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AGREEMENT
THIS LIQUIDITY AGREEMENT (the "Agreement") is made and entered
into this 20th day of October 1997, by and between Builders ProLoan Fund,
Inc., a Maryland corporation (the "Fund"), and Mercantile Bank N.A. (the
"Bank").
WHEREAS, the Fund has entered into ProLoan Master Agreements with
various financial institutions pursuant to which the Fund has agreed to
acquire mortgage-backed securities in the form of ▇▇▇▇▇▇ ▇▇▇ Certificates,
▇▇▇▇▇▇ Mae Certificates or ▇▇▇▇▇▇▇ Mac Gold Participation Certificates that
are secured by home mortgages originated by such financial institutions and
qualified under the terms of the ProLoan program ("Qualified Mortgage
Loans"), as such ProLoan program is described in the Fund's currently
effective registration statement as filed with the Securities and Exchange
Commission, and the Fund may in the future agree to acquire whole Qualified
Mortgage Loans that have not yet closed according to their terms ("unclosed
Loans");
WHEREAS, from time to time, the Fund may desire to sell its
commitments to acquire mortgage-backed securities secured by Qualified
Mortgage Loans or unclosed Loans and the Bank may desire to purchase these
commitments to acquire mortgage-backed securities secured by Qualified
Mortgage Loans or unclosed Loans;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties to this Agreement agree as
follows:
ARTICLE ONE
1.1 Fund's Option to Require Purchase on Demand. The
Fund may, upon two business days' prior notice to the Bank, require the Bank
to purchase all or a portion of its commitments to acquire mortgage-backed
securities secured by Qualified Mortgage Loans. The Fund also may, upon two
business days' prior notice to the Bank, require the Bank to purchase any
unclosed Loan and the related servicing rights to such Loan. As used herein,
the term "Qualified Mortgage Loan" shall mean any mortgage loan originated by
a bank, mortgage lender or other financial institution according to the terms
of the ProLoan program, as described in the Fund's registration statement,
that is underwritten according to standards established by the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"),
and that is eligible to be guaranteed by GNMA, FNMA or FHLMC.
1.2 Obligations to Purchase and Sell.
(a) Upon receipt of the Fund's written notice provided for
in Section 1.1 above, the Bank shall purchase all or a portion
of the Fund's commitments to acquire mortgage-backed
securities secured by Qualified Mortgage Loans or any unclosed
Loan described in such Notice for a purchase price based upon
the bid price of the weighted average interest rate of the
respective Qualified Mortgage Loans securing an issue of
mortgage-backed securities or the value of the unclosed Loan,
respectively. Upon exercise of the Fund's right, the Fund
will pay the Bank an amount equal to the principal amount of
the underlying Qualified Mortgage Loan(s) or the unclosed
Loan, as the case may be, multiplied by any positive
difference between par and the six-month forward
to-be-announced ("TBA") price of ▇▇▇▇▇▇ Mae mortgage-backed
securities with a coupon rate nearest to, but not greater
than, the one-half percent (1/2%) coupon rate increment for such
securities that have a coupon rate equal to the weighted average
yield for all such Qualified Mortgage Loans, or the yield of an
unclosed Loan, as the case may be, minus 0.625%.
(b) The written notice given by the Fund to the Bank
shall create a binding and enforceable contract for the sale
of all of the Fund's commitments to acquire mortgage-backed
securities or any unclosed Loans which are the subject of such
notice, at the price specified above, such sale to be closed
upon the terms and conditions set forth above.
(c) In the event that the Bank shall fail to meet its
obligation to purchase the Fund's commitments to acquire
mortgage-backed securities or unclosed Loans as specified in
the Fund's written notice, at the expiration of the notice
period, the Fund shall have the right, without further consent
or acquiescence of the Bank, to either: (i) sell to a third
party purchaser, at any price, all of commitments to purchase
the mortgage-backed securities or any unclosed Loans which are
the subject of the notice; or (ii) seek declaratory injunctive
relief in the appropriate court. The Fund may exercise either
option by written notice given to
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the Bank within the time specified above. The Fund's written notice,
if given, shall create a binding and enforceable contract between
the Fund and the Bank whereby each is obligated to execute and
deliver all documents, and to take such further action as may
be reasonably required, to carry out the specified election, and
each shall be liable for actual, monetary damages for its own
failure to perform.
