/or (y) fixed or adjustable rate, second lien, residential
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mortgage loans (such borrowing being the "Second Lien Loan" and, together
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with the First Lien Loan, the "Loans"; and any advances made in respect of
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the Second Lien Loan being the "Second Lien Advances" and, together with
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the First Lien Advances, the "Advances"); provided, however, that at no
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time shall the aggregate outstanding amount of the Second Lien Loan be
greater than the Second Lien Amount (as defined below). In addition, the
Borrower agrees that at no time shall the aggregate amount of the Loans
made with respect to Mortgage Loans originated under Borrower's 80/20
program and not purchased in bulk ("Non-Bulk Mortgage Loans") be greater
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than the Non-Bulk Amount (as defined below). The Borrower agrees that the
First Lien Loan shall be used to warehouse fixed or adjustable rate, first
lien, residential mortgage loans that are to be included in the First Lien
Securitization (the "First Lien Mortgage Loans"), as such First Lien
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Mortgage Loans are identified to the Lender in writing and in electronic
form from time to time. The Borrower agrees that Second Lien Loan shall be
used to warehouse fixed or adjustable rate, second lien, residential
mortgage loans that are to be included in the Second Lien Securitization
(the "Second Lien Mortgage Loans" and, together with the First Lien
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Mortgage Loans, the "Mortgage Loans"), as such Second Lien Mortgage Loans
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are identified to the Lender in writing and in electronic form from time to
time. All Mortgage Loans fmanced hereunder shall be closed loans; i.e.,
this facility shall not be used for "wet" or "table" fundings. The Lender
may refuse to lend against any Mortgage Loans which the Lender in its sole
discretion believes will not be eligible for inclusion in any securitized
pool. "Available Amount" means, at any time, $100,000,000 (One Hundred
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Million dollars) less the principal amount of mortgage loans outstanding
under the Interim Warehouse and Security Agreement between Wilshire
Financing Company, L.L.C. (formerly Wilshire Funding Company, L.L.C.) and
the Lender (the "Prior Agreement"). "Second Lien Amount" means, at any
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time, $20,000,000 (Twenty Million dollars) less the principal amount of
second lien mortgage loans outstanding under the Prior Agreement. "Non-
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Bulk Amount" means, at any time, $20,000,000 (Twenty Million dollars) less
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the principal amount of non-bulk mortgage loans outstanding under the Prior
Agreement.
(ii) Each Advance shall be made on or following the Effective
Date and on a date prior to the Maturity Date referred to below (each such
date, a "Funding Date"); provided that:
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(A) the conditions precedent to the making of Advances set
forth in Section 2 hereof shall have been satisfied, and the
representations and warranties
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of the Borrower in Section 4 hereof shall be true and correct on and
as of such Funding Date as if made on and as of such date;
(B) no Event of Default shall have occurred and be continuing
or would exist after the making of the Advance on such Funding Date;
(C) the Lender shall have received (x) in connection with
each Advance, a certificate from the Custodian referred to below to
the effect that it has reviewed the mortgage files relating to the
Mortgage Loans being pledged in connection with the Advance being made
on such Funding Date and has found no material deficiencies in such
mortgage files (the "Custodian's Certification"), and (y) prior to the
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initial Advance, a legal opinion from counsel (which may be in-house
counsel) to the Borrower in the form of Exhibit B attached hereto;
(D) following such Advance the Mortgage Loans (other than the
Non-Bulk Mortgage Loans) financed under this Agreement shall have (i)
a weighted average coupon of at least 10.00%; (ii) a weighted average
margin of at least 4.00% if it is a Mortgage Loan with an adjustable
interest rate; (iii) a weighted average original loan-to-value ratio
not to exceed 80% for First Lien Mortgage Loans, and the original
loan-to-value ratio for each individual First Lien Mortgage Loan not
to exceed 100% and the original loan-to-value ratio for each
individual Second Lien Mortgage Loan, when combined with the related
first lien mortgage loan, not to exceed 100%; (iv) a weighted average
remaining balance not to exceed $125,000; (v) no original term to
maturity to exceed 360 months; and (vii) a payment history, when
available, no worse than that of the B-rated first-lien borrowers
contemplated under the Borrower's 80/20 Program.
(E) the Borrower shall have delivered or caused to be
delivered to the Custodian all documents required to be delivered
pursuant to Section 2 of the Custodial Agreement with respect to the
Mortgage Loans being pledged on such Funding Date; and
(F) to the extent described in Section 5(c) hereof, no notice
described in said Section 5(c) shall have been received by PSI.
(iii) The Loan shall accrue interest daily (from and including
the date of disbursement to and excluding the date of payment) on its
outstanding principal amount, with interest calculated for the actual
number of days elapsed, based on a 365-day year. The interest rate shall
be (except as otherwise provided in Section 1(e) and Section 11(d) hereof)
LIBOR plus 1.50% per annum, and shall be reset on each business day.
Interest which accrues during each calendar month shall be payable on the
5th business day of the following month, with any outstanding interest due
and payable in its entirety on the date of termination of this warehouse
facility (including the Maturity Date).
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"LIBOR" shall mean, the London interbank offered rate for one-month
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U.S. dollar deposits, as set forth in the most recently-published edition
of The Wall Street Journal.
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Any amounts pre-paid under this Agreement prior to the Maturity Date
may be re-borrowed, subject to the terms and conditions of this Agreement,
until the Maturity Date.
(b) The amount of each Advance in respect of Non-Bulk Mortgage Loans
shall not exceed the lesser of:
(i) 100% of the aggregate outstanding principal balance of the
Mortgage Loans (calculated as of the related Cut-Off Date or, if the
Borrower is using the proceeds of the Advance to purchase the related
Mortgage Loans at their aggregate outstanding principal balance as of the
settlement date for the purchase, then their aggregate outstanding
principal balance as of such settlement date) proposed to be pledged to the
Lender in connection with such Advance, minus, in the event that a
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Collateral Deficiency Situation exists as of the date of such Advance, the
Restoration Amount as of the date of such Advance; and
(ii) the product of (x) the Market Value of the Mortgage Loans
proposed to be pledged to the Lender in connection with such Advance and
(y) 95%, in the case of First Lien Advances, and 85%, in the case of Second
Lien Advances, minus, in the event that a Collateral Deficiency Situation
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exists as of the date of such Advance, the Restoration Amount as of the
date of such Advance.
For purposes of this Agreement:
A Collateral Deficiency Situation shall be deemed to be existing as of
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any day on which either: (i) the outstanding principal amount of the Loans
made in respect of Non-Bulk Mortgage Loans as of such day exceeds the
product of (I) the Market Value of the Pledged Mortgage Loans that are Non-
Bulk Mortgage Loans (disregarding the Market Value of any Mortgage Loans
proposed to be pledged to the Lender on such day) and (II) the Collateral
Percentage, in the case of First Lien Mortgage Loans, and 86%, in the case
of Second Lien Mortgage Loans; or (ii) the outstanding principal amount of
the Loans made in respect of Mortgage Loans that are not Non-Bulk Mortgage
Loans as of such day exceeds the product of (x) the lesser of (I) the
Market Value of the Pledged Mortgage Loans that are not Non-Bulk Mortgage
Loans (disregarding the Market Value of any Mortgage Loans proposed to be
pledged to the Lender on such day), or (II) the aggregate outstanding
principal balance of the Pledged Mortgage Loans that are not Non-Bulk
Mortgage Loans (disregarding the outstanding principal balance of any
Mortgage Loans proposed to be pledged to the Lender on such day), or (III)
the Cost of any Pledged Mortgage Loans that are not Non-Bulk Mortgage Loans
(disregarding the Cost of any Mortgage Loans proposed to be pledged to the
Lender on such day), and (y) the Collateral Percentage, in the case of
First Lien Mortgage Loans, and 86%, in the case of Second Lien Mortgage
Loans. "Collateral Percentage" means 96% so long as none of the First Lien
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Mortgage Loans are more than 31 days delinquent and 95.5 % if any of the
First
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Lien Mortgage Loans are more than 31 days delinquent. "Cost" means, with
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respect to any Mortgage Loan, the aggregate cost to the Borrower of such
Mortgage Loan, as determined by the Borrower, based on evidence reasonably
satisfactory to the Lender.
Cut-Off Date means, as of any date, the close of business on the date
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set forth in the related Mortgage Loan Schedule (as defined in the
Custodial Agreement). In no event shall the Cut-Off Date precede by more
than two weeks the date on which the related Mortgage Loan Schedule is
delivered.
Market Value means, as of any date and with respect to any Mortgage
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Loans, the whole-loan servicing-retained fair market value of such Mortgage
Loans as of such date as determined by the Lender (or an affiliate thereof)
in its sole discretion and in good faith, together with the aggregate
principal amount of principal payments and prepayments on deposit in the
Collection Account maintained by the Custodian in respect of the Mortgage
Loans.
Maturity Date, means, the earlier of (i) June 30, 1997 and (ii) the
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date on which both the First Lien Securitization and the Second Lien
Securitization have occurred. The Maturity Date may be extended by Lender,
in Lender's sole and unreviewable discretion, on any date by the execution
and delivery of a Credit Increase Confirmation and Note Amendment in the
form of Exhibit C hereto. The Lender will give the Borrower 10 Business
Days prior written notice if it determines not to extend the Maturity Date
or renew this facility.
Pledged Mortgage Loans means, as of any date of determination, any
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mortgage loans then held by the Custodian on behalf of the Lender to secure
the Loans.
Restoration Amount means, as of any date of determination, either (A)
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with respect to Loans made in respect of Non-Bulk Mortgage Loans, the
amount, if any, by which (x) the outstanding principal amount of the Loans
made in respect of Non-Bulk Mortgage Loans as of such date exceeds (y) the
lesser of (i) the product of (I) the Market Value of the Pledged Mortgage
Loans that are Non-Bulk Mortgage Loans (disregarding the Market Value of
any Mortgage Loans proposed to be pledged to the Lender on such date) and
(II) 95%, in the case of First Lien Mortgage Loans, and 85%, in the case of
Second Lien Mortgage Loans, and (ii) the outstanding principal balance of
the Pledged Mortgage Loans that are Non-Bulk Mortgage Loans (disregarding
the outstanding principal balance of any Mortgage Loans to be pledged to
the Lender on such date); or (B) with respect to Loans made in respect of
Mortgage Loans that are not Non-Bulk Mortgage Loans, the amount, if any, by
which the outstanding principal amount of the Loans made in respect of
Mortgage Loans that are not Non-Bulk Mortgage Loans as of such date exceeds
the product of (x) the lesser of (i) the Market Value of the Pledged
Mortgage Loans that are not Non-Bulk Mortgage Loans (disregarding the
Market Value of any Mortgage Loans proposed to be pledged to the Lender on
such date), or (ii) the outstanding principal amount of the Pledged Loans
that are not Non-Bulk Mortgage Loans (disregarding the outstanding
principal amount of any Mortgage Loans proposed to be pledged to the
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Lender on such date), or (iii) the Cost of the Pledged Loans that are not
Non-Bulk Mortgage Loans (disregarding the Cost of any Mortgage Loans
proposed to be pledged to the Lender on such date), and (y) 95%, in the
case of First Lien Mortgage Loans, and 85%, in the case of Second Lien
Mortgage Loans.
(c) The Loans evidenced hereby shall mature on the Maturity Date and
all amounts outstanding hereunder shall be due and payable on the Maturity Date.
(d) The Loans are pre-payable at any time without premium or penalty,
in whole or in part, and an equal aggregate principal amount of Pledged Mortgage
Loans may be removed from this facility in connection with any such prepayment
of the Loan in part; provided, that Pledged Mortgage Loans removed from this
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facility in connection with any prepayment of the Loans in part will not result
(based on rating agency criteria or standards) in the remaining Pledged Mortgage
Loans being, in the aggregate, materially inferior as collateral as compared to
the pool of Pledged Mortgage Loans immediately prior to such removal. In
addition, no Pledged Mortgage Loans may be removed from this facility with the
result that a Collateral Deficiency Situation would then exist. Notwithstanding
the foregoing, however, a Pledged Mortgage Loan, may in any event be removed
from this facility if such Pledged Mortgage Loan has been paid in full by the
mortgagor. If the Borrower intends to prepay the Loan in whole or in
substantial part from a source other than the proceeds of the Securitization,
the Borrower shall give two business days' written notice to the Lender.
(e) (i) If the Loan is not extended by means of a Credit Increase
Confirmation and Note Amendment, the Loan shall immediately and automatically
become due and payable without any further action by the Lender on the then
scheduled Maturity Date, and in the event of non-payment in full on such
Maturity Date the Lender may exercise all rights and remedies available to it as
the holder of a first perfected security interest under the Uniform Commercial
Code of the State of New York (the "New York UCC").
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(ii) So long as there are Loans outstanding under this Agreement, the
parties hereby acknowledge and agree that PSI will be invited to participate in
any issuance by the Borrower (or any special purpose entity created by the
Borrower) of mortgage-backed securities which are collateralized by Mortgage
Loans financed under this Program or by fixed or adjustable rate, first or
second lien, residential mortgage loans which were not financed under this
Program in each case on the following terms and conditions:
(1) in the event that any such mortgage-backed securities
issuance is not collateralized by any Mortgage Loans financed under
this Program, PSI will be invited to participate as a co-manager in
such mortgage-backed securities issuance and its allocation will be
determined by the lead manager (book runner);
(2) in the event that any such mortgage-backed securities
issuance is in part collateralized by Mortgage Loans financed under
this Program but such Mortgage Loans are less than a majority of all
mortgage loans collateralizing such mortgage-backed securities (based
on outstanding principal balances at the cut-off
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date), PSI will be invited to participate as a co-manager in such
mortgage-backed securities issuance and PSI will be entitled to
receive an allocation of securities being offered by underwriters,
i.e. excluding residual securities (the "Offered Securities"), in a
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principal amount at least equal to the Specified Percentage (as
defined below) of the aggregate principal amount of the Offered
Securities; provided, that the price quoted by PSI for such Offered
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Securities (i.e., interest rate and issue price) will be at least
equal to the pricing set by the lead manager; and
(3) in the event that any such mortgage-backed securities
issuance is in part collateralized by Mortgage Loans financed under
this Program and such Mortgage Loans constitute a majority of all
mortgage loans collateralizing such mortgage-backed securities (based
on outstanding principal balances at the cut-off date), PSI will be
invited to act as lead manager (and book runner) in such mortgage-
backed securities issuance; provided, that PSI will be obligated to
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provide a minimum allocation of Offered Securities to any Specified
Underwriter in a principal amount at least equal to the Specified
Percentage (as defined below) of the aggregate principal amount of the
Offered Securities; provided, that the price quoted by such Specified
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Underwriter for such Offered Securities (i.e., interest rate and issue
price) will be at least equal to the pricing set by PSI.
For purposes of this agreement, "Specified Percentage" means the percentage
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determined by (i) in the case of PSI when not acting as lead manager, dividing
the aggregate principal amount of Mortgage Loans financed under the Program and
included in such mortgage-backed issuance by the aggregate principal amount of
all mortgage loans collateralizing such mortgage-backed securities (based on
outstanding principal balances at the cut-off date) and (ii) in the case of any
Specified Underwriter, dividing the aggregate principal amount of mortgage loans
financed under such Specified Underwriter's or one of its affiliate's warehouse
lending facility and included in such mortgage-backed issuance by the aggregate
principal amount of all mortgage loans collateralizing such mortgage-backed
securities (based on outstanding principal balances at the cut-off date). For
purposes of this agreement, "Specified Underwriter" means any underwriter
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designated by the Borrower with respect to which the Borrower or its parent has
a similar warehousing and underwriting arrangement as the one between the Lender
and PSI described in this Section.
(iii) In the event that the Borrower does not invite PSI to
participate in any issuance by the Borrower or any special purpose entity
created by the Borrower of mortgage-backed securities in the circumstances set
forth in Section 1(e)(ii) above or any Whole Loan Trade, then the interest rate
on the Loans shall increase to LIBOR plus 3.50% per annum, which higher rate
shall respectively be applied as of the related Funding Date for all prior
Advances or Pledged Mortgage Loans so involved. "Whole Loan Trade" shall mean
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any whole loan trade involving the Pledged Mortgage Loans, other than a whole
loan trade instituted by the Borrower due to the termination of this facility by
the Lender prior to maturity as a result of an Event of Default (other than an
Event of Default under Section 10(a) below).
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(f) The First Lien Loan shall be evidenced by the secured promissory
note of the Borrower in the form attached hereto as Exhibit A-1 (the "First Lien
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Secured Note") and the Second Lien Loan shall be evidenced by the secured
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promissory note of the Borrower in the form attached hereto as Exhibit A-2 (the
"Second Lien Secured Note" and, together with the First Lien Secured Note, the
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"Secured Notes").
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(g) In the event that the Loan is extended beyond its then scheduled
Maturity Date by means of a Credit Increase Confirmation and Note Amendment, the
factors set forth in the definitions of "Collateral Deficiency Situation" and
"Restoration Amount" may be revised downward by the Lender in its sole
discretion.
(h) The Lender shall not make Advances in amounts less than $250,000 (Two
Hundred Fifty Thousand dollars). The amount of each Advance in respect of
Mortgage Loans (other than Non-Bulk Mortgage Loans) shall not exceed the lesser
of:
(A) The product of (x) the aggregate outstanding principal balance of
such Mortgage Loans (calculated as of the related Cut-Off Date or, if the
Borrower is using the proceeds of the Advance to purchase the related
Mortgage Loans at their aggregate outstanding principal balance as of the
settlement date for the purchase, then their aggregate outstanding
principal balance as of such settlement date) proposed to be pledged to the
Lender in connection with such Advance and (y) 95%, in the case of First
Lien Advances, and 85%, in the case of Second Lien Advances, minus, in the
event that a Collateral Deficiency Situation exists with respect to
Mortgage Loans that are not Non-Bulk Mortgage Loans as of the date of such
Advance, the Restoration Amount as of the date of such Advance; and
(B) the product of (x) the Market Value of the Mortgage Loans proposed
to be pledged to the Lender in connection with such Advance and (y) 95%, in
the case of First Lien Advances, and 85%, in the case of Second Lien
Advances, minus, in the event that a Collateral Deficiency Situation exists
with respect to Mortgage Loans that are not Non-Bulk Mortgage Loans as of
the date of such Advance, the Restoration Amount as of the date of such
Advance; and
(C) the product of (x) the Cost of the Mortgage Loans proposed to be
pledged to the Lender in connection with such Advance and (y) 95%, in the
case of First Lien Advances, and 85%, in the case of Second Lien Advances,
minus, in the event that a Collateral Deficiency Situation exists with
respect to Mortgage Loans that are not Non-Bulk Mortgage Loans as of the
date of such Advance, the Restoration Amount as of the date of such
Advance.
Section 2. Additional Conditions Precedent; Required Characteristics;
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and Correspondents.
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(a) Not later than two business days prior to the proposed Funding
Date for an Advance, the Borrower shall deliver to the Lender (i) a written
notice in the form of Exhibit D
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hereto and (ii) an electronic disk or tape, in a mutually satisfactory form to
be agreed upon detailing certain specified characteristics of the Mortgage Loans
proposed to be pledged in connection with such Advance (each such schedule, a
"Mortgage Loan Schedule"). Mortgage Loan Schedules containing the information
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set forth in Exhibit F are considered to be in satisfactory form.
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(b) It is the Lender's understanding that the Borrower's current
business strategy (the "Program") is to operate as a "conduit" for the
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securitization of first and second lien, conforming and non-performing credit
mortgage loans which the Borrower will purchase from others.
In connection with the Program, the Borrower agrees as follows:
(i) the Borrower shall supply to the Lender and/or its
counsel copies of all purchase agreements ("Purchase Agreements") (or,
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if such agreements have not been finalized, the latest drafts of such
agreements), together with copies of all underwriting guidelines
applicable to any Mortgage Loans proposed to be financed hereunder,
not later than the second business day prior to the proposed Funding
Date (it being understood that if the same agreements and guidelines
apply to multiple Funding Dates they only need to be furnished once);
(ii) the Lender may in its sole reasonable discretion reject
for financing hereunder any Mortgage Loans based upon the identity of
the entity selling such Mortgage Loans to the Borrower (each such
entity, a "Correspondent"), or, if the originator of such Mortgage
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Loans is not the Correspondent, upon the identity of such originator,
provided, that, in furtherance of the foregoing the Borrower and the
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Lender agree to communicate with reasonable frequency concerning the
Borrower's pipeline and upcoming trades;
(iii) the Borrower hereby assigns to the Lender, as
collateral security for the Loans, all of the Borrower's right, title
and interest in and to each Purchase Agreement and the Custodial
Agreement (collectively, the "Program Agreements"); and
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(iv) notwithstanding the collateral assignment granted in
clause (iii) above, the Borrower agrees and covenants with the Lender
(x) to enforce diligently the Borrower's rights and remedies set forth
in the Program Agreements and (y) to provide the Lender with prompt
written notice of any default or event which, with the passage of
time, will become a default, by any party to any Program Agreement and
of which the Borrower is aware.
(c) The Borrower shall reimburse the Lender for any of the Lender's
reasonable out-of-pocket costs, including due diligence review costs and
reasonable attorney's fees, incurred by the Lender in determining the
acceptability to the Lender of (x) any Mortgage
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Loans, (y) any Program Agreement or (z) the identity of any Correspondent,
originator or servicer.
Section 3. Mortgage Files and Custodian. The Borrower shall deliver
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to Bankers Trust Company of California, N.A. as custodian (the "Custodian") on
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behalf of the Lender, the documents and instruments listed in Section 2 of that
certain Custodial Agreement dated as of November 15, 1996 (the "Custodial
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Agreement") among the Borrower, Wilshire Funding Corporation and the Custodian.
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Such documents and instruments evidencing and relating to the Mortgage Loans,
together with any proceeds thereof, and together with the Borrower's right,
title and interest in and to the Program Agreements with respect to Pledged
Mortgage Loans are hereinafter referred to as the "Collateral". The Borrower
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hereby pledges all of its right, title and interest in and to the Collateral to
the Lender to secure the repayment of principal of and interest on the Loans and
all other amounts owing by the Borrower to the Lender hereunder (collectively,
the "Secured Obligations").
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Section 4. Representations, Warranties and Covenants. (a) The
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Borrower represents and warrants to the Lender that:
(i) It has been duly organized and is validly existing as a
limited liability company in good standing under the laws of the State of
Delaware.
(ii) It or Wilshire Credit Corporation, as applicable, is duly
licensed as a "Licensee" or is otherwise qualified in each state in which
it or such affiliate transacts business and is not in default of such
state's applicable laws, rules and regulations. It has the requisite power
and authority and legal right to own and ▇▇▇▇▇ ▇ ▇▇▇▇ on all of its right,
title and interest in and to the Collateral, and to execute and deliver,
engage in the transactions contemplated by, and perform and observe the
terms and conditions of, this Agreement, each Program Agreement, and the
Secured Notes.
(iii) At all times after the Custodian has received a Mortgage
Loan from the Borrower and until payment in full of the Loan, the Borrower
will not knowingly and intentionally commit any act in violation of
applicable laws or regulations promulgated with respect thereto.
(iv) Each of the Borrower and the guarantor under the attached
Guarantee (the "Guarantor") is solvent and is not in default under any
mortgage, borrowing agreement or other instrument or agreement pertaining
to indebtedness for borrowed money, and the execution, delivery and
performance by the Borrower of this Agreement, the Secured Notes and the
Program Agreements do not conflict with any term or provision of the
certificate of formation or operating agreement of the Borrower or any law,
rule, regulation, order, judgment, writ, injunction or decree applicable to
the Borrower of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Borrower and will not result
in any violation of any such mortgage, instrument or agreement.
-10-
(v) All financial statements or certificates of the Borrower or
the Guarantor furnished to the Lender are true and complete and do not omit
to disclose any material liabilities or other facts relevant to the
Borrower's or such Guarantor's condition. All such financial statements
have been prepared in accordance with GAAP. No financial statement or
other financial information as of a date later than that supplied to the
Lender, has been furnished by the Borrower or the Guarantor to another
lender of the Borrower or the Guarantor that has not been furnished to the
Lender.
(vi) Except for those held by its affiliate, Wilshire Credit
Corporation, no consent, approval, authorization or order of, registration
or filing with, or notice to any governmental authority or court is
required under applicable law in connection with the execution, delivery
and performance by the Borrower of this Agreement, the Secured Notes and
the Program Agreements.
(vii) There is no action, proceeding or investigation pending
with respect to which the Borrower has received service of process or, to
the best of the Borrower's knowledge threatened against it before any
court, administrative agency or other tribunal (A) asserting the invalidity
of this Agreement, the Secured Notes or any Program Agreement, (B) seeking
to prevent the consummation of any of the transactions contemplated by this
Agreement, the Secured Notes or any Program Agreement, or (C) which might
materially and adversely affect the validity of the Mortgage Loans or the
performance by it of its obligations under, or the validity or
enforceability of, this Agreement, the Secured Notes or any Program
Agreement.
(viii) There has been no material adverse change in the
business, operations, financial condition, properties or prospects of the
Borrower or the Guarantor since the date set forth in the financial
statements supplied to the Lender.
(ix) This Agreement, the Secured Notes and the Program Agreements
have been (or, in the case of Program Agreements not yet executed, will be)
duly authorized, executed and delivered by the Borrower, all requisite
corporate action having been taken, and each is valid, binding and
enforceable against the Borrower in accordance with its terms except as
such enforcement may be affected by bankruptcy, by other insolvency laws,
or by general principles of equity.
(b) With respect to every Mortgage Loan pledged to the Lender, the
Borrower represents and warrants to the Lender that:
(i) Such Mortgage Loan and all documents listed in Section 2 of
the Custodial Agreement are complete and authentic and all signatures
thereon are genuine.
(ii) Such Mortgage Loan arose from a bona fide loan, complying
with all applicable State and Federal laws and regulations, to persons
having legal capacity to contract and is not subject to any defense, set
off or counterclaim.
-11-
(iii) Except for payment defaults permitted by clause 8 below,
no default has occurred in any provisions of such Mortgage Loan.
(iv) To the best of the Borrower's knowledge, any property
subject to any security interest given in connection with such Mortgage
Loan is not subject to any other encumbrances other than in the case of
Second Lien Mortgages, the security interest of the party having the first
mortgage lien on such property.
(v) The Borrower pledging such Mortgage Loan hereunder holds good
and indefeasible title to, and is the sole owner of, such Mortgage Loan
subject to no liens, charges, mortgages, participations, encumbrances or
rights of others or other liens released simultaneously with such pledge.
(vi) Each Mortgage Loan conforms to the description thereof as
set forth on the related Mortgage Loan Schedule delivered to the Custodian
and the Lender.
(vii) All disclosures required by the Real Estate Settlement
Procedures Act, by Regulation X promulgated thereunder and by Regulation Z
of the Board of Governors of the Federal Reserve System promulgated
pursuant to the statute commonly known as the Truth-in-Lending Act and the
Notice of the Right of Rescission required by said statute and regulation
have been properly made and given.
(viii) Such Mortgage Loan is not 31 or more days delinquent as
of the last payment due date for such Mortgage Loan; except that in the
aggregate up to 1% of the First Lien Mortgage Loans hereunder may be not 61
or more days delinquent as of the last payment due date for such First Lien
Mortgage Loans.
(ix) Such Mortgage Loan was originated in accordance with the
underwriting guidelines set forth in the Wilshire Mortgage Corporation
Seller Guide as of the date of origination and referred to in the Purchase
Agreements.
(x) Each representation and warranty made by the related
Correspondent in the related Purchase Agreement was true and correct as of
its date.
(c) The Borrower covenants with the Lender that during the term of
this facility (i) the Guarantor will continue to maintain, for it and its
affiliates, insurance coverage with respect to employee dishonesty, forgery or
alteration, theft, disappearance and destruction, robbery and safe burglary,
property (other than money and securities) and computer fraud in an amount which
is consistent with industry practice, (ii) the Borrower will establish and
maintain a lock-box account with Bank of America (Oregon) for the benefit of the
Custodian under the Custodial Agreement into which the obligors on the Pledged
Mortgage Loans will be instructed to remit their payments and the Borrower will
remit, or cause to be remitted, from such account no later than the first
Business Day after the Business Day on which payments on the Mortgage Loans are
received and identified by the Servicer, all principal payments and such portion
of the interest payments on such Mortgage Loans in an amount sufficient to make
the monthly payments
-12-
of interest required by Section 1(a)(iii) hereunder, and (iii) the Borrower and
the Guarantor will, at the request of the Lender, employ a third party contract
underwriter to reunderwrite up to 20% of the Mortgage Loans financed under this
Program during any month; provided, that (x) such third party contract
--------
underwriter shall initially be ▇▇▇▇▇ & Associates and any successor thereto
appointed by the Borrower shall be a third party contract underwriter acceptable
to any credit rating agency or monoline insurance company, (y) the cost of such
third party contract underwriter's services shall be for the account of the
Borrower and shall not exceed $5,000 in any month, and (z) any such
reunderwriting shall be done during regular business hours with reasonable
frequency and in such a manner as to be the least disruptive as possible to the
Borrower and the Guarantor.
Section 5. Mandatory Payment of Loan.
---------- -------------------------
(a) Upon discovery by the Borrower or the Lender of any breach of any
of the representations and warranties listed in Section 4(b) preceding, the
party discovering such breach shall promptly give notice of such discovery to
the others.
The Lender has the right to require, in its unreviewable discretion,
the Borrower to repay the Loans in part with respect to any Mortgage Loan (i)
which breaches one or more of the representations and warranties listed in
Section 4(b) preceding or (ii) which is determined by a rating agency or a party
providing credit enhancement to be unacceptable for inclusion in the First Lien
Securitization or the Second Lien Securitization, as the case may be.
(b) If 1% of the First Lien Mortgage Loans hereunder are 31 or more
days delinquent as of the last payment due date for such First Lien Mortgage
Loans, the Lender may require the Borrower to prepay the First Lien Loan in part
with respect to any First Lien Mortgage Loan which becomes 31 or more days
delinquent as indicated on any Supplemental Mortgage Loan Schedule delivered
pursuant to Section 9(a) hereof, or, with the Lender's consent, deliver a
qualifying substitute mortgage loan in its place. The Lender may require the
Borrower to prepay the First Lien Loan in part with respect to any First Lien
Mortgage Loan which becomes 61 or more days delinquent as indicated on any
Supplemental Mortgage Loan Schedule delivered pursuant to Section 9(a) hereof,
or, with the Lender's consent, deliver a qualifying substitute mortgage loan in
its place. The Lender may require the Borrower to prepay the Second Lien Loan
in part with respect to any Second Lien Mortgage Loan which becomes 31 or more
days delinquent as indicated on any Supplemental Mortgage Loan Schedule
delivered pursuant to Section 9(a) hereof, or, with the Lender's consent,
deliver a qualifying substitute mortgage loan in its place.
(c) If the Borrower awards a securitization or any Whole Loan Trade
involving any Pledged Mortgage Loans to an investment banking house, agent or
underwriter other than as agreed or permitted in Section 1(e)(ii) then (x) the
Lender may demand that the Borrower prepay any portion of the Loans evidenced
hereby relating to the dollar amount of the Mortgage Loans to be included in
such securitization or Whole Loan Trade for payment within five business days of
the demand for prepayment, (y) the Lender may refuse to make further Advances
hereunder if such Advances would relate to Mortgage Loans to be included in such
-13-
securitization or Whole Loan Trade in which PSI has not been selected for
participation and (z) the interest rate on the Loan shall increase as set forth
in Section 1(e)(iii) hereof. The Borrower shall give immediate notice, by
facsimile transmission, to the attention of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ at the Lender,
and to ▇▇▇▇ ▇▇▇▇▇▇▇ at PSI (fax ▇▇▇-▇▇▇▇▇▇▇) of any decision to award the lead
manager role or to name any group of managers for any Securitization or whole-
loan trade involving any Pledged Mortgage Loans.
(d) If, on any date other than a Funding Date, the Lender determines
that a Collateral Deficiency Situation exists, the Lender shall so notify the
Borrower, and the Borrower, within two business days, shall either (i) pay to
the Lender the Restoration Amount or (ii) deliver to the Custodian on behalf of
the Lender additional Mortgage Loans having an aggregate Market Value at least
equal to the Restoration Amount. The provisions of Section 1(b) shall govern
with regard to a Collateral Deficiency Situation as of a Funding Date.
Section 6. Release of Mortgage Files Following Payment. The Lender
---------- -------------------------------------------
agrees to release its lien hereunder and to cause to be released the documents
described in Section 2 of the Custodial Agreement upon payment in full of the
Loans, or, if a partial payment of the Loans occurs, the liens and documents
relating to the Pledged Mortgage Loans in respect of which such partial
prepayment was made.
Section 7. Servicing. Wilshire Credit Corporation or a subsidiary of
---------- ---------
WFSG shall act as servicer of the Mortgage Loans and shall service the Mortgage
Loans in the same manner and subject to the same standards as set forth in the
Wilshire Mortgage Corporation Loan Servicing Procedures Manual or comparable
procedures manual of such subsidiary of WFSG.
Section 8. Modifications; Successors and Assigns. No provisions of
---------- -------------------------------------
this Agreement shall be waived or modified except by a writing duly signed by
the authorized agents of the Lender and the Borrower. This Agreement shall be
binding upon the successors and assigns of the parties hereto and the parties
may assign their rights and obligations under this Agreement; provided that the
--------
Borrower will not be required to deal with a lender other than the Lender.
Section 9. Reports. (a) The Borrower shall provide the Lender with
---------- -------
an electronic disk or tape (each, a "Supplemental Mortgage Loan Schedule")
-----------------------------------
within two business days following any reasonable request made by the Lender or
any affiliate thereof for such a report, but in any event at least once a month
on the 8th day of such month. Such Supplemental Mortgage Loan Schedule will
contain information concerning all Mortgage Loans then held in the warehouse
facility, and shall be in the format as may be agreed upon by the Borrower and
the Lender from time to time.
(b) The Borrower shall furnish to Lender (x) promptly, copies of any
material and adverse notices (including, without limitation, notices of
defaults, breaches, potential defaults or potential breaches) given to or
received from its other lenders, (y) immediately, notice of the occurrence of
any "Event of Default" hereunder or of any situation which the Borrower, with
the
-14-
passage of time or notice or both, would become an "Event of Default" hereunder
and (z) the following:
(i) audited financial statements of WFSG within 120 days of
its fiscal year end;
(ii) unaudited financial statements of WFSG for each of its
first three quarters of each fiscal year, within 45 days after quarter
end; and
(iii) unaudited financial statements of the Borrower for
each quarter within 45 days after quarter end.
All required financial statements, information and reports shall be
prepared in accordance with U.S. GAAP.
Section 10. Events of Default. Each of the following shall
----------- -----------------
constitute an "Event of Default" hereunder:
(a) Failure of the Borrower to (i) make any payment of interest or
principal or any other sum which has become due, whether by acceleration or
otherwise, under the terms of the Secured Notes, this Agreement, or (ii) pay or
deliver any Restoration Amount following the expiration of the grace period set
forth in Section 5(d).
(b) Any "event of default" by the Borrower or the Guarantor under any
agreement relating to any indebtedness of the Borrower or the Guarantor or any
warehouse and security agreement or any other document evidencing or securing
indebtedness of the Borrower to the Lender or to any affiliate of the Lender or
any other lender which results in the acceleration of such indebtedness in an
amount in excess of $100,000.
(c) Assignment or attempted assignment by the Borrower of this
Agreement or any rights hereunder, without first obtaining the written consent
of Lender, or the granting by the Borrower of any security interest, lien or
other encumbrance on any Collateral hereunder to any other person other than the
Lender or the holder of a second lien position in respect of such Collateral.
(d) The filing by the Borrower or the Guarantor of a petition for
liquidation, reorganization, arrangement or adjudication as a bankrupt or
similar relief under the bankruptcy, insolvency or similar laws of the United
States or any state or territory thereof or of any foreign jurisdiction; the
failure of the Borrower or the Guarantor to secure dismissal of any such
petition filed against it within forty-five (45) days of receiving notice of
such filing; the making of any general assignment by the Borrower or the
Guarantor for the benefit of creditors; the appointment of a receiver or trustee
for the Borrower or the Guarantor, or for any part of the Borrower's or the
Guarantor's assets; the institution by the Borrower or the Guarantor of any
other type of insolvency proceeding (under the Bankruptcy Code or otherwise) or
of any formal or informal proceeding, for the dissolution or liquidation of,
settlement of claims against, or winding up of
-15-
the affairs of, the Borrower or the Guarantor; the institution of any such
proceeding against the Borrower or the Guarantor if the Borrower or the
Guarantor shall fail to secure a stay or dismissal thereof within forty-five
(45) days thereafter; the lifting of any such stay if the Borrower or the
Guarantor shall fail to secure a dismissal of such proceeding within forty-five
(45) days of the date such proceeding was originally instituted; the consent by
the Borrower or the Guarantor to any type of insolvency proceeding against the
Borrower or the Guarantor (under the Bankruptcy Code or otherwise).
(e) Any materially adverse change in the financial condition of the
Borrower or of the Guarantor or the occurrence of any other condition which in
the Lender's sole discretion impairs the Borrower's ability to perform its
obligations under this Agreement or the Borrower's obligations under the Secured
Notes or the Guarantor's obligations under the Guarantee and which condition is
not remedied within ten (10) days after written notice to the Borrower or the
Guarantor thereof or, if the conditions cannot be fully remedied within said ten
(10) days, substantial progress has not been made within said ten (10) days
toward remedy of the condition.
(f) Wilshire Credit Corporation or a subsidiary of WFSG ceases to be
the servicer of the Mortgage Loans and no replacement servicer reasonably
acceptable to the Lender is found within 30 days of such termination.
(g) A breach by the Borrower of any representation, warranty or
covenant set forth in Section 4, Section 7 or Section 9 hereof or a use by the
Borrower of the proceeds of the Loans for a purpose other than as set forth in
Section 1(a) hereof.
Section 11. Remedies Upon Default. (a) Upon the happening of one or
----------- ---------------------
more Events of Default, the Lender may (x) refuse to make further Advances
hereunder and (y) immediately declare the principal of the Secured Notes then
outstanding to be immediately due and payable, together with all interest
thereon and fees and expenses accruing under this Agreement; provided that, upon
--------
the occurrence of the Event of Default referred to in Section 10(d), such
amounts shall immediately and automatically become due and payable without any
further action by any person or entity. Upon such declaration or such automatic
acceleration, the balance then outstanding on the Secured Notes shall become
immediately due and payable without presentation, demand or further notice of
any kind to the Borrower.
(b) Upon the happening of one or more Events of Default, the Lender
shall have the right to obtain physical possession, and to commence an action to
obtain physical possession, of all files of the Borrower relating to the
Collateral and all documents relating to the Collateral which are then or may
thereafter come into the possession of the Borrower or any third party acting
for the Borrower. The Lender shall be entitled to specific performance of all
agreements of the Borrower contained in this Agreement. The Borrower and the
Lender hereby acknowledge that the Lender's right to obtain physical possession
of the Collateral is deemed for all purposes to be equivalent to the rights of
"seizure of property or maintenance or continuation of perfection of an interest
in property" as specified under Bankruptcy Code Sections 362(b) and 546(b)(2).
-16-
(c) Upon the happening of one or more Events of Default, the Lender
shall have the right to direct all servicers then servicing any Pledged Mortgage
Loans to remit all collections on the Pledged Mortgage Loans to the Lender, and
if any such payments are received by the Borrower, the Borrower shall not
commingle the amounts received with other funds of the Borrower and shall
promptly pay them over to the Lender. In addition, the Lender shall have the
right to dispose of the Collateral as provided herein, or as provided in the
other documents executed in connection herewith, or in any commercially
reasonable manner, or as provided by law. Subject to the provisions of Section
11(e) below, such disposition may be on either a servicing released or a
servicing-retained basis. The Lender shall be entitled to place the Mortgage
Loans which it receives after any default in a pool for issuance of mortgage-
backed securities at the then-prevailing price for such securities and to sell
such securities for such prevailing price in the open market as a commercially
reasonable disposition of Collateral, subject to the applicable requirements of
the New York UCC. The Lender shall also be entitled to sell any or all of such
Mortgage Loans individually for the prevailing price as a commercially
reasonable disposition of Collateral, subject to the applicable requirements of
the New York UCC. The specification in this Section of manners of disposition
of collateral as being commercially reasonable shall not preclude the use of
other commercially reasonable methods (as contemplated by the New York UCC) at
the option of the Lender.
(d) Following the occurrence and during the continuance of an Event of
Default (other than an Event of Default under Section 10(a) above), interest
shall accrue on the Loan at a default interest rate of LIBOR plus 2.00% per
annum. Following the occurrence of an Event of Default under Section 10(a)
above, interest shall accrue on the Loan at a default interest rate of LIBOR
plus 5.00% per annum; provided, that such interest rate shall decline to LIBOR
--------
plus 2.50% per annum on the occurrence of a Trade Date as provided in Section
11(e) below. Following the occurrence and during the continuance of an Event of
Default, the Borrower or its designee, Wilshire Credit Corporation or a
subsidiary of WFSG, shall be entitled to receive a servicing fee (the "Servicing
---------
Fee"), payable monthly in arrears on the 5th day of each month, in an amount
---
equal to 0.50% per annum on the outstanding principal balance of the Mortgage
Loans as of the first day of the month preceding the month in which such fee is
payable, and such servicing fee shall continue to be payable until the default
is cured or the Collateral is disposed of as provided in Section 11(e) below.
In addition, following the occurrence and during the continuance of an Event of
Default, principal payments received in respect of Mortgage Loans will be
applied to reduce the principal amount of the Loans and interest payments will
be applied in the following order: first, to pay interest on the Loans, second,
to pay the Servicing Fee, and third to reduce the principal amount of the Loans.
(e) If the Lender determines to begin marketing the Collateral as
provided in Section 11(c) above, the Lender shall immediately give written
notice of such determination to Wilshire Credit Corporation and WFSG and, at any
time prior to the Lender entering into an agreement to sell all or a portion of
the Collateral with any third party (the "Trade Date"), will allow Wilshire
----------
Credit Corporation or WFSG (or any affiliate thereof) to purchase all the
Mortgage Loans then subject to this Agreement at a price equal to the then
outstanding principal balance of the Loans together with accrued interest. The
Lender agrees to promptly provide the Borrower with written evidence of any such
agreement with a third party. In the event that
-17-
Wilshire Credit Corporation does not purchase the Mortgage Loans as provided in
this Section 11(e), the Lender agrees to act in a commercially reasonable manner
in disposing of such Collateral. The Lender and Borrower also agree that in the
event that the Mortgage Loans are sold to a third party as provided in this
Section 11(e) at a price in excess of 105% of the principal balance of such
Mortgage Loans, any amounts payable in excess of 105% of the principal balance
of such Mortgage Loans shall be equally divided between the Borrower and the
Lender. On payment by Wilshire Credit Corporation (or an affiliate), the Lender
shall promptly release any right, title interest or other claim in the Mortgage
Loans or proceeds thereof.
Section 12. Indemnification. The Borrower agrees to hold the Lender
----------- ---------------
harmless from and indemnifies the Lender against all liabilities, losses,
damages, judgments, costs and expenses of any kind which may be imposed on,
incurred by, or asserted against the Lender relating to or arising out of this
Agreement, the Secured Notes, any Program Agreement or any transaction
contemplated hereby or thereby resulting from anything other than the Lender's
negligence or willful misconduct. The Borrower also agrees to reimburse the
Lender for all reasonable expenses in connection with the enforcement of this
Agreement, the Secured Notes and any Program Agreement, including without
limitation the reasonable fees and disbursements of counsel. The Borrower's
agreements in this Section shall survive the payment in full of the Secured
Notes and the expiration or termination of this Agreement. The Borrower hereby
acknowledges that, notwithstanding the fact that the Secured Notes is secured by
the Collateral, the obligations of the Borrower under the Secured Notes are
recourse obligations of the Borrower.
Section 13. Power of Attorney. The Borrower hereby authorizes the
----------- -----------------
Lender, at the Borrower's expense, to file such financing statement or
statements relating to the Collateral without the Borrower's signature thereon
as the Lender at its option may deem appropriate, and appoints the Lender as the
Borrower's attorney-in-fact to execute any such financing statement or
statements in the Borrower's name and to perform all other acts which the Lender
deems appropriate to perfect and continue the security interest granted hereby
and to protect, preserve and realize upon the Collateral, including, but not
limited to, the right to endorse notes, complete blanks in documents, transfer
servicing, and sign assignments on behalf of the Borrower as its attorney-in-
fact. This Power of Attorney is coupled with an interest and is irrevocable
without the Lender's consent. Notwithstanding the foregoing, the power of
attorney hereby granted may be exercised only during the occurrence and
continuance of any Event of Default hereunder.
Section 14. Agreement Constitutes Security Agreement. This Agreement
----------- ----------------------------------------
is intended by the parties hereto to be governed by New York Law, and to
constitute a security agreement within the meaning of the New York UCC.
Section 15. Lender May Act Through Affiliates. The lender may, from
----------- ---------------------------------
time to time, designate one or more affiliates for the purpose of performing any
action hereunder.
Section 16. Notices. All demands, notices and communications
----------- -------
relating to this Agreement be in writing and shall be deemed to have been duly
given when received by the other party or parties at the address shown below, or
such other address as may hereafter be furnished to the other party or parties
by like notice.
-18-
If to the Borrower:
WMFC 1997-2, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Guarantor:
Wilshire Financial Services Group Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Proskauer ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Phone Number: ▇▇▇-▇▇▇-▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
Stoel ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ & Grey
Standard Insurance Center
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇,. ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Phone Number: ▇▇▇-▇▇▇-▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
If to the Lender:
Prudential Securities Credit
Corporation
One Seaport Plaza, 27th Floor
Treasury Department
New York, New York 10292
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Phone Number: ▇▇▇-▇▇▇-▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
-19-
With copies to:
Prudential Securities Incorporated
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Phone Number: ▇▇▇-▇▇▇-▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
Section 17. Severability. Any provision of this Agreement which is
----------- ------------
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
Section 18. Counterparts. This Agreement may be executed in one or
----------- ------------
more counterparts, each of which shall be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.
Section 19. Certain Definitions. The following capitalized terms are
----------- -------------------
defined in the corresponding sections specified below:
"Advance" - Section 1(a)(i).
-------
"Agreements - Introductory Clause.
----------
"Borrower" - Introductory Clause.
--------
"Collateral" - Section 3.
----------
"Collateral Deficiency Situation" - Section 1(b)(ii).
-------------------------------
"Correspondent" - Section 2(b)(ii).
-------------
"Custodian" - Section 3.
---------
"Custodial Agreement" - Section 3.
-------------------
"Custodian's Certification" - Section 1(a)(ii)(C).
-------------------------
"Cut-Off Date" - Section 1(b)(ii).
------------
"Engagement Letter" - Recitals.
-----------------
"Event of Default" - Section 10.
----------------
-20-
"First Lien Advance" - Section 1(a)(i).
------------------
"First Lien Mortgage Loan" - Section 1(a)(i).
------------------------
"Funding Date" - Section 1(a)(ii).
------------
"Guarantee" - Section 10.
---------
"Guarantor" - Section 10.
---------
"Lender" - Introductory Clause.
------
"LIBOR" - Section 1(a)(iii).
-----
"Loans" - Section 1(a)(i).
-----
"Market Value" - Section 1(b)(ii).
------------
"Maturity Date" - Section 1(b)(ii).
-------------
"Mortgage Loans" - Section 1(a)(i).
--------------
"NY UCC" - Section 1(e)(i).
------
"Offered Securities" - Section 1(e).
------------------
"Pledged Mortgage Loans" - Section (1)(b)(ii).
----------------------
"Program" - Section 2(b).
-------
"Program Agreements" - Section 2(b)(iv).
------------------
"PSI" - Recitals.
---
"Purchase Agreements" - Section 2(b)(i).
-------------------
"Restoration Amount" - Section 1(b)(ii).
------------------
"Second Lien Advance" - Section 1(a)(i).
-------------------
"Second Lien Mortgage Loan" - Section 1(a)(i)
-------------------------
"Secured Notes" - Section 1(f).
-------------
"Secured Obligations" - Section 3.
-------------------
-21-
"Securitization" - Recitals.
--------------
"Specified Percentage" - Section 1(e).
--------------------
"Specified Underwriter" - Section 1(e).
---------------------
"Supplemental Mortgage Loan Schedule" - Section 9.
-----------------------------------
-22-
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
WMFC 1997-2, INC.
By
---------------------------------
Name:
Title:
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By
---------------------------------
Name:
Title:
[Signature Page for Warehouse Agreement]
-▇▇-
▇▇▇▇▇▇▇ ▇-▇
-----------
SECURED NOTE
Dated November 15, 1996
FOR VALUE RECEIVED, the undersigned, WMFC 1997-2, INC., a limited
liability company organized under the laws of the State of Delaware, whose
address is ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower"),
promises to pay to the order of PRUDENTIAL SECURITIES CREDIT CORPORATION, a
Delaware corporation, whose address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (the "Lender"), on or before the Maturity Date the amount then outstanding
in respect of First Lien Advances (including accrued interest) under that
certain Interim Warehouse and Security Agreement dated as of November 15, 1996
(the "Agreement"). Initially, the maximum principal amount which may be
outstanding in respect of Advances is $100,000,000. Capitalized terms used
herein and not defined herein shall have their respective meanings as set forth
in the Agreement.
The holder of this Note is authorized to record the date and amount of
each Advance and the date and amount of each repayment of principal thereof on
the schedule to be maintained by the Lender (which schedule may be obtained upon
Borrower's request), and any such recordation shall constitute prima facie
evidence of the accuracy of the amount so recorded; provided that the failure of
the holder hereof to make such recordation (or any error in such recordation)
shall not affect the obligations of the Borrower hereunder or under the
Agreement.
MAXIMUM RATE OF INTEREST: It is intended that the rate of interest
------------------------
herein shall never exceed the maximum rate, if any, which may be legally charged
on the Loans evidenced by this Note (the "Maximum Rate"), and if the provisions
for interest contained in this Note would result in a rate higher than the
Maximum Rate, interest shall nevertheless be limited to the Maximum Rate and any
amounts which may be paid toward interest in excess of the Maximum Rate shall be
applied to the reduction of principal, or, at the option of the Lender, returned
to the Borrower.
DUE DATE: If the Loans evidenced hereby are not paid before the
--------
Maturity Date, they shall be due and payable on the Maturity Date.
PLACE OF PAYMENT: All payments hereon shall be made, and all notices
----------------
to the Lender required or authorized hereby shall be given, at the office of the
Lender at the address designated in the heading of this Note, or at such other
place as the Lender may from time to time direct by written notice to the
Borrower.
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable hereunder are
----------------------------------
payable by wire transfer in immediately available funds to the account number
specified by the Lender, in lawful money of the United States. Payments
remitted by the Borrower via wire transfer initiated after 1:00 p.m. New York
City time shall be deemed to be
received on the next business day. The Borrower agrees to pay all costs of
collection when incurred, including, without limiting the generality of the
foregoing, reasonable attorneys' fees through appellate proceedings, and to
perform and comply with each of the covenants, conditions, provisions and
agreements contained in every instrument now evidencing or securing said
indebtedness.
SECURITY: This Note is issued pursuant to the Agreement and is
--------
secured by a pledge of the Collateral described therein. Notwithstanding the
pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees
that the Borrower's obligations under this Note are full recourse obligations of
the Borrower to which the Borrower pledges its full faith and credit.
DEFAULTS: Upon the happening of an Event of Default, the Lender shall
--------
have all rights and remedies set forth in the Agreement.
The failure to exercise any of the rights and remedies set forth in
the Agreement shall not constitute a waiver of the right to exercise the same or
any other option at any subsequent time in respect of the same event or any
other event. The acceptance by the Lender of any payment hereunder which is
less than payment in full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the
foregoing rights and remedies at that time or at any subsequent time or nullify
any prior exercise of any such rights and remedies without the express consent
of the Lender, except as and to the extent otherwise provided by law.
WAIVERS: The Borrower waives diligence, presentment, protest and
-------
demand and also notice of protest, demand, dishonor and nonpayment of this Note,
and expressly agrees that this Note, or any payment hereunder, may be extended
from time to time, and consents to the acceptance of further Collateral, the
release of any Collateral for this Note, the release of any party primarily or
secondarily liable hereon, and that it will not be necessary for the Lender, in
order to enforce payment of this Note, to first institute or exhaust Lender's
remedies against the Borrower or any other party liable hereon or against any
collateral for this Note. None of the foregoing shall affect the liability of
the Borrower. No extension of time for the payment of this Note or an
installment hereof, made by agreement by the Lender with any person now or
hereafter liable for the payment of this Note, shall affect the liability under
this Note of the Borrower, even if the Borrower is not a party to such
agreement; provided, however, that the Lender and the Borrower, by written
agreement between them, may affect the liability of the Borrower.
TERMINOLOGY: If more than one party joins in the execution of this
-----------
Note, the covenants and agreements herein contained shall be the joint and
several obligations of each and all of them and of their respective heirs,
executors, administrators, successors and assigns, and relative words herein
shall be read as if written in the plural when appropriate. Any reference
herein to the Lender shall be deemed to include and apply to every subsequent
holder of this Note. Words of masculine or neuter import shall be read as if
written in the neuter or masculine or feminine when appropriate.
A-1-2
AGREEMENT: Reference is made to the Agreement for provisions as to
---------
Advances, rates of interest, mandatory principal repayments, collateral and
acceleration. If there is any conflict between the terms of this Note and the
terms of the Agreement, the terms of the Agreement shall control.
APPLICABLE LAW: This Note shall be governed by and construed in
--------------
accordance with the laws of the State of New York, which the Borrower hereby
expressly elects to apply to this Note. The Borrower agrees that any action or
proceeding brought to enforce or arising out of this Note may be commenced in
the Supreme Court of the State of New York, or in the United States District
Court for the Southern District of New York.
* * * * * * * * * * * * *
A-1-3
WMFC 1997-2, INC.
By --------------------------
Name:
Title:
[First Lien Secured Note Signature Page]
EXHIBIT A-2
-----------
SECURED NOTE
Dated November 15, 1996
FOR VALUE RECEIVED, the undersigned, WMFC 1997-2, INC., a limited
liability company organized under the laws of the State of Delaware, whose
address is ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower"),
promises to pay to the order of PRUDENTIAL SECURITIES CREDIT CORPORATION, a
Delaware corporation, whose address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (the "Lender"), on or before the Maturity Date the amount then outstanding
in respect of Second Lien Advances (including accrued interest) under that
certain Interim Warehouse and Security Agreement dated as of November 15, 1996
(the "Agreement"). Initially, the maximum principal amount which may be
outstanding in respect of Second Lien Advances is $20,000,000. Capitalized
terms used herein and not defined herein shall have their respective meanings as
set forth in the Agreement.
The holder of this Note is authorized to record the date and amount of
each Advance and the date and amount of each repayment of principal thereof on
the schedule to be maintained by the Lender (which schedule may be obtained upon
Borrower's request), and any such recordation shall constitute prima facie
evidence of the accuracy of the amount so recorded; provided that the failure of
the holder hereof to make such recordation (or any error in such recordation)
shall not affect the obligations of the Borrower hereunder or under the
Agreement.
MAXIMUM RATE OF INTEREST: It is intended that the rate of interest
------------------------
herein shall never exceed the maximum rate, if any, which may be legally charged
on the Loans evidenced by this Note (the "Maximum Rate"), and if the provisions
for interest contained in this Note would result in a rate higher than the
Maximum Rate, interest shall nevertheless be limited to the Maximum Rate and any
amounts which may be paid toward interest in excess of the Maximum Rate shall be
applied to the reduction of principal, or, at the option of the Lender, returned
to the Borrower.
DUE DATE: If the Loans evidenced hereby are not paid before the
--------
Maturity Date, they shall be due and payable on the Maturity Date.
PLACE OF PAYMENT: All payments hereon shall be made, and all notices
----------------
to the Lender required or authorized hereby shall be given, at the office of the
Lender at the address designated in the heading of this Note, or at such other
place as the Lender may from time to time direct by written notice to the
Borrower.
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable hereunder are
----------------------------------
payable by wire transfer in immediately available funds to the account number
specified by the Lender, in lawful money of the United States. Payments
remitted by the Borrower via wire transfer initiated after 1:00 p.m. New York
City time shall be deemed to be
received on the next business day. The Borrower agrees to pay all costs of
collection when incurred, including, without limiting the generality of the
foregoing, reasonable attorneys' fees through appellate proceedings, and to
perform and comply with each of the covenants, conditions, provisions and
agreements contained in every instrument now evidencing or securing said
indebtedness.
SECURITY: This Note is issued pursuant to the Agreement and is
--------
secured by a pledge of the Collateral described therein. Notwithstanding the
pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees
that the Borrower's obligations under this Note are full recourse obligations of
the Borrower to which the Borrower pledges its full faith and credit.
DEFAULTS: Upon the happening of an Event of Default, the Lender shall
--------
have all rights and remedies set forth in the Agreement.
The failure to exercise any of the rights and remedies set forth in
the Agreement shall not constitute a waiver of the right to exercise the same or
any other option at any subsequent time in respect of the same event or any
other event. The acceptance by the Lender of any payment hereunder which is
less than payment in full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the
foregoing rights and remedies at that time or at any subsequent time or nullify
any prior exercise of any such rights and remedies without the express consent
of the Lender, except as and to the extent otherwise provided by law.
WAIVERS: The Borrower waives diligence, presentment, protest and
-------
demand and also notice of protest, demand, dishonor and nonpayment of this Note,
and expressly agrees that this Note, or any payment hereunder, may be extended
from time to time, and consents to the acceptance of further Collateral, the
release of any Collateral for this Note, the release of any party primarily or
secondarily liable hereon, and that it will not be necessary for the Lender, in
order to enforce payment of this Note, to first institute or exhaust Lender's
remedies against the Borrower or any other party liable hereon or against any
collateral for this Note. None of the foregoing shall affect the liability of
the Borrower. No extension of time for the payment of this Note or an
installment hereof, made by agreement by the Lender with any person now or
hereafter liable for the payment of this Note, shall affect the liability under
this Note of the Borrower, even if the Borrower is not a party to such
agreement; provided, however, that the Lender and the Borrower, by written
agreement between them, may affect the liability of the Borrower.
TERMINOLOGY: If more than one party joins in the execution of this
-----------
Note, the covenants and agreements herein contained shall be the joint and
several obligations of each and all of them and of their respective heirs,
executors, administrators, successors and assigns, and relative words herein
shall be read as if written in the plural when appropriate. Any reference
herein to the Lender shall be deemed to include and apply to every subsequent
holder of this Note. Words of masculine or neuter import shall be read as if
written in the neuter or masculine or feminine when appropriate.
A-2-2
AGREEMENT: Reference is made to the Agreement for provisions as to
---------
Advances, rates of interest, mandatory principal repayments, collateral and
acceleration. If there is any conflict between the terms of this Note and the
terms of the Agreement, the terms of the Agreement shall control.
APPLICABLE LAW: This Note shall be governed by and construed in
--------------
accordance with the laws of the State of New York, which the Borrower hereby
expressly elects to apply to this Note. The Borrower agrees that any action or
proceeding brought to enforce or arising out of this Note may be commenced in
the Supreme Court of the State of New York, or in the United States District
Court for the Southern District of New York.
* * * * * * * * * * * *
A-2-3
WMFC 1997-2, INC.
By
-----------------------------
Name:
Title:
[Second Lien Secured Note Signature Page]
EXHIBIT B
---------
November 15, 1996
Bankers Trust Company of
California, N.A.
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Prudential Securities Credit Corporation
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Re: Interim Funding Arrangement
---------------------------
Gentlemen:
We have acted as special New York counsel to WMFC 1997-2, Inc., a
Delaware limited liability company (the "Borrower") and to Wilshire Financial
Services Group Inc., a Delaware corporation (the "Guarantor") in connection with
the execution and delivery of the following documents:
(i) Interim Warehouse and Security Agreement, dated as of
November 15, 1996 (the "Interim Warehouse and Security Agreement"), between
the Borrower and Prudential Securities Credit Corporation (the "Lender");
(ii) each of the two Secured Notes executed November 15, 1996 by
the Borrower in favor of the Lender (the "Notes");
(iii) Custodial Agreement, dated as of November 15, 1996 (the
"Custodial Agreement"), among the Borrower, the Guarantor and Bankers Trust
Company of California, N.A.; and
(iv) Guarantee, dated November 15, 1996 (the "Guarantee"),
executed by the Guarantor in favor of the Lender.
Capitalized terms used herein, but not defined herein, shall have the
meanings assigned to them in the Interim Warehouse and Security Agreement.
We have examined executed copies of the Interim Warehouse and Security
Agreement, the Notes, the Guarantee and the Custodial Agreement. We have also
examined originals or photostatic or certified copies of all such corporate
records of the Borrower and the Guarantor and such certificates of public
officials, certificates of corporate officers, and other documents as we have
deemed appropriate and necessary as a basis for the opinions hereinafter
expressed. In making our examination and rendering the opinions herein
expressed, we have made the following assumptions: (i) each party to each of the
Interim Warehouse and Security Agreement and the Custodial Agreement (other than
the Borrower and the Guarantor) has the power to enter into and perform all of
its obligations thereunder, (ii) the due authorization, execution and delivery
of each of the Interim Warehouse and Security Agreement and the Custodial
Agreement by all parties thereto (other than the Borrower and the Guarantor),
and (iii) the validity and binding effect on all parties thereto (other than the
Borrower and the Guarantor) of each of the Interim Warehouse and Security
Agreement and the Custodial Agreement.
The opinions expressed below with respect to enforceability are
subject to the following additional qualifications:
(a) The effect of insolvency, reorganization, moratorium,
conservatorship, receivership, or other similar laws relating to or affecting
the rights of creditors.
(b) The application of general principles of equity, including, but
not limited to, the right of specific performance (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(c) The unenforceability of provisions to the effect that failure to
exercise or delay in exercising rights or remedies will not operate as a waiver
of any such rights or remedies, or to the effect that provisions therein may
only be waived in writing to the extent that an oral agreement has been entered
into modifying such provisions.
We are licensed to practice law in the State of New York and each
opinion hereinafter set forth is an opinion concerning only the law of the State
of New York and the general corporation and limited liability company law of the
State of Delaware. All opinions expressed herein are based on laws, regulations
and policy guidelines currently enforced and may be affected by future changes
in law. Furthermore, no opinion is expressed herein regarding the applicable
state Blue Sky, legal investment or real estate syndication laws.
Based upon the foregoing, and subject to the last paragraph hereof, we
are of the opinion that:
1. The Interim Warehouse and Security Agreement, the Notes and the
Custodial Agreement each constitutes the valid, legal and binding agreement
of the Borrower, and each is enforceable against the Borrower in accordance
with its terms.
B-2
2. No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required
under federal laws or the laws of the State of New York for the execution,
delivery and performance of the Interim Warehouse and Security Agreement,
the Notes, or the Custodial Agreement as applicable, by the Borrower,
except such of which as have been obtained.
3. The execution, delivery and performance by the Borrower of the
Interim Warehouse and Security Agreement, the Notes and the Custodial
Agreement does not conflict with or result in a breach of, or constitute a
default under any law, rule or regulation of the federal government or of
the State of New York.
4. The execution, delivery and performance of the Interim Warehouse
and Security Agreement, the Notes and the Custodial Agreement by the
Borrower will not result in a default under any mortgage, borrowing
agreement, or other instrument or agreement pertaining to indebtedness for
borrowed money to which the Borrower is a party.
5. The Guarantee constitutes the valid, legal and binding agreement
of the Guarantor, and is enforceable against the Guarantor in accordance
with its terms.
6. No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required
under federal laws or the laws of the State of New York for the execution,
delivery and performance of the Guarantee by the Guarantor, except such of
which as have been obtained.
7. The execution, delivery and performance by the Guarantor of the
Guarantee does not conflict with or result in a breach of, or constitute a
default under any law, rule or regulation of the federal government or of
the State of New York.
8. The execution, delivery and performance of the Guarantee by the
Guarantor will not result in a default under any mortgage, borrowing
agreement, or other instrument or agreement pertaining to indebtedness for
borrowed money to which the Guarantor is a party.
This opinion is furnished is solely for the benefit of the addressees
hereof.
Yours truly,
B-3
EXHIBIT C
---------
[FORM OF CREDIT INCREASE CONFIRMATION AND
NOTE AMENDMENT AND LEGALITY CERTIFICATE]
Dated , 199
------------------ -
Reference is made to (i) the Interim Warehouse and Security Agreement,
dated as of November 15, 1996 (the "Interim Warehouse Agreement") between
Prudential Securities Credit Corporation (the "Lender") and WMFC 1997-2, Inc.
(the "Borrower ") and (ii) each of the two Secured Notes dated November 15, 1996
(the "Notes") from the Borrower to the Lender.
Section 1.
----------
The "Maturity Date" referenced in the Interim Warehouse Agreement and
in the Notes shall be .
---------------------------------
[Any other changes.]
Section 2.
----------
As amended by Section 1 hereof all provisions of the Interim Warehouse
Agreement and of the Notes are reconfirmed as of the date hereof. The Borrower,
in addition, hereby reconfirms and remakes as of the date hereof each of its
representations, warranties and covenants set forth in the Interim Warehouse
Agreement.
WMFC 1997-2, INC.
By:
----------------------------
Name:
Title:
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By:
----------------------------
Name:
Title:
Approval as to Legality
-----------------------
, special New York counsel to the Borrower, hereby
-------------
confirms that (i) we delivered the opinion letter dated November __, 1996
relating to the Interim Warehouse Agreement and the Notes, a copy of which is
attached hereto (the "Opinion Letter"), (ii) we have represented the Borrower in
connection with its execution and delivery of the Credit Increase Confirmation
and Note Amendment (the "Confirmation") to which this Approval as to Legality is
attached, and we hereby confirm as of the date hereof the opinions set forth in
the Opinion Letter to cover both the Confirmation itself as well as the
transactions described on the Confirmation and confirm, as of the date hereof,
and subject to any and all assumptions and qualifications set forth therein, the
opinions set forth in the Opinion Letter.
Yours truly,
-------------------------------------------
Dated:
-----------------
C-2
EXHIBIT D
---------
[FORM OF NOTICE TO LENDER]
[Date]
Prudential Securities Realty
Funding Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Gentlemen:
Reference is made to the Interim Warehouse and Security Agreement,
dated as of November 15, 1996, between you and us (the "Agreement"). We hereby
request that on , 199 , you make an Advance (as defined in the
----------------
Agreement) in the amount of $ in respect of the mortgage
-------------------
loans identified in the [electronic disk] [tape] delivered to you together with
this notice.
Very truly yours,
WMFC 1997-2, INC.
By:
-------------------------
Name:
Title:
EXHIBIT E
---------
[FORM OF GUARANTEE]
WILSHIRE FINANCIAL SERVICES GROUP INC., a corporation duly organized
and existing under the laws of the State of Delaware (the "Guarantor"), hereby
issues this full recourse Guarantee (this "Guarantee") to PRUDENTIAL SECURITIES
CREDIT CORPORATION (the "Lender"). Unless otherwise indicated, all capitalized
terms herein have the same meaning ascribed to such terms in the Interim
Warehouse and Security Agreement dated as of November 15, 1996 (the "Loan
Agreement"), by and among the Lender and WMFC 1997-2, INC., as the Borrower (the
"Borrower").
The Lender has required the execution, delivery and on-going
effectiveness of this Guarantee as a condition to its providing the financing
facility described in the Loan Agreement. The Guarantor indirectly owns more
than 95% of the Borrower, and the Guarantor has determined that the issuance of
this Guarantee is in furtherance of the best interests of the Borrower and of
the Guarantor.
To the extent that funds available in accordance with the Loan
Agreement are insufficient to make payments on any of the Secured Obligations
owed by the Borrower to the Lender in connection with the Loan Agreement or the
Secured Note when such payments become due, the Guarantor hereby unconditionally
and irrevocably agrees to pay such amounts to the Lender upon demand.
The obligations of the Guarantor under this Guarantee shall be a
continuing obligation and a fresh cause of action under this Guarantee shall be
deemed to arise in respect of each payment default by the Borrower under the
Loan Agreement. This Guarantee shall remain in full force and effect until the
later of (a) the Maturity Date (subject to extension, if any, pursuant to the
terms of the Loan Agreement), (b) the termination of the Loan Agreement and (c)
the date on which all Secured Obligations due and owing by the Borrower to the
Lender in connection with the Loan Agreement have been paid in full. The
Guarantor's obligations under this Guarantee shall be reinstated and be
continued in full force and effect if at any time any payment received by the
Lender under the Loan Agreement is invalidated, declared to be fraudulent or
preferentially set aside and/or required to be repaid by the Lender. This is a
guarantee of payment and not of collection and is a primary obligation of the
Guarantor. The Lender may enforce this Guarantee against the Guarantor without
prior enforcement of the Secured Obligations against the Borrower.
The Guarantor hereby agrees that its obligations under this Guarantee
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Loan Agreement; the absence of any action to enforce the
same; any waiver or consent by the Lender concerning any provisions thereof, the
rendering of any judgment against the Borrower or any action to enforce the
same; or any other circumstance that might otherwise constitute a legal or
equitable discharge of a guarantor or a defense of a guarantor. The Guarantor
covenants that this Guarantee will not be discharged except by complete payment
of the amounts payable hereunder. This Guarantee
shall continue to be effective if the Borrower merges or consolidates with or
into another entity, loses its separate legal identity or ceases to exist.
The Guarantor shall be subrogated to all rights of the Lender against
the Borrower in respect of any amounts paid by the Guarantor pursuant to the
provisions of this Guarantee; provided, however, that the Guarantor shall not be
entitled to enforce, or to receive any payments arising out of or based upon
such right of subrogation until all Secured Obligations under the LA)an
Agreement shall have been paid in full for a period of one year.
The Guarantor hereby waives diligence, presentment, protest, notice of
protest, notice of acceleration, notice of dishonor, filing of claims with a
court in the event of insolvency or bankruptcy of the Borrower, all demands
whatsoever, and any right to require a proceeding first against the Borrower.
The Guarantor makes the following representations and warranties to
the Lender, all of which shall be continuing representations and warranties
until all of the Secured Obligations shall have been paid in full and this
Guarantee shall be terminated:
(a) The Guarantor has been duly organized and is validly
existing in good standing under the laws of the state of
Delaware, and is duly qualified to do business and is in good
standing as a foreign corporation in all jurisdictions where the
nature of its properties or business requires it to be so
qualified and where the failure to so qualify could have a
material adverse effect upon the business, operations or
conditions (financial or otherwise) of the Guarantor.
(b) The Guarantor has the corporate power and authority to
execute, deliver and perform its obligations under this
Guarantee. The execution, delivery and performance of this
Guarantee (a) have been duly authorized by all requisite
corporate action, (b) do not conflict with or result in a
violation or breach of the Certificate of Incorporation or the
By-Laws of the Guarantor or of any agreement, instrument,
indenture, note, statute, regulation, rule, order, writ, judgment
or decree to which the Guarantor is a party or to which it or its
property is subject, and (c) will not give cause for acceleration
of any indebtedness of the Guarantor.
(c) This Guarantee has been duly executed and delivered by
the Guarantor and constitutes a legal and binding obligation of
the Guarantor, enforceable against the Guarantor in accordance
with its terms, except as such validity and enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws affecting
creditor's rights generally or by the effect of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law).
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(d) The audited, consolidated balance sheet of the Guarantor
and certain subsidiaries as of September 30, 1996 and the related
statements of income, cash flows and changes in stockholders
equity for the period then ended contained in such financial
statements were prepared in accordance with generally accepted
accounting principles consistently applied, and present fairly
the financial condition and results of operations at the dates
and for the periods indicated therein.
(e) There has been no material adverse change in the
financial condition of the Guarantor since September 30, 1996.
(f) No authority from or approval by any court, governmental
body, commission or agency is required in connection with the
Guarantor's execution, delivery and performance of this
Guarantee.
This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of New York (without regard to choice of law provisions).
This Guarantee becomes effective concurrent with the effectiveness of
the Loan Agreement, according to its terms.
If any one or more provisions contained in this Guarantee should be
invalid, illegal or unenforceable in any respect, the validity, legality, and
enforceability of the remaining provisions contained herein shall in no way be
affected or impaired thereby.
* * * * * * * * * * * *
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IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be executed in
its name by its duly authorized representative.
WILSHIRE FINANCIAL SERVICES GROUP INC.
By:
-----------------------------------
Name:
Title:
Dated: November 15, 1996
[Guarantee Signature Page]
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EXHIBIT F
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MORTGAGE LOAN SCHEDULE
The Mortgage Loan Schedule shall include the following items to the
extent applicable:
1. the Servicer's Loan identifying number;
2. the Obligors' first and last name(s);
3. the street address of the Mortgaged Property;
4. the state in which the Mortgaged Property is located;
5. the city in which the Mortgaged Property is located;
6. the five digit zip code in which the Mortgaged Property is located;
7. a code indicating whether the Mortgaged Property is occupied as the owner's
primary residence or as a second home or is an investment property;
8. the original months to maturity;
9. the original principal amount of the Mortgage Loan;
10. the Loan-to-Value Ratio at origination of the Mortgage being sold to the
Owner;
11. the Mortgage Interest Rate at origination;
12. the date on which the first Monthly Payment was due on the Mortgage Loan;
13. the stated maturity date;
14. the amount of the Monthly Payment;
15. the original closing date of the Mortgage Note (origination date);
16. with respect to each Adjustable Rate Loan, the next Rate Adjustment Date;
17. with respect to each Adjustable Rate Loan, the period between resets;
18. with respect to each Adjustable Rate Loan, the Gross Margin;
19. with respect to each Adjustable Rate Loan, the number of days prior to the
Adjustment Date on which the value of Index is determined, i.e., the look-
back;
20. with respect to each Adjustable Rate Loan, a code indicating the rounding
factor, if any, applied to the Mortgage Interest Rate, e.g. the nearest
1/8%, or up to the nearest 1/8%;
21. with respect to each Adjustable Rate Loan, the Maximum Mortgage Interest
Rate under the terms of the Mortgage Note;
22. with respect to each Adjustable Rate Loan, the Minimum Mortgage Interest
Rate under the terms of the Mortgage Note;
23. with respect to each Adjustable Rate Loan, the Periodic Rate Cap (if the
initial periodic cap is different from the subsequent periodic caps, this
field should state the initial periodic cap);
24. a code indicating if the Mortgage Loan is a balloon mortgage;
25. the Appraised Value of the Mortgaged Property at origination;
26. a code indicating if the Mortgage Loan has a prepayment penalty;
27. with respect to each Mortgage Loan that is not a first lien, the principal
balance of the senior lien on the Mortgaged Property at the time the
Mortgage Loan being sold to the Owner is originated;
28. a code indicating the lien position of the Mortgage Loan;
29. a code indicating which, if any, primary mortgage insurance company has
insured the Mortgage Loan;
30. a code indicating the relevant index; and
31. if the Mortgage Loan is not secured by a first lien, the combined loan-to-
value ratio.
* * * * * * * * * * * *
F-2
TABLE OF CONTENTS
-----------------
Section 1. The Loan...................................................... 1
Section 2. Additional Conditions Precedent; Required Characteristics; and
Correspondents................................................ 6
Section 3. Mortgage Files and Custodian.................................. 7
Section 4. Representations, Warranties and Covenants..................... 8
Section 5. Mandatory Payment of Loan..................................... 11
Section 6. Release of Mortgage Files Following Payment................... 12
Section 7. Servicing..................................................... 12
Section 8. Modifications; Successors and Assigns......................... 12
Section 9. Reports....................................................... 12
Section 10. Events of Default............................................. 13
Section 11. Remedies Upon Default......................................... 14
Section 12. Indemnification............................................... 16
Section 13. Power of Attorney............................................. 16
Section 14. Agreement Constitutes Security Agreement...................... 16
Section 15. Lender May Act Through Affiliates............................. 16
Section 16. Notices....................................................... 16
Section 17. Severability 18
Section 18. Counterparts 18
Section 19. Certain Definitions........................................... 18
EXHIBITS
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Exhibit A - Secured Notes
Exhibit B - Legal Opinion
Exhibit C - Form of Credit Increase
Exhibit D - Form of Notice to Lender
Exhibit E - Form of Guarantee
Exhibit F - Mortgage Loan Schedule Information