1.3 Terms of Sale. The following terms and provisions shall
apply with respect to any contract created hereunder for the sale to the Bank
of the Fund's commitments to acquire mortgage-backed securities or unclosed
Loans.
(a) The sale shall be closed at the close of business
on the second business day following the creation of the
contract of sale, at the offices of the Fund, or at such other
location as is agreed to by both purchaser and seller.
(b) At the closing, the Bank shall deliver to the
Fund's custodian cash or a cashier's check for the total
purchase price due, and the Bank shall receive ▇▇▇▇▇▇ ▇▇▇
Certificates, ▇▇▇▇▇▇ Mae Certificates or ▇▇▇▇▇▇▇ Mac Gold
Participation Certificates, as agreed upon, or the documents
evidencing the commitments to acquire the unclosed loans as the
case may be. The Fund and the Bank hereby irrevocably appoint
UMB Bank, N.A., Kansas City, Missouri as its respective agent
to receive tender of such delivery from the other party.
1.4 Indemnification. The Bank at any sale hereunder agrees
hereby that at all times after creation of the contract for such sale, the
Bank shall defend and indemnify the Fund from and against any and all
liability of the Fund as a guarantor or surety of any indebtedness of the
Bank.
ARTICLE TWO
TERMINATION AND MODIFICATION
2.1 Termination. This Agreement shall terminate upon the
occurrence of any of the following events:
(a) The Fund ceases to be an investment company registered
under the Investment Company Act of 1940, as amended;
(b) The bankruptcy of the Bank;
(c) The mutual agreement of the Fund and the Bank to
terminate this Agreement; or
(d) The giving of written notice of termination by one
party to the other party, in which event this Agreement shall
terminate ninety (90) days after receipt by the other party of
such written notice.
2.2 Modification and Waivers. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms
and conditions hereof may be waived, only by a written instrument signed by
the parties or, in the case of a waiver, by the party waiving compliance.
ARTICLE THREE
MISCELLANEOUS
3.1 Dispute Resolution. Any controversy or claim arising out
of or relating to this Agreement, its interpretation or its enforcement shall
be submitted to arbitration in the City or County of St. Louis, Missouri, as
determined by the Fund. Such arbitration shall be governed in accordance
with the commercial arbitration rules of the American Arbitration Association
then in effect in that area. The parties hereto consent to the jurisdiction
of the
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▇▇▇▇▇▇▇ ▇▇▇▇▇ of the City of St. Louis, State of Missouri and the United
States District Court for the Eastern District of Missouri for the entry of
judgment relating to any award of the arbitrator or for the issuance of any
injunction or compulsion of specific performance pursuant to this Section
3.1. Notwithstanding the foregoing, the parties recognize that irreparable
injury will result to their business and property in the event of the breach
of this Agreement. Therefore, the parties agree that in the event any party
actually or anticipatorily breaches this Agreement, the other parties shall
be entitled, in addition to any other remedies and damages available, (i) to
an injunction to restrain any such violation, and (ii) to compel specific
performance of the terms and conditions of this Agreement, which injunction
or compulsion shall be terminated at such time as a final and binding
determination is made by the arbitrator(s), to the extent that such
determination is in conflict with such injunction or compulsion. The court
granting such relief shall retain jurisdiction to enforce such injunction,
compulsion and arbitration determination to the extent that there is no
conflict. Any party shall be entitled to receive his costs and expenses
incurred in bringing or defending any claim arising under this Agreement in
which he prevails, including reasonable attorneys' fees.
3.2 Notice. Any notice required or permitted to be given under
this Agreement shall be in writing and shall be effective upon delivery by
personal delivery, facsimile telecopy, or registered mail to the following
addresses:
The Fund: Builders ProLoan Fund, Inc.
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Bank: Mercantile Bank, N.A.
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or at such other address as is set forth in a notice to all of the parties.
3.3 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
3.4 Successors and Assigns. This Agreement shall be binding
on and inure to the benefit of each party's successors and assigns. No party
to this Agreement may assign any of its rights or delegate any of his duties
under the Agreement.
3.5 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior understandings with respect thereto.
3.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri applicable to
agreements made and to be performed entirely within such State.
3.7 Headings. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
construction of this Agreement.
3.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
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THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED
BY THE PARTIES.
BUILDERS PROLOAN FUND, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President
MERCANTILE BANK, N.A.
By: /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its: