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EXHIBIT 10.30(a)
AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASES AND SALES OF MORTGAGE LOANS
Dated as of February 10, 1999
Between
▇▇▇▇▇▇ COMMERCIAL PAPER INC.,
as Buyer
and
AAMES CAPITAL CORPORATION,
as Seller
1. APPLICABILITY
From time to time until February 10, 2000, ▇▇▇▇▇▇ Commercial Paper Inc.
("Buyer") shall, subject to the terms hereof, enter into transactions upon the
request of Aames Capital Corporation ("Seller") in which Seller agrees to
transfer to Buyer Mortgage Loans against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to Seller such Mortgage Loans at a
date certain not later than 30 days after the date of transfer or on demand, as
specified in the Confirmation, against the transfer of funds by Seller. Each
such transaction shall be referred to herein as a "Transaction" and shall be
governed by this Agreement and the related Confirmation, unless otherwise agreed
in writing. Notwithstanding anything in this Agreement to the contrary, Buyer
shall have no obligation to enter into any Transaction hereunder if there shall
have occurred any material adverse change, as determined by Buyer in its
reasonable judgment, in the financial condition of Seller, the financial markets
generally or the secondary market for Mortgage Loans. Buyer shall promptly
notify Seller of any determination by Buyer that any of the foregoing has
occurred.
2. DEFINITIONS
"Act of Insolvency" means, with respect to any party and its Affiliates,
(i) the filing of a petition, commencing, or authorizing the commencement of any
case or proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law relating to the protection of creditors,
or suffering any such petition or proceeding to be commenced by another which is
consented to, not timely contested or results in entry of an order for relief;
(ii) the seeking the appointment of a receiver, trustee, custodian or similar
official for such party or an Affiliate or any substantial part of the property
of either, (iii) the appointment of a receiver, conservator, or manager for such
party or an Affiliate by any governmental agency or authority having the
jurisdiction to do so; (iv) the making or offering by such party or an Affiliate
of a composition with its creditors or a general assignment for the benefit of
creditors, (v) the admission by such party or an Affiliate of such party of its
inability to pay its debts or discharge
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its obligations as they become due or mature; or (vi) that any governmental
authority or agency or any person, agency or entity acting or purporting to act
under governmental authority shall have taken any action to condemn, seize or
appropriate, or to assume custody or control of, all or any substantial part of
the property of such party or of any of its Affiliates, or shall have taken any
action to displace the management of such party or of any of its Affiliates or
to curtail its authority in the conduct of the business of such party or of any
of its Affiliates.
"Additional Loans" means Mortgage Loans or cash provided by Seller to
Buyer or its designee pursuant to Section 4(a).
"Adjusted Leverage Ratio" means, at any time, the ratio of (i) the
aggregate principal amount of all indebtedness (other than indebtedness incurred
in connection with Mortgage Loan warehousing facilities of Guarantor and its
subsidiaries) of Guarantor and its subsidiaries at such time which on a
consolidated basis in accordance with GAAP would be required to be reflected on
a consolidated balance sheet of Guarantor and its subsidiaries as a liability to
(ii) Tangible Net Worth.
"Affiliate" means an affiliate of a party as such term is defined in the
United States Bankruptcy Code in effect from time to time.
"Agreement" means this Master Repurchase Agreement Governing Purchases
and Sales of Mortgage Loans between Buyer and Seller, as amended from time to
time.
"Balloon Mortgage Loan" means any Mortgage Loan that provided on the
date of origination for scheduled payments by the Mortgagor based upon an
amortization schedule extending beyond its maturity date.
"Business Day" means a day other than (i) a Saturday or Sunday, or (ii)
a day in which the New York Stock Exchange is authorized or obligated by law or
executive order to be closed.
"Buyer" has the meaning specified in Section 1.
"Collateral" has the meaning specified in Section 6.
"Collateral Amount" means, with respect to any Transaction, the amount
obtained by application of the applicable Collateral Amount Percentage to the
Repurchase Price for such Transaction.
"Collateral Amount Percentage" means the amount set forth in the
Confirmation which, in any event, (i) shall not be less than 103% in determining
whether a Market Value Collateral Deficit exists pursuant to the first sentence
of Section 4(a) hereof and (ii) shall not be less than 105% in determining
whether a Securitization Value Collateral Deficit exists pursuant to the second
sentence of Section 4(a) hereof.
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"Collateral Deficit" means either a Market Value Collateral Deficit or a
Securitization Value Collateral Deficit.
"Collateral Information" means the following information with respect to
each Mortgage Loan: (i) Seller's loan number, (ii) the Mortgagor's name, (iii)
the address of the Mortgaged Property, (iv) the current interest rate, (v) the
original balance, (vi) current balance as of the first day of the current month,
(vii) the paid to date and the next payment date, (viii) the appraised value of
the Mortgaged Property at the time the Mortgage Loan was originated, (ix)
whether interest rate is fixed or adjustable (and if adjustable, the ARM code,
which includes the index, adjustment frequency, spread and caps), (x) the lien
position of the Mortgage Loan on the Mortgaged Property (and if a second lien,
the outstanding principal balance of the first lien at the time the Mortgage
Loan was originated), (xi) the occupancy status of the Mortgaged Property
(including whether owner occupied), (xii) whether the Mortgage Loan is a Balloon
Loan, (xiii) the first payment date, (xiv) the maturity date, (xv) the principal
and interest payment, (xvi) the property type of the Mortgaged Property, (xvii)
the Mortgagor's Credit Score (where available in the Mortgage File), (xviii) the
Mortgage Loan grade and FICO score (where available in the Mortgage File), and
(xix) the delinquency status.
"Confirmation" has the meaning specified in Section 3(a).
"Custodial Agreement" means that amended and restated custodial
agreement, dated as of February 10, 1999, as amended, modified or supplemented
from time to time, by and among Buyer, Seller and the Custodian.
"Custodial Delivery" means the form executed by the Seller in order to
deliver a Mortgage Loan Schedule and/or Mortgage Files to Buyer or its designee
(including the Custodian) pursuant to Section 7, a form of which is attached
hereto as Exhibit II.
"Custodian" means the custodian under the Custodial Agreement. The
initial custodian is Bankers Trust Company of California, N.A.
"Delinquent" means, with respect to any Mortgage Loan, the period of
time from the date on which a Mortgagor fails to pay an obligation under the
terms of such Mortgage Loan to the date on which such payment is made.
"EBITDA" means, for any period, Net Income for such period plus, without
duplication and to the extent reflected as a charge in the statement of such Net
Income for such period, the sum of (a) total income tax expense, (b) interest
expense, (c) depreciation and amortization expense, (d) amortization of
intangibles (including, but not limited to, goodwill) and organization costs,
(e) any extraordinary expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Net Income for such
period, losses on sales of assets outside of the ordinary course of business),
and (f) any other noncash charges, and minus, to the extent included in the
statement of such Net Income for such period, the sum of (a) any extraordinary
income or gains (including, whether or not otherwise includable as a separate
item in the statement of such Net Income for such period, gains on the sales of
assets outside of the
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ordinary course of business) and (b) any other noncash income (other than any
income represented by a receivable that in the ordinary course would be expected
to be paid in cash), all as determined on a consolidated basis.
"Event of Default" has the meaning specified in Section 13.
"Fee Letter" has the meaning specified in Section 3(h).
"First Mortgage" means the Mortgage that is the first lien on the
Mortgaged Property.
"Forward Commitment Provider" means a Person who enters into a formal
commitment to purchase Mortgage Loans from the Seller and who is approved by
Buyer in its sole discretion.
"GAAP" means with respect to the financial statements or other financial
information of any Person, generally accepted accounting principles in the
United States which are in effect from time to time.
"Guarantor" means Aames Financial Corporation.
"Hedge" means, with respect to any or all of the Mortgage Loans, any
interest rate swap, cap or collar agreement or similar arrangements providing
for protection against fluctuations in interest rates or the exchange of nominal
interest obligations, either generally or under specific contingencies, entered
into by Seller, and reasonably acceptable to the Buyer.
"HUD" means the United States Department of Housing and Urban
Development.
"Income" means, with respect to any Mortgage Loan at any time, any
principal thereof then payable and all interest, dividends or other
distributions payable thereon less any related servicing fee(s) charged by the
Servicer.
"Interest Coverage Ratio" means for any period, the ratio of (a) EBITDA
of Guarantor and its subsidiaries for such period to (b) Interest Expense for
such period.
"Interest Expense" means for any period, total interest expense, both
expensed and capitalized, of Guarantor and its subsidiaries for such period with
respect to all outstanding indebtedness of Guarantor and its subsidiaries
(including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under interest rate protection agreements), determined on a
consolidated basis in accordance with GAAP, net of interest income of Guarantor
and its subsidiaries for such period (determined on a consolidated basis in
accordance with GAAP).
"Leverage Ratio" means, at any time, the ratio of (i) the aggregate
principal amount of all indebtedness of Guarantor and its subsidiaries at such
time which on a consolidated basis in accordance with GAAP would be required to
be reflected on a consolidated balance sheet of Guarantor and its subsidiaries
as a liability to (ii) the Net Worth at such time.
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"LIBOR" means the London Interbank Offered Rate for one-month United
States dollar deposits as set forth on page 3750 of Telerate as of 11:00 a.m.,
London time, on the date of determination.
"Loan-to-Value Ratio" means with respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of such Mortgage Loan at the date of origination and the denominator of
which is the lowest of (a) the value of the related Mortgaged Property as set
forth in the appraisal of such Mortgaged Property obtained in connection with
the origination of such Mortgage Loan, (b) the purchase price of the Mortgaged
Property or (c) the review appraisal, if any, provided that the appraised value
shown in the review appraisal is less than the appraised value at origination by
a variance of 10% or greater. For purposes of calculating the Loan-to-Value
Ratio of a Mortgage Loan secured by a second Mortgage, the principal balance of
the related First Mortgage as well as the second Mortgage shall be included in
the numerator.
"Market Value" means as of any date with respect to any Mortgage Loan,
the price at which such Mortgage Loan could readily be sold as determined by
Buyer in its sole discretion; provided, that Buyer may take into consideration
the price at which the Forward Commitment Provider will buy such Mortgage Loan
from Seller and any ▇▇▇▇▇▇ with respect to such Mortgage Loans; provided,
further, that Buyer shall not take into account, for purposes of calculating
Market Value, any Mortgage Loan (i) which has been subject to Transactions for
more than 90 days (provided that this clause (i) shall not apply to Purchased
Mortgage Loans which do not exceed in the aggregate 20% of the aggregate
outstanding principal balance of Purchased Mortgage Loans subject to then
outstanding Transactions), (ii) which is referred to in the parenthetical in the
preceding clause (i) and has been subject to Transactions for more than 180
days, (iii) which, together with the other Mortgage Loans subject to then
outstanding Transactions, would cause the 30+ Delinquency Percentage to exceed
5.0%, (iv) which is more than 59 days Delinquent , (v) which is a Wet Ink
Mortgage Loan for more than 7 Business Days or (vi) with respect to which there
is a breach of a representation, warranty or covenant made by Seller in this
Agreement that materially adversely affects Buyer's interest in such Mortgage
Loan and which breach has not been cured.
"Market Value Collateral Deficit" has the meaning specified in Section
4(a).
"Mortgage" means a mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first or second lien on or a first
or second priority ownership interest in an estate in fee simple in real
property and the improvements thereon, securing a mortgage note or similar
evidence of indebtedness.
"Mortgage File" means the documents specified as the "Mortgage File" in
Section 7(d).
"Mortgage Loan" means (i) non-securitized whole loan, namely a
conventional mortgage loan secured by a first or second lien on a one to four
family residential property or mixed-use
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property including, without limitation, a Wet Ink Mortgage Loan, or (ii) other
type of non-securitized whole loan as may be agreed upon in writing by the
parties hereto from time to time.
"Mortgage Loan Schedule" means a schedule of Mortgage Loans attached to
each Trust Receipt, Confirmation and Custodial Delivery.
"Mortgage Note" means a note or other evidence of indebtedness of a
Mortgagor secured by a Mortgage.
"Mortgaged Property" means the real property securing repayment of the
debt evidenced by a Mortgage Note.
"Mortgagee" means the record holder of a Mortgage Note secured by a
Mortgage.
"Mortgagor" means the obligor on a Mortgage Note and the grantor of the
related Mortgage.
"Net Income" means, for any period, the consolidated net income (or
loss) for such period, determined on a consolidated basis in accordance with
GAAP.
"Net Worth" mean the amount which would be included under stockholders'
equity on a consolidated balance sheet of Guarantor and its subsidiaries
determined on a consolidated basis in accordance with GAAP
"Periodic Payment" has the meaning specified in Section 5(b).
"Person" means an individual, partnership, corporation, joint stock
company, trust or unincorporated organization or a governmental agency or
political subdivision thereof.
"Price Differential" means, with respect to any Transaction hereunder as
of any date, the aggregate amount obtained by daily application of the Pricing
Rate for such Transaction to the Purchase Price for such Transaction on a 360
day per year basis for the actual number of days during the period commencing on
(and including) the Purchase Date for such Transaction and ending on (but
excluding) the Repurchase Date (reduced by any amount of such Price Differential
previously paid by Seller to Buyer with respect to such Transaction).
"Pricing Rate" means, with respect to a Transaction, the per annum
percentage rate specified in the related Confirmation for determination of the
Price Differential which shall not exceed LIBOR as of the applicable Purchase
Date plus the applicable Pricing Spread.
"Pricing Spread" means the rate specified in the Confirmation, which
shall be equal to (i) on each date prior to the delivery to the Custodian of the
complete Mortgage Files with respect to the related Purchased Mortgage Loans,
1.75% and (ii) on each date on and after the delivery to the Custodian of such
Mortgage Files, 1.25%.
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"Prime Rate" means the rate of interest published by The Wall Street
Journal, northeast edition, as the "prime rate."
"Purchase Date" means the date on which Purchased Mortgage Loans are
transferred by Seller to Buyer or its designee (including the Custodian) as
specified in the Confirmation.
"Purchase Price" means on each Purchase Date, the price at which
Purchased Mortgage Loans are transferred by Seller to Buyer or its designee
(including the Custodian).
"Purchased Mortgage Loans" means the Mortgage Loans (including any
Additional Loans) sold by Seller to Buyer in a Transaction, any Additional Loans
and any Substituted Mortgage Loans.
"Replacement Loans" has the meaning specified in Section 14(b)(ii).
"Repurchase Date" means the date on which Seller is to repurchase the
Purchased Mortgage Loans from Buyer, including any date determined by
application of the provisions of Sections 3 or 14, as specified in the
Confirmation; provided that in no event shall such date be more than 30 days
after the Purchase Date.
"Repurchase Price" means the price at which Purchased Mortgage Loans are
to be transferred from Buyer or its designee (including the Custodian) to Seller
upon termination of a Transaction, which will be determined in each case
(including Transactions terminable upon demand) as the sum of the Purchase Price
and the Price Differential as of the date of such determination decreased by all
cash, Income and Periodic Payments actually received by Buyer pursuant to
Sections 4(a), 5(a) and 5(b), respectively, with respect to such Transaction.
"Securitization Value" means, as of any date with respect to any
Mortgage Loans, the price at which such Mortgage Loans could be securitized and
sold in a securitization as determined by Buyer in its sole discretion;
provided, that the Buyer may take into consideration any ▇▇▇▇▇▇ with respect to
such Mortgage Loans; provided, however, that Buyer shall not take into account,
for purposes of calculating Securitization Value, any Mortgage Loan (i) which
has been subject to Transactions for more than 90 days (provided this clause (i)
shall not apply to Purchased Mortgage Loans which do not exceed in the aggregate
20% of the aggregate outstanding principal balance of Purchased Mortgage Loans
subject to then outstanding Transactions), (ii) which is referred to in the
parenthetical in the preceding clause (i) and has been subject to Transactions
for more than 180 days, (iii) which, together with the other Mortgage Loans
subject to then outstanding Transactions, would cause the 30+ Delinquency
Percentage to exceed 5.0%, (iv) which is more than 59 days Delinquent, (v) which
is a Wet Ink Mortgage Loan for more than 7 Business Days or (vi) with respect to
which there is a breach of a representation, warranty or covenant made by Seller
in this Agreement that materially adversely affects Buyer's interest in such
Mortgage Loan and which breach has not been cured.
"Securitization Value Collateral Deficit" has the meaning specified in
Section 4(a).
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"Seller" has the meaning specified in Section 1.
"Servicing Records" has the meaning specified in Section 25.
"Substituted Mortgage Loans" means any Mortgage Loans substituted for
Purchased Mortgage Loans in accordance with Section 9 hereof.
"Tangible Net Worth" means, at any time, Net Worth at such time, minus
intangible assets included in determining Net Worth.
"30+ Delinquency Percentage" means the fraction, expressed as a
percentage, the numerator of which is the aggregate outstanding principal
balance of Purchased Mortgage Loans subject to then outstanding Transactions
which are more than 30 days Delinquent and the denominator of which is the
aggregate outstanding principal balance of all Purchased Mortgage Loans subject
to then outstanding Transactions.
"Transaction" has the meaning specified in Section 1.
"Trigger Event" means the occurrence of any of the following with
respect to Guarantor and its subsidiaries on a consolidated basis:
(a) Net Worth shall be less than (i) $125,000,000 at any time from the
date of this Agreement to (but excluding) June 30, 1999, (ii) $170,000,000 on
June 30, 1999 or (iii) thereafter, $170,000,000 plus 90% of all additional
shareholders' equity raised, determined in accordance with GAAP, since the date
of this Agreement plus 75% of all cumulative reported net income, determined in
accordance with GAAP, since the date of this Agreement;
(b) Tangible Net Worth shall be less than (i) $125,000,000 at any time
from the date of this Agreement to (but excluding) June 30, 1999, (ii)
$170,000,000 on June 30, 1999 or (iii) thereafter, $170,000,000 plus 90% of all
additional shareholders' equity raised, determined in accordance with GAAP,
since the date of this Agreement plus 75% of all cumulative reported net income,
determined in accordance with GAAP, since the date of this Agreement; or
(c) the Leverage Ratio shall exceed 4.5 to 1.0.
"Trust Receipt" means a trust receipt issued by Custodian to Buyer
confirming the Custodian's possession of certain mortgage loan files which are
the property of and held by Custodian for the benefit of the Buyer or the
registered holder of such trust receipt.
"Wet Ink Mortgage Loan" means a Mortgage Loan for which a Mortgage File
has not been delivered to the Custodian.
"Year 2000 Compliant" has the meaning specified in Section 10(d).
"Year 2000 Problem" has the meaning specified in Section 10(d).
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3. INITIATION; CONFIRMATION; TERMINATION; MAXIMUM TRANSACTION AMOUNTS
(a) Each agreement to enter into a Transaction must be entered into in
writing at the initiation of Seller. In any event, Buyer shall confirm the terms
of each Transaction by issuing a written confirmation to Seller promptly after
the parties enter into such Transaction in the form of Exhibit I attached hereto
(a "Confirmation"). Such Confirmation shall describe the Purchased Mortgage
Loans, identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the
Purchase Price, (iii) the Repurchase Date, unless the Transaction is stated to
be terminable on demand as stated in the Confirmation, (iv) the Pricing Rate
applicable to the Transaction, (v) the applicable Collateral Amount Percentages
and (vi) additional terms or conditions not inconsistent with this Agreement.
After receipt of the Confirmation, Seller shall, subject to the provisions of
subsection (c) below, sign the Confirmation and promptly return it to Buyer. The
Purchase Price for any Transaction shall exceed $750,000.
(b) Any Confirmation by Buyer shall be deemed to have been received by
Seller on the date actually received by Seller.
(c) Each Confirmation, together with this Agreement, shall be conclusive
evidence of the terms of the Transaction(s) covered thereby unless objected to
in writing by Seller no more than two (2) Business Days after the date the
Confirmation was received by Seller or unless a corrected Confirmation is sent
by Buyer. An objection sent by Seller must state specifically that writing which
is an objection, must specify the provision(s) being objected to by Seller, must
set forth such provision(s) in the manner that the Seller believes they should
be stated, and must be received by Buyer no more than two (2) Business Days
after the Confirmation was received by Seller. Buyer shall promptly respond to
any such objection raised by Seller.
(d) In the case of Transactions terminable upon demand, such demand
shall be made by Buyer or Seller by telephone or otherwise, no later than 1:00
p.m. (New York Time) on the Business Day prior to the Repurchase Date.
(e) On the Repurchase Date, termination of the Transaction will be
effected by transfer to Seller or its designee of the Purchased Mortgage Loans
(and any Income in respect thereof received by Buyer not previously credited or
transferred to, or applied to the obligations of, Seller pursuant to Section 5)
against the simultaneous transfer of the Repurchase Price to an account of
Buyer. Seller is obligated to obtain the Mortgage Files from Buyer or its
designee at Seller's expense on the Repurchase Date.
(f) With respect to all Transactions hereunder, the aggregate Purchase
Price for all Purchased Mortgage Loans at any one time subject to then
outstanding Transactions shall not exceed $300,000,000. The Purchase Price for
any individual Purchased Mortgage Loan under this Agreement shall not exceed the
unpaid principal balance of such Purchased Mortgage Loan.
(g) Buyer shall not be obligated to enter into any Transaction until
such time as Capital Z Financial Services Fund II, L.P. has made an equity
contribution to Seller in an amount
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equal to $75,000,000 less expenses.
(h) On the date of execution of this Agreement, Seller shall pay to
Buyer a commitment fee pursuant to a separate letter agreement dated the date
hereof (the "Fee Letter") among Seller, Buyer and Guarantor.
(i) Buyer shall not be obligated to enter into any Transaction until
such time as Buyer shall have received copies of each material agreement or
instrument entered into by Guarantor, Seller or any of their respective
subsidiaries with respect to indebtedness for borrowed money, certified by the
chief financial officer or vice president of finance of Guarantor or Seller as
being a true and correct copy of such agreement or instrument, as the case may
be, and in full force and effect.
4. COLLATERAL AMOUNT MAINTENANCE
(a) Buyer shall ▇▇▇▇ to market the Mortgage Loans in its sole
discretion, but at least monthly. If at any time the aggregate Market Value of
all Purchased Mortgage Loans subject to all Transactions is less than the
aggregate Collateral Amount for all such Transactions (a "Market Value
Collateral Deficit"), then Buyer may by notice to Seller require Seller to
transfer to Buyer or its designee (including the Custodian) Mortgage Loans
("Additional Loans") or cash or other collateral acceptable to Buyer, so that
the cash and aggregate Market Value of the Purchased Mortgage Loans and other
collateral, including any such Additional Loans, will thereupon equal or exceed
the aggregate Collateral Amount. If at any time the aggregate Securitization
Value of all Mortgage Loans subject to Transactions is less than the aggregate
Collateral Amount for all such Transactions (a "Securitization Value Collateral
Deficit"), then Buyer may by notice to Seller require Seller to transfer to
Buyer or its designee (including the Custodian) Additional Loans or cash or
other collateral acceptable to Buyer, so that the cash and aggregate
Securitization Value of the Purchased Mortgage Loans and other collateral,
including any such Additional Loans, will thereupon equal or exceed the
aggregate Collateral Amount.
(b) Notice required pursuant to subsection (a) above may be given by any
means of facsimile or telegraphic transmission. Seller shall transfer Additional
Loans or cash pursuant to subsection (a) above not later than 5:00 p.m. on
Business Day following the receipt of such notice. The failure of Buyer, on any
one or more occasions, to exercise its rights under subsection (a) of this
Section shall not change or alter the terms and conditions to which this
Agreement is subject or limit the right of the Buyer to do so at a later date.
Buyer and Seller agree that a failure or delay to exercise its rights under
subsection (a) of this Section shall not limit Buyer's rights under this
Agreement or otherwise existing by law or in any way create additional rights
for Seller.
(c) In the event that Seller fails to comply with the provisions of this
Section 4, Buyer shall not enter into any additional Transactions hereunder
after the date of such failure.
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5. INCOME PAYMENTS
(a) Where a particular Transaction's term extends over an Income payment
date on the Purchased Mortgage Loans subject to that Transaction such Income
shall be the property of Buyer. Seller shall instruct each Mortgagor to remit
all Income (including all tax and insurance escrow payments) to a lockbox under
the sole dominion and control of a financial institution (the "Lockbox Bank")
reasonably acceptable to Buyer. The Lockbox Bank shall upon receipt thereof
deposit all cash, checks, and other near cash items received in the lockbox to a
lockbox account, and shall promptly remit all Income (other than tax and
insurance escrow payments) on deposit in such lockbox account to the Collection
Account (as defined below).
(b) Seller shall establish on or prior to the date of the first
Transaction, and maintain for the Buyer's benefit, one or more collection
accounts pledged to the Buyer with a financial institution (the "Collection
Account Bank") reasonably acceptable to the Buyer, which may be interest-bearing
and entitled "Aames Capital Corporation in trust for ▇▇▇▇▇▇ Commercial Paper
Inc." (the "Collection Account"). Prior to the date of the first Transaction,
Seller shall cause the Collection Account Bank to deliver to the Buyer an
acknowledgment of the Buyer's security interest in the Collection Account (the
"Depository Acknowledgment"). The Depository Acknowledgment shall provide that
upon notice to the Collection Account Bank (which notice Buyer may deliver after
the occurrence of a Trigger Event, an Event of Default or a Market Value
Collateral Deficit or Securitization Value Collateral Deficit which is not cured
in accordance with Section 4), only Buyer shall be permitted to withdraw funds
from the Collection Account, such funds to be applied by Buyer to reduce the
outstanding Repurchase Price. Prior to the delivery by Buyer to the Collection
Account Bank of the notice referred to in the immediately preceding sentence,
all Income held in the Collection Account may be withdrawn by Seller for
servicing of the Mortgage Loans, administration of and escrow-related matters
pertaining to the Purchased Mortgage Loans and any other purposes approved by
Buyer.
(c) Notwithstanding that Buyer and Seller intend that the Transactions
hereunder be sales to Buyer of the Purchased Mortgage Loans, Seller shall pay by
wire transfer to Buyer the accreted value of the Price Differential (less any
amount of such Price Differential previously paid by Seller to Buyer) (each such
payment, a "Periodic Payment") on the earlier of (x) the fifth day of each month
(or if such day is not a Business Day, the following Business Day) or (y) the
related Repurchase Date. The Price Differential shall accrue, be calculated and
be compounded on a daily basis for each Purchased Mortgage Loan.
(d) Buyer shall offset against the Repurchase Price of each such
Transaction all Income and Periodic Payments actually received by Buyer pursuant
to Sections 5(a) and (b), respectively.
6. SECURITY INTEREST
(a) Buyer and the Seller intend that the Transactions hereunder be sales
to Buyer of the Purchased Mortgage Loans and not loans from Buyer to Seller
secured by the Purchased Mortgage Loans. However, in order to preserve Buyer's
rights under this Agreement in the event
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that a court or other forum recharacterizes the Transactions hereunder as loans
and as security for the performance by Seller of all of Seller's obligations to
Buyer under this Agreement and the Transactions entered into pursuant to this
Agreement, Seller grants Buyer a first priority security interest in the
Purchased Mortgage Loans, Servicing Records, insurance relating to the Purchased
Mortgage Loans, Income, any and all ▇▇▇▇▇▇, any and all custodial accounts and
escrow accounts relating to the Purchased Mortgage Loans, the Collection Account
and all cash or other property or amounts on deposit therein and any other
contract rights, general intangibles and other assets relating to the Purchased
Mortgage Loans or any interest in the Purchased Mortgage Loans and the servicing
of the Purchased Mortgage Loans and any and all replacements, substitutions,
distributions on or proceeds of any and all of the foregoing (collectively, the
"Collateral").
(b) Seller shall pay all fees and expenses associated with perfecting
Buyer's security interest in the Collateral, including, without limitation, the
cost of filing financing statements under the Uniform Commercial Code and, upon
the occurrence of an Event of Default, recording assignments of Mortgage, as and
when required by Buyer in its sole discretion.
7. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of funds
hereunder shall be in immediately available funds.
(b) On or before each Purchase Date, Seller shall deliver or cause to be
delivered to Buyer or its designee the Custodial Delivery in the form attached
hereto as Exhibit II.
(c) On the Purchase Date for each Transaction, ownership of the
Purchased Mortgage Loans shall be transferred to the Buyer or its designee
(including the Custodian) against the simultaneous transfer of the Purchase
Price to an account of Seller specified in the Confirmation. Seller,
simultaneously with the delivery to Buyer or its designee (including the
Custodian) of the Purchased Mortgage Loans relating to each Transaction hereby
sells, transfers, conveys and assigns to Buyer or its designee (including the
Custodian) without recourse, but subject to the terms of this Agreement, all the
right, title and interest of Seller in and to the Purchased Mortgage Loans
together with all right, title and interest in and to the proceeds of any
related insurance policies.
(d) In connection with each sale, transfer, conveyance and assignment,
on or prior to each Purchase Date with respect to each Mortgage Loan which is
not a Wet Ink Mortgage Loan (or with respect to item (vii) below within seven
Business Days after the Purchase Date), the Seller shall deliver or cause to be
delivered and released to the Custodian the following original documents
(collectively the "Mortgage File"), pertaining to each of the Purchased Mortgage
Loans identified in the Custodial Delivery delivered therewith:
(i) the original Mortgage Note bearing all intervening
endorsements (or allonges), endorsed "Pay to the order of ________,
without recourse" and signed in the name of the last endorsee (the "Last
Endorsee") by an authorized officer (in the event that
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the Mortgage Loan was acquired by the Last Endorsee in a merger, the
signature must be in the following form: "[the Last Endorsee], successor
by merger to [name of predecessor]"; in the event that the Mortgage Loan
was acquired or originated while doing business under another name, the
signature must be in the following form: "[the Last Endorsee], formerly
known as [previous name]");
(ii) the original of any guarantee executed in connection with
the Mortgage Note (if any);
(iii) the original Mortgage with evidence of recording thereon or
a copy certified by Seller to have been sent for recording;
(iv) the originals of all assumption, modification, consolidation
or extension agreements, with evidence of recording thereon or copies
certified by Seller to have been sent for recording;
(v) the original assignment of Mortgage in blank for each
Mortgage Loan, in form and substance acceptable for recording and signed
in the name of the Last Endorsee (in the event that the Mortgage Loan
was acquired by the Last Endorsee in a merger, the signature must be in
the following form: "[the Last Endorsee], successor by merger to [name
of predecessor]"; in the event that the Mortgage Loan was acquired or
originated while doing business under another name, the signature must
be in the following form: "[the Last Endorsee], formerly known as
[previous name]");
(vi) the originals of all intervening assignments of mortgage
with evidence of recording thereon or copies certified by Seller to have
been sent for recording;
(vii) the original policy of title insurance or a true copy
thereof or, if such policy has not yet been delivered by the insurer,
the commitment or binder to issue the same; and
(viii) the original of any security agreement, chattel mortgage
or equivalent document executed in connection with the Mortgage (if
any).
(e) In connection with each sale, transfer, conveyance and assignment,
on or prior to the seventh Business Day following each Purchase Date with
respect to each Mortgage Loan which is a Wet Ink Mortgage Loan, Seller shall
deliver or cause to be delivered to the Custodian a complete Mortgage File. On
the date on which the Buyer receives a Trust Receipt from the Custodian
certifying that a complete Mortgage File with respect to a Wet Ink Mortgage Loan
is in the possession of the Custodian, such Wet Ink Mortgage Loan be deemed a
standard Mortgage Loan (and no longer a Wet Ink Mortgage Loan) for all purposes
hereunder, including, without limitation, determination of the Pricing Spread
and compliance with subsection (zz) of Exhibit V.
(f) With respect to each Mortgage Loan delivered by Seller to Buyer or
its designee (including the Custodian), Seller shall have executed an omnibus
power of attorney substantially
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in the form of Exhibit III attached hereto irrevocably appointing Buyer its
attorney-in-fact with full power to complete and record the assignment of
Mortgage, complete the endorsement of the Mortgage Note and take such other
steps as may be necessary or desirable to enforce Buyer's rights against such
Mortgage Loans, the related Mortgage Files and the Servicing Records.
(g) Buyer shall deposit the Mortgage Files representing the Purchased
Mortgage Loans, or direct that the Mortgage Files be deposited directly, with
the Custodian. The Mortgage Files shall be maintained in accordance with the
Custodial Agreement.
(h) Any Mortgage Files not delivered to Buyer or its designee (including
the Custodian) are and shall be held in trust by Seller or its designee for the
benefit of Buyer as the owner thereof. Seller or its designee shall maintain a
copy of the Mortgage File and the originals of the Mortgage File not delivered
to Buyer or its designee. The possession of the Mortgage File by Seller or its
designee is at the will of the Buyer for the sole purpose of servicing the
related Purchased Mortgage Loan, and such retention and possession by the Seller
or its designee is in a custodial capacity only. The books and records
(including, without limitation, any computer records or tapes) of Seller or its
designee shall be marked appropriately to reflect clearly the sale of the
related Purchased Mortgage Loan to Buyer. Seller or its designee (including the
Custodian) shall release its custody of the Mortgage File only in accordance
with written instructions from Buyer, unless such release is required as
incidental to the servicing of the Purchased Mortgage Loans or is in connection
with a repurchase of any Purchased Mortgage Loan by Seller.
8. REHYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS
Title to all Purchased Mortgage Loans shall pass to Buyer and Buyer
shall have free and unrestricted use of all Purchased Mortgage Loans. Nothing in
this Agreement shall preclude Buyer from engaging in repurchase transactions
with the Purchased Mortgage Loans or otherwise assigning, syndicating,
participating, sub-participating, pledging, repledging, hypothecating, or
rehypothecating the Purchased Mortgage Loans, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Mortgage Loans to Seller
pursuant to Section 3. Seller shall cooperate with Buyer's reasonable requests
to complete such assignments, syndication, participation or pledge. Nothing
contained in this Agreement shall obligate Buyer to segregate any Purchased
Mortgage Loans delivered to Buyer by Seller. In the event that there is a
material adverse change or other development in the repurchase markets which
results in Buyer being unable to finance its position through the repurchase
market with its traditional repurchase counterparties, Buyer may accelerate the
Repurchase Date for any outstanding Transactions following reasonable written
notice to Seller of the occurrence of such event.
9. SUBSTITUTION
(a) Subject to Section 9(b) and the agreement of Buyer, Seller may, upon
one (1) Business Days written notice to Buyer, with a copy to Custodian,
substitute Mortgage Loans or other assets for any Purchased Mortgage Loans. Such
substitution shall be made by transfer to Buyer or its designee (including the
Custodian) of the Mortgage File of such other Mortgage
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Loans together with a Custodial Delivery and transfer to Seller or its designee
of the Purchased Mortgage Loans requested for release. After substitution, the
substituted Mortgage Loans, shall be deemed to be Purchased Mortgage Loans
subject to the same Transaction as the released Mortgage Loans.
(b) Notwithstanding anything to the contrary in this Agreement, Seller
may not substitute other Mortgage Loans or other assets for any Purchased
Mortgage Loans if (i) after taking into account such substitution, a Collateral
Deficit would occur, (ii) such substitution would cause a breach of any
provision of this Agreement or (iii) the Market Value of the Mortgage Loans or
assets substituted is less than the Market Value of such Purchased Mortgage
Loans.
10. REPRESENTATIONS AND WARRANTIES
(a) Each of Buyer and Seller represents and warrants to the other that
(i) it is duly authorized to execute and deliver this Agreement, to enter into
the Transactions contemplated hereunder and to perform its obligations hereunder
and has taken all necessary action to authorize such execution, delivery and
performance; (ii) it will engage in such Transactions as principal; (iii) the
person signing this Agreement on its behalf is duly authorized to do so on its
behalf; (iv) no approval, consent or authorization of the Transactions
contemplated by this Agreement from any federal, state, or local regulatory
authority having jurisdiction over it is required or, if required, such
approval, consent or authorization has been or will, prior to the first Purchase
Date, be obtained; (v) the execution, delivery, and performance of this
Agreement and the Transactions hereunder will not violate any law, regulation,
order, judgment, decree, ordinance, charter, by-law, or rule applicable to it or
its property or constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under or result in a breach of any
agreement or other instrument by which it is bound or by which any of its assets
are affected; (vi) it has received approval and authorization to enter into this
Agreement and each and every Transaction actually entered into hereunder
pursuant to its internal policies and procedures; and (vii) neither this
Agreement nor any Transaction pursuant hereto are entered into in contemplation
of insolvency or with intent to hinder, delay or defraud any creditor.
(b) Seller represents and warrants to Buyer that as of the Purchase Date
for the purchase of any Purchased Mortgage Loans by Buyer from Seller and as of
the date of this Agreement and any Transaction hereunder and at all times while
this Agreement and any Transaction hereunder is in full force and effect:
(i) Organization. Seller is duly organized, validly existing and
in good standing under the laws and regulations of the state of
California and is duly licensed, qualified, and in good standing in
every state where Seller transacts business and in any state where any
Mortgaged Property is located if the laws of such state require
licensing or qualification in order to conduct business of the type
conducted by Seller therein.
(ii) No Litigation. There is no action, suit, proceeding,
arbitration or investigation pending or, to Seller's knowledge,
threatened against Seller which, either in
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any one instance or in the aggregate, may result in any material adverse
change in the business, operations, financial condition, properties or
assets of Seller, or in any material impairment of the right or ability
of Seller to carry on its business substantially as now conducted, or in
any material liability on the part of Seller, or which if adversely
determined would affect the validity of this Agreement or any of the
Purchased Mortgage Loans or of any action taken or to be taken in
connection with the obligations of Seller contemplated herein, or which
would be likely to impair materially the ability of Seller to perform
under the terms of this Agreement;
(iii) No Broker. Seller has not dealt with any broker, investment
banker, agent, or other person, except for Buyer, who may be entitled to
any commission or compensation in connection with the sale of Purchased
Mortgage Loans pursuant to this Agreement;
(iv) Good Title to Collateral. Purchased Mortgage Loans shall be
free and clear of any lien, encumbrance or impediment to transfer, and
Seller has good, valid and marketable title and the right to sell and
transfer such Purchased Mortgage Loans to Buyer.
(v) Delivery of Mortgage File. With respect to each Purchased
Mortgage Loan (other than a Wet Ink Mortgage Loan), the Mortgage Note,
the Mortgage, the assignment of Mortgage and any other documents
required to be delivered under this Agreement and the Custodial
Agreement for the Mortgage Loans have been delivered to the Custodian.
Seller or its designee is in possession of a complete, true and accurate
Mortgage File with respect to the Mortgage Loans, except for such
documents the originals of which have been delivered to the Custodian.
(vi) Selection Process. The Purchased Mortgage Loans were
selected from among the outstanding mortgage loans in Seller's portfolio
as to which the representations and warranties set forth in this
Agreement could be made and such selection was not made in a manner so
as to affect adversely the interests of Buyer.
(vii) No Untrue Statements. To the best of Seller's knowledge,
neither this Agreement nor any written statement made, or any report or
other document issued or delivered or to be issued or delivered by
Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements
contained herein or therein not misleading;
(viii) Origination Practices. The origination practices used by
Seller with respect to each Mortgage Loan (i) have been and are in all
respects legal and proper in the mortgage origination business and (ii)
are in accordance with the underwriting guidelines previously supplied
by Seller to Buyer;
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(ix) Performance of Agreement. Seller does not believe, nor does
it have any reason or cause to believe, that it cannot perform each and
every covenant contained in this Agreement on its part to be performed;
(x) Seller Not Insolvent. Seller is not, and with the passage of
time does not expect to become, insolvent; and
(xi) No Event of Default. No Event of Default has occurred and is
continuing hereunder.
(c) Seller represents and warrants to the Buyer that each Purchased
Mortgage Loan sold hereunder and each pool of Purchased Mortgage Loans sold in a
Transaction hereunder, as of the related Purchase Date, conforms to the
representations and warranties set forth in Exhibit V attached hereto and that
each Mortgage Loan delivered hereunder as Additional Loans or Substituted
Mortgage Loans, as of the date of such delivery, conforms to the representations
and warranties set forth in Exhibit V hereto. Seller further represents and
warrants to the Buyer that, as of the seventh Business Day of each month, the
Collateral Information delivered on such day with respect to each Purchased
Mortgage Loan is complete, true and correct. It is understood and agreed that
the representations and warranties set forth in Exhibit V hereto, if any, shall
survive delivery of the respective Mortgage File to Buyer or its designee
(including the Custodian).
(d) Seller represents and warrants to the Buyer that Seller has (i)
initiated a review and assessment of all areas within its and each of its
subsidiaries' business and operations (including those affected by suppliers,
vendors and customers) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by Seller or any of
its subsidiaries (or suppliers, vendors and customers) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with that timetable. Based on the
foregoing, Seller believes that all computer applications (including those of
its suppliers, vendors and customers) that are material to its or any of its
subsidiaries' business and operations are reasonably expected on a timely basis
to be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 Compliant").
(e) On the Purchase Date for any Transaction, Buyer and Seller shall
each be deemed to have made all the foregoing representations with respect to
itself as of such Purchase Date.
11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until
this Agreement is no longer in force with respect to any Transaction, Seller
covenants that it will not:
(a) take any action which would directly or indirectly impair or
adversely affect Buyer's title to or the value of the Purchased Mortgage Loans;
or
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(b) pledge, assign, convey, grant, bargain, sell, set over, deliver or
otherwise transfer any interest in the Purchased Mortgage Loans to any person
not a party to this Agreement nor will the Seller create, incur or permit to
exist any lien, encumbrance or security interest in or on the Purchased Mortgage
Loans except as described in Section 6 of this Agreement.
12. AFFIRMATIVE COVENANTS OF THE SELLER
For so long as this Agreement is in effect:
(a) Seller covenants that it will promptly notify Buyer of any material
adverse change in its business operations and/or financial condition.
(b) Seller shall provide Buyer with copies of such documentation as
Buyer may reasonably request evidencing the truthfulness of the representations
set forth in Section 10, including but not limited to resolutions evidencing the
approval of this Agreement by Seller's board of directors or loan committee and
copies of the minutes of the meetings of Seller's board of directors or loan
committee at which this Agreement and the Transactions contemplated by this
Agreement were approved.
(c) Seller shall, at Buyer's request, take all action necessary to
ensure that Buyer will have a first priority security interest in the Purchased
Mortgage Loans, including, among other things, filing such Uniform Commercial
Code financing statements as Buyer may reasonably request.
(d) Seller covenants that it will not create, incur or permit to exist
any lien, encumbrance or security interest in or on any of the Collateral
without the prior express written consent of Buyer.
(e) Seller shall notify Buyer no later than one (1) Business Day after
obtaining actual knowledge thereof, if any event has occurred that constitutes
an Event of Default with respect to Seller or any event that with the giving of
notice or lapse of time, or both, would become an Event of Default with respect
to Seller.
(f) Seller covenants that each Purchased Mortgage Loan subject to this
Agreement shall be serviced in accordance with Section 25 hereof.
(g) Seller covenants to provide Buyer with a copy of any material
changes to Seller's underwriting guidelines prior to the effectiveness of any
such change. Buyer shall use commercially reasonable efforts to notify Seller
within 7 Business Days of receipt of such changes if such changes are
acceptable. If such changes are not acceptable to Buyer in its sole discretion,
Buyer shall not be obligated to purchase Mortgage Loans hereunder that are
originated in accordance with such changed underwriting guidelines.
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(h) Seller covenants, upon request of Buyer after the occurrence of a
Collateral Deficit, to enter into hedging transactions with respect to fixed
rate Purchased Mortgage Loans in order to protect adequately, in the reasonable
judgment against interest rate risks.
(i) Seller covenants to provide Buyer on the seventh Business Day of
each month, either by direct modem electronic transmission or via a computer
diskette, the Collateral Information in computer readable format with respect to
all Purchased Mortgage Loans then subject to Transactions.
(j) Seller covenants to provide Buyer with the following financial and
reporting information:
(i) Within 90 days after the last day of its fiscal year,
Guarantor's audited consolidated statements of income and balance sheets
and statements of changes in cash flow for such year and balance sheets
as of the end of such year in each case presented fairly in accordance
with GAAP, and accompanied, in all cases, by an unqualified report of
Price ▇▇▇▇▇▇▇▇▇▇ ▇▇ or another nationally recognized independent
certified public accounting firm consented to by Buyer (which consent
shall not be unreasonably withheld);
(ii) Within 90 days after the last day of its fiscal year,
Seller's audited consolidated statements of income and balance sheets as
of the end of such year in each case presented fairly in accordance with
GAAP, and accompanied, in all cases, by an unqualified report of Price
▇▇▇▇▇▇▇▇▇▇ ▇▇ or another nationally recognized independent certified
public accounting firm consented to by Buyer (which consent shall not be
unreasonably withheld);
(iii) Within 60 days after the last day of the first three fiscal
quarters in any fiscal year, Seller's unaudited consolidated statements
of income and statements of changes in cash flow for such quarter and
balance sheets as of the end of such quarter presented fairly in
accordance with GAAP;
(iv) Within 30 days after the last day of each calendar month, an
officer's certificate from the chief financial officer or vice president
of finance of Seller addressed to Buyer certifying that, as of such
calendar month, (x) Seller is in compliance with all of the terms,
conditions and requirements of this Agreement (such certification to
include a calculation on a quarterly basis of the financial tests set
forth in Sections 13(xiii) - (xviii)), and (y) no Event of Default
exists;
(v) As soon as available, copies of all proxy statements,
financial statements, and reports which Guarantor sends to its
stockholders, and copies of all regular, periodic and special reports,
and all registration statements under the Securities Act of 1933, as
amended, which it files with the Securities and Exchange Commission or
any government authority which may be substituted therefor, or with any
national securities exchange
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(vi) Within 30 days after the last day of each fiscal quarter in
any fiscal year, an officer's certificate from the chief financial
officer or vice president of finance of Guarantor addressed to Buyer
certifying the calculation of Tangible Net Worth, including the
valuation (and the assumptions used to derive such valuation) of
residual certificates, interest-only certificates and other comparable
instruments with respect to securitizations of mortgage loans included
in the calculation of such Tangible Net Worth.
(k) Seller covenants to repurchase or substitute pursuant to Section 9
hereof any Mortgage Loan, within two Business Days following written notice from
Buyer, which as to a representation or warranty made by Seller set forth in
Exhibit V hereto proves to be incorrect or untrue in any material respect.
(l) Seller covenants to provide Buyer, within seven Business Days
following the execution thereof by the parties thereto, copies of each material
agreement or instrument entered into after the date of this Agreement by
Guarantor, Seller or any of their respective subsidiaries with respect to
indebtedness for borrowed money, certified by the chief financial officer or
vice president of finance of Guarantor or Seller as being a true and correct
copy of such agreement or instrument, as the case may be, and in full force and
effect.
13. EVENTS OF DEFAULT
If any of the following events (each an "Event of Default") occur,
Seller and Buyer shall have the rights set forth in Section 14, as applicable:
(i) Seller or Buyer fails to satisfy or perform any material
obligation or covenant under this Agreement;
(ii) an Act of Insolvency occurs with respect to Seller or Buyer;
(iii) any representation (excluding the representations and
warranties made with respect to the Mortgage Loans set forth on Exhibit
V hereto) made by Seller shall have been incorrect or untrue in any
material respect when made or repeated or deemed to have been made or
repeated;
(iv) Seller or Buyer shall admit its inability to, or its
intention not to, perform any of its obligations hereunder;
(v) any governmental, regulatory, or self-regulatory authority
takes any action to remove, limit, restrict, suspend or terminate the
rights, privileges, or operations of the Seller or any of its
Affiliates, including suspension as an issuer, lender or seller/servicer
of mortgage loans, which suspension has a material adverse effect on the
ordinary business operations of Seller or Seller's Affiliate, and which
continues for more than 24 hours;
(vi) Seller dissolves, merges or consolidates with another
entity (unless (A) it is the surviving party or (B) the entity into
which it mergers has equity and a market
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value of at least that of the Seller immediately prior to such merger
and such entity expressly assumes the obligations of the Seller at the
time of such merger), or sells, transfers, or otherwise disposes of a
material portion of its business or assets, except for the sale or
transfer of Mortgage Loans in the ordinary course of business;
(vii) Buyer, in its good faith judgment, believes that there has
been a material adverse change in the business, operations, corporate
structure or financial condition of Seller or that Seller will not meet
any of its obligations under any Transaction pursuant to this Agreement,
this Agreement or any other agreement between the parties;
(viii) Seller, Guarantor or any of their respective subsidiaries
shall fail to perform or shall violate any other material agreement or
instrument between any of them and Buyer or any of its Affiliates and
such failure or violation continues unremedied after any applicable
grace period therefor, or Seller, Guarantor or any of their respective
subsidiaries shall fail to pay when due or within any applicable grace
period therefor any portion of any single obligation constituting
indebtedness of Borrower, Guarantor or any of their respective
subsidiaries in excess of $1,000,000; or any default or other event
shall occur under or with respect to any agreement under which any
single obligation constituting indebtedness of Borrower, Guarantor or
any of their respective subsidiaries in excess of $1,000,000 was created
or is governed, the effect of which is to cause, or to permit the holder
or holder of such indebtedness to cause, such indebtedness to become due
prior to its stated maturity; or any single obligation constituting
indebtedness of Borrower, Guarantor or any of their respective
subsidiaries in excess of $1,000,000 shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
payment), prior to the stated maturity thereof;
(ix) A final judgment by any competent court in the United States
of America for the payment of money in an amount of at least $1,000,000
is rendered against the Seller, and the same remains undischarged or
unpaid for a period of sixty (60) days during which execution of such
judgment is not effectively stayed;
(x) This Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Purchased Mortgage Loans
purported to be covered hereby;
(xi) A Market Value Collateral Deficit or Securitization Value
Collateral Deficit occurs with respect to Seller or Buyer, as
applicable, and is not eliminated within the time period specified in
Section 4(b);
(xii) Capital Z Financial Services Fund II, L.P. shall have
failed to make an additional equity contribution, or cause an additional
equity contribution to be made, to Seller in an amount equal to
$25,000,000 by June 30, 1999;
(xiii) Net Worth shall be less than (i) $125,000,000 at any time
from the date of this Agreement to (but excluding) June 30, 1999, (ii)
$155,000,000 on June 30, 1999 or (iii) thereafter, $155,000,000 plus 90%
of all additional shareholders' equity raised,
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determined in accordance with GAAP, since the date of this Agreement
plus 75% of all cumulative reported net income, determined in accordance
with GAAP, since the date of this Agreement;
(xiv) Tangible Net Worth shall be less than (i) $125,000,000 at
any time from the date of this Agreement to (but excluding) June 30,
1999, (ii) $155,000,000 on June 30, 1999 or (iii) thereafter,
$155,000,000 plus 90% of all additional shareholders' equity raised,
determined in accordance with GAAP, since the date of this Agreement
plus 75% of all cumulative reported net income, determined in accordance
with GAAP, since the date of this Agreement;
(xv) at any time, the Leverage Ratio shall exceed 5.0 to 1.0;
(xvi) the Adjusted Leverage Ratio shall exceed (a) 2.25 to 1.0 on
the last Business Day of any calendar month or (b) 3.5 to 1.0 on any
other day;
(xvii) at any time on and after September 30,1999, the Interest
Coverage Ratio shall be less than 1.0 to 1.0;
(xviii) for any two consecutive fiscal quarters of Guarantor,
beginning with the fiscal quarter ending June 30, 1999, Guarantor and
its subsidiaries shall incur a loss on a consolidated basis in
accordance with GAAP; or
(xix) Seller or Guarantor shall fail to satisfy or perform any
obligation or covenant under the Fee Letter.
14. REMEDIES
(a) If an Event of Default occurs with respect to Seller, the following
rights and remedies are available to Buyer:
(i) At the option of Buyer, exercised by written notice to Seller
(which option shall be deemed to have been exercised, even if no notice
is given, immediately upon the occurrence of an Act of Insolvency), the
Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(ii) If Buyer exercises or is deemed to have exercised the option
referred to in subsection (a)(i) of this Section,
(A) Seller's obligations hereunder to repurchase all
Purchased Mortgage Loans in such Transactions shall thereupon
become immediately due and payable,
(B) to the extent permitted by applicable law, the
Repurchase Price with respect to each such Transaction shall be
increased by the aggregate amount obtained by daily application
of, on a 360 day per year basis for the actual number
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of days during the period from and including the date of the
exercise or deemed exercise of such option to but excluding the
date of payment of the Repurchase Price as so increased, (x) the
greater of the Prime Rate or the Pricing Rate for each such
Transaction to (y) the Repurchase Price for such Transaction as
of the Repurchase Date as determined pursuant to subsection
(a)(i) of this Section (decreased as of any day by (I) any
amounts actually in the possession of Buyer pursuant to clause
(C) of this subsection, (II) any proceeds from the sale of
Purchased Mortgage Loans applied to the Repurchase Price pursuant
to subsection (a)(xii) of this Section, and (III) any amounts
applied to the Repurchase Price pursuant to subsection (a)(iii)
of this Section), and
(C) all Income actually received by the Buyer or its
designee (including the Custodian) pursuant to Section 5 shall be
applied to the aggregate unpaid Repurchase Price owed by Seller.
(iii) After one Business Day's notice to Seller (which notice
need not be given if an Act of Insolvency shall have occurred, and which
may be the notice given under subsection (a)(i) of this Section), Buyer
may (A) immediately sell, without notice or demand of any kind, at a
public or private sale and at such price or prices Buyer may reasonably
deem satisfactory any or all Purchased Mortgage Loans subject to a
Transaction hereunder or (B) in its sole discretion elect, in lieu of
selling all or a portion of such Purchased Mortgage Loans, to give
Seller credit for such Purchased Mortgage Loans in an amount equal to
the Market Value of the Purchased Mortgage Loans against the aggregate
unpaid Repurchase Price and any other amounts owing by Seller hereunder.
The proceeds of any disposition of Purchased Mortgage Loans shall be
applied first to the costs and expenses incurred by Buyer in connection
with Seller's default; second to costs of cover and/or related hedging
transactions relating to Transactions and to losses, damages, costs or
expenses directly arising or resulting from the occurrence of the Event
of Default; third to the Repurchase Price; and fourth to any other
outstanding obligation of Seller to Buyer or its Affiliates.
(iv) The parties recognize that it may not be possible to
purchase or sell all of the Purchased Mortgage Loans on a particular
Business Day, or in a transaction with the same purchaser, or in the
same manner because the market for such Purchased Mortgage Loans may not
be liquid. In view of the nature of the Purchased Mortgage Loans, the
parties agree that liquidation of a Transaction or the underlying
Purchased Mortgage Loans does not require a public purchase or sale and
that a good faith private purchase or sale shall be deemed to have been
made in a commercially reasonable manner. Accordingly, Buyer may elect,
in its sole discretion, the time and manner of liquidating any Purchased
Mortgage Loan and nothing contained herein shall (A) obligate Buyer to
liquidate any Purchased Mortgage Loan on the occurrence of an Event of
Default or to liquidate all Purchased Mortgage Loans in the same manner
or on the same Business Day or (B) constitute a waiver of any right or
remedy of Buyer. However, in recognition of the parties' agreement that
the Transactions hereunder have been entered into in consideration of
and in reliance upon the fact that all Transactions hereunder constitute
a
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single business and contractual relationship and that each Transaction
has been entered into in consideration of the other Transactions, the
parties further agree that Buyer shall use its best efforts to liquidate
all Transactions hereunder upon the occurrence of an Event of Default as
quickly as is prudently possible in the reasonable judgment of Buyer.
(v) Buyer shall, without regard to the adequacy of the security
for the Seller's obligations under this Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without
notice, to take possession of and protect, collect, manage, liquidate,
and sell the Collateral or any portion thereof, and collect the payments
due with respect to the Collateral or any portion thereof. Seller shall
pay all costs and expenses incurred by Buyer in connection with the
appointment and activities of such receiver.
(vi) Seller agrees that Buyer may obtain an injunction or an
order of specific performance to compel Seller to fulfill its
obligations as set forth in Section 25, if Seller fails or refuses to
perform its obligations as set forth therein.
(vii) Seller shall be liable to Buyer for the amount of all
expenses, reasonably incurred by Buyer in connection with or as a
consequence of an Event of Default, including, without limitation,
reasonable legal fees and expenses and reasonable costs incurred in
connection with hedging or covering transactions relating to
Transactions.
(viii) Buyer shall have all the rights and remedies provided
herein, provided by applicable federal, state, foreign, and local laws
(including, without limitation, the rights and remedies of a secured
party under the Uniform Commercial Code of the State of New York, to the
extent that the Uniform Commercial Code is applicable, and the right to
offset any mutual debt and claim), in equity, and under any other
agreement between Buyer and Seller.
(ix) Buyer may exercise one or more of the remedies available to
Buyer immediately upon the occurrence of an Event of Default and, except
to the extent provided in subsections (a)(i) and (iii) of this Section,
at any time thereafter without notice to Seller. All rights and remedies
arising under this Agreement as amended from time-to-time hereunder are
cumulative and not exclusive of any other rights or remedies which Buyer
may have.
(x) In addition to its rights hereunder, Buyer shall have the
right to proceed against any assets of Seller which may be in the
possession of Buyer or its agent on Buyer's behalf including the right
to liquidate such assets and to set off the proceeds against monies owed
by Seller to Buyer pursuant to this Agreement. Buyer may set off cash,
the proceeds of the liquidation of the Purchased Mortgage Loans, any
Collateral or its proceeds, and all other sums or obligations owed by
Seller to Buyer against all of Seller's obligations to Buyer, whether
under this Agreement, under a Transaction, or under any other agreement
between the parties, or otherwise, whether or not such obligations are
then due, without prejudice to Buyer's right to recover any deficiency.
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Any cash, proceeds, or property in excess of any amounts due, or which
Buyer reasonably believes may become due, to it from Seller shall be
returned to Seller after satisfaction of all obligations of Seller to
Buyer.
(xi) Buyer may enforce its rights and remedies hereunder without
prior judicial process or hearing, and Seller hereby expressly waives
any defenses Seller might otherwise have to require Buyer to enforce its
rights by judicial process. Seller also waives any defense Seller might
otherwise have arising from the use of nonjudicial process, enforcement
and sale of all or any portion of the Collateral, or from any other
election of remedies. Seller recognizes that nonjudicial remedies are
consistent with the usages of the trade, are responsive to commercial
necessity and are the result of a bargain at arm's length.
(xii) Buyer and Seller hereby agree that sales of the Purchased
Mortgage Loans shall be deemed to include and permit the sales of
Purchased Mortgaged Loans pursuant to a securities offering. The net
proceeds of any such sale shall be applied to reduce the Repurchase
Price of outstanding Transactions.
(b) If an Event of Default occurs with respect to Buyer, the following
rights and remedies are available to Seller:
(i) Upon tender by Seller of payment of the aggregate Repurchase
Price for all such Transactions, Buyer's right, title and interest in
all Purchased Mortgage Loans subject to such Transactions shall be
deemed transferred to Seller, and Buyer shall deliver or cause to be
transferred all such Purchased Mortgage Loans to Seller or its designee
at Buyer's expense.
(ii) If Seller exercises the option referred to in subsection
(b)(i) of this Section and Buyer fails to deliver or cause to be
delivered the Purchased Mortgage Loans to Seller or its designee, after
one Business Day's notice to Buyer, Seller may (A) purchase Mortgage
Loans ("Replacement Loans") that are as similar as is reasonably
practicable in characteristics, outstanding principal amounts (as a
pool) and interest rate to any Purchased Mortgage Loans that are not
delivered by Buyer to Seller or its designee as required hereunder or
(B) in its sole discretion elect, in lieu of purchasing Replacement
Loans, to be deemed to have purchased Replacement Loans at a price
therefor on such date, equal to the Market Value of the Purchased
Mortgage Loans.
(iii) Buyer shall be liable to the Seller (A) with respect to
Purchased Mortgage Loans (other than Additional Loans), for any excess
of the price paid (or deemed paid) by Seller for Replacement Loans
therefor over the Repurchase Price for such Purchased Mortgage Loans and
(B) with respect to Additional Loans, for the price paid (or deemed
paid) by Seller for the Replacement Loans therefor. In addition, Buyer
shall be liable to Seller for interest on such remaining liability with
respect to each such purchase (or deemed purchase) of Replacement Loans
calculated on a 360-day year basis for the actual number of days during
the period from and including the date of such purchase (or
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deemed purchase) until paid in full by Buyer. Such interest shall be at
the greater of the Pricing Rate or the Prime Rate.
(iv) Buyer shall be liable to Seller for the amount of all
expenses reasonably incurred by Seller in connection with or as a
consequence of an Event of Default, including, without limitation,
reasonable legal fees and expenses and reasonable costs incurred in
connection with covering existing hedging transactions with respect to
the Purchased Mortgage Loans.
(v) Seller shall have all the rights and remedies provided
herein, provided by applicable federal, state, foreign, and local laws,
in equity, and under any other agreement between Buyer and Seller,
including, without limitation, the right to offset any debt or claim.
(vi) Seller may exercise one or more of the remedies available to
Seller immediately upon the occurrence of an Event of Default and at any
time thereafter without notice to Buyer. All rights and remedies arising
under this Agreement as amended from time-to-time hereunder are
cumulative and not exclusive of any other rights or remedies which
Seller may have.
15. ADDITIONAL CONDITION
Seller shall, on the date of the initial Transaction hereunder and, upon
the request of Buyer, on the date of any subsequent Transaction, cause to be
delivered to Buyer, with reliance thereon permitted as to any Person that
purchases the Purchased Mortgage Loan from Buyer in a repurchase transaction, a
favorable opinion or opinions of counsel with respect to the matters set forth
in Exhibit IV attached hereto.
16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereunto and will
enter into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and that each has been entered into in consideration of
the other Transactions. Accordingly, each of Buyer and Seller agrees (i) to
perform all of its obligations in respect of each Transaction hereunder, and
that a default in the performance of any such obligations shall constitute a
default by it in respect of all Transactions hereunder, (ii) that each of them
shall be entitled to set off claims and apply property held by them in respect
of any Transaction against obligations owing to them in respect of any other
Transactions hereunder and (iii) that payments, deliveries, and other transfers
made by either of them in respect of any Transaction shall be deemed to have
been made in consideration of payments, deliveries, and other transfers in
respect of any other Transactions hereunder, and the obligations to make any
such payments, deliveries, and other transfers may be applied against each other
and netted; provided, however, that the parties hereto acknowledge and agree
that each Purchased Mortgage Loan is identified and unique and nothing in this
Agreement should limit or
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reduce Buyer's obligation to deliver the Purchased Mortgage Loans to Seller as
and when provided herein.
17. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective party
to whom any written notice or other communication is to be given hereunder, all
such notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in the form of Confirmation set
forth in Exhibit I.
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement together with the applicable Confirmation constitutes the
entire understanding between Buyer and Seller with respect to the subject matter
it covers and shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions involving
Purchased Mortgage Loans. By acceptance of this Agreement, Buyer and Seller
acknowledge that they have not made, and are not relying upon, any statements,
representations, promises or undertakings not contained in this Agreement. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
19. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by Seller without the prior written
consent of Buyer. Subject to the foregoing, this Agreement and any Transactions
shall be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. Nothing in this Agreement express or implied,
shall give to any person, other than the parties to this Agreement and their
successors hereunder, any benefit or any legal or equitable right, power, remedy
or claim under this Agreement.
20. TERMINABILITY
(a) This Agreement shall terminate upon the earlier of (i) 364 days from
the date hereof or (ii) written notice from Seller to Buyer to such effect,
except that this Agreement shall, notwithstanding the above clauses, remain
applicable to any Transaction then outstanding.
(b) Buyer may, in its sole and absolute discretion, terminate this
Agreement if, within 30 days after notice from Buyer to Guarantor stating that
Buyer does not agree with the valuation (and the assumptions used to derive such
valuation) of residual certificates, interest-only certificates and other
comparable instruments with respect to securitizations of mortgage loans
included in the calculation of Tangible Net Worth as certified in the
certificate delivered to Buyer pursuant to Section 12(j)(vi), Buyer and
Guarantor do not agree on such valuation. Upon any such termination, the
Repurchase Price of all Transactions shall become immediately due and
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payable.
(c) Notwithstanding any termination of this Agreement or the occurrence
of an Event of Default, all of the representations and warranties hereunder
(including those made in Exhibit V) shall continue and survive.
21. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAW PRINCIPLES THEREOF.
22. CONSENT TO JURISDICTION AND ARBITRATION
The parties irrevocably agree to submit to the personal jurisdiction of
the United States District Court for the Southern District of New York, the
parties irrevocably waiving any objection thereto. If, for any reason, federal
jurisdiction is not available, and only if federal jurisdiction is not
available, the parties irrevocably agree to submit to the personal jurisdiction
of the Supreme Court of the State of New York, the parties irrevocably waiving
any objection thereto. Notwithstanding the foregoing two sentences, at either
party's sole option exercisable at any time not later than thirty (30) days
after an action or proceeding has been commenced, the parties agree that the
matter may be submitted to binding arbitration in accordance with the commercial
rules of the American Arbitration Association then in effect in the State of New
York and judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction thereof within the City, County and State of New
York; provided, however, that the arbitrator shall not amend, supplement, or
reform in any regard this Agreement or the terms of any Confirmation, the rights
or obligations of any party hereunder or thereunder, or the enforceability of
any of the terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase transactions
and the secondary mortgage market in the City, County, and State of New York.
23. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party
shall constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to exercise
any other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Any such waiver or modification shall be effective only in the
specific instance and for the specific purpose for which it was given.
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24. INTENT
The parties understand and intend that this Agreement and each
Transaction hereunder constitute a "repurchase agreement" and a "securities
contract" as those terms are defined under the relevant provisions of Title 11
of the United States Code, as amended.
25. SERVICING
(a) Notwithstanding the purchase and sale of the Purchased Mortgage
Loans hereby, Seller shall continue to service the Purchased Mortgage Loans for
the benefit of Buyer and, if Buyer shall exercise its rights to pledge or
hypothecate the Purchased Mortgage Loan prior to the related Repurchase Date
pursuant to Section 8, Buyer's assigns; provided, however, that the obligations
of Seller to service the Purchased Mortgage Loans shall cease upon the payment
by Seller to Buyer of the Repurchase Price therefor. Seller shall service the
Purchased Mortgage Loans in accordance with the servicing standards maintained
by other prudent mortgage lenders with respect to mortgage loans similar to the
Purchased Mortgage Loans.
(b) Seller agrees that Buyer is the owner of all servicing records,
including but not limited to any and all servicing agreements, files, documents,
records, data bases, computer tapes, copies of computer tapes, proof of
insurance coverage, insurance policies, appraisals, other closing documentation,
payment history records, and any other records relating to or evidencing the
servicing of Purchased Mortgage Loans (the "Servicing Records"). Seller grants
Buyer a security interest in all servicing fees and rights relating to the
Mortgage Loans and all Servicing Records to secure the obligation of the Seller
or its designee to service in conformity with this Section and any other
obligation of Seller to Buyer. Seller covenants to, and will cause each servicer
and subservicer to, segregate such Servicing Records from any and all servicing
agreements, files, documents, records, data bases, computer tapes, copies of
computer tapes, proof of insurance coverage, insurance policies, appraisals,
other closing documentation, payment history records, and any other records
relating to or evidencing the servicing of Mortgage Loans which are not
Purchased Mortgage Loans and to safeguard such Servicing Records and to deliver
them promptly to Buyer or its designee (including the Custodian) at Buyer's
request.
(c) Upon the occurrence and continuance of an Event of Default, Buyer
may, in its sole discretion, (i) sell its right to the Purchased Mortgage Loans
on a servicing released basis or (ii) terminate the Seller as servicer of the
Purchased Mortgage Loans with or without cause, in each case without payment of
any termination fee.
(d) Seller shall not employ sub-servicers (other than an Affiliate of
Seller) to service the Purchased Mortgage Loans without the prior written
approval of Buyer.
(e) Seller shall cause any sub-servicer hereunder to execute a letter
agreement with Buyer acknowledging Buyer's security interest and agreeing that,
upon notice from Buyer (or the Custodian on its behalf) that an Event of Default
has occurred and in continuing hereunder, it
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shall deposit all Income with respect to the Purchased Mortgage Loans in the
account specified in the third sentence of Section 5(a).
(f) After the occurrence of a Trigger Event, an Event of Default or a
Market Value Collateral Deficit or Securitization Value Collateral Deficit which
is not cured in accordance with Section 4, at the request of Buyer, Seller shall
enter into a master servicing agreement with Buyer and a backup servicer
reasonably acceptable to Buyer, which agreement shall be satisfactory in form
and substance to Buyer.
26. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that in the case of
Transactions in which one of the parties is an "insured depository institution"
as that term is defined in Section 1831(a) of Title 12 of the United States
Code, as amended, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
Federal Deposit Insurance Corporation, the Savings Association Insurance Fund or
the Bank Insurance Fund, as applicable.
27. NETTING
If Buyer and Seller are "financial institutions" as now or hereinafter
defined in Section 4402 of Title 12 of the United States Code ("Section 4402")
and any rules or regulations promulgated thereunder:
(a) All amounts to be paid or advanced by one party to or on behalf of
the other under this Agreement or any Transaction hereunder shall be deemed to
be "payment obligations" and all amounts to be received by or on behalf of one
party from the other under this Agreement or any Transaction hereunder shall be
deemed to be "payment entitlements" within the meaning of Section 4402, and this
Agreement shall be deemed to be a "netting contract" as defined in Section 4402.
(b) The payment obligations and the payment entitlements of the parties
hereto pursuant to this Agreement and any Transaction hereunder shall be netted
as follows. In the event that either party (the "Defaulting Party") shall fail
to honor any payment obligation under this Agreement or any Transaction
hereunder, the other party (the "Nondefaulting Party") shall be entitled to
reduce the amount of any payment to be made by the Nondefaulting Party to the
Defaulting Party by the amount of the payment obligation that the Defaulting
Party failed to honor.
28. MISCELLANEOUS
(a) Time is of the essence under this agreement and all Transactions and
all references to a time shall mean New York time in effect on the date of the
action unless otherwise expressly stated in this Agreement.
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(b) Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given in
writing by any authorized officer of Seller listed on Exhibit VI hereto, as such
list may be amended in writing from time to time. Seller shall indemnify Buyer,
defend, and hold Buyer harmless from and against any and all liabilities,
losses, damages, costs, and expenses of any nature arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from such authorized
officers of Seller.
(c) If there is any conflict between the terms of this Agreement or any
Transaction entered into hereunder and the Custodial Agreement, this Agreement
shall prevail.
(d) If there is any conflict between the terms of a Confirmation or a
corrected Confirmation issued by the Buyer and this Agreement, the Confirmation
shall prevail.
(e) This Agreement may be executed in counterparts, each of which so
executed shall be deemed to be an original, but all of such counterparts shall
together constitute but one and the same instrument.
(f) Seller agrees to reimburse Buyer for all reasonable costs and
expenses of Buyer in connection with this Agreement including, without
limitation, the fees, expenses and disbursement of outside counsel to Buyer and
due diligence expenses and on-going auditing fees not to exceed $25,000 per
year.
(g) Seller and Buyer agree to maintain the confidentiality of this
Agreement and its terms and agree not to disclose this Agreement or its terms to
any other party except as required for the enforcement of its terms or as
required by law, regulatory requirements or court order or discovery. In the
event Seller determines that the Agreement must be filed with the Securities and
Exchange Commission pursuant to applicable law, such filing may only be made
after consultation with Buyer and upon redaction of the Pricing Spread.
(h) The headings in this Agreement are for convenience of reference only
and shall not affect the interpretation or construction of this Agreement.
[Signature page follows]
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth above.
▇▇▇▇▇▇ COMMERCIAL PAPER INC., as Buyer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Authorized Signatory
AAMES CAPITAL CORPORATION, as Seller
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name:
Title:
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EXHIBITS
EXHIBIT I Confirmation
EXHIBIT II Form of Custodial Delivery
EXHIBIT III Form of Power of Attorney
EXHIBIT IV Opinion of Counsel to Seller
EXHIBIT V Representations and Warranties Regarding Mortgage Loan
EXHIBIT VI Authorized Officers of Seller
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EXHIBIT I
Form of Confirmation Letter
(date)
Aames Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Confirmation No.: _____________________
Ladies/Gentlemen:
This letter confirms our agreement to purchase from you the Mortgage
Loans listed in Appendix I hereto, pursuant to the Amended and Restated Master
Repurchase Agreement Governing Purchases and Sales of Mortgage Loans between us,
dated as of February 10, 1999 (the "Agreement"), as follows:
Purchase Date:
Mortgage Loans to be Purchased: See Appendix I hereto.(1)
Aggregate Principal Amount of Purchased Mortgage Loans:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Collateral Amount Percentage with respect to Market Value:
Collateral Amount Percentage with respect to Securitization Value:
Names and addresses for communications:
Buyer:
--------
(1) Appendix I to Confirmation Letter will list Mortgage Loans.
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▇▇▇▇▇▇ Commercial Paper Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Central Funding Department
Seller:
Aames Capital Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ Treasure, Finance Department
▇▇▇▇▇▇ COMMERCIAL PAPER INC., as Buyer
By: ___________________________________
Name:
Title:
Agreed and Acknowledged:
AAMES CAPITAL CORPORATION, as Seller
By: __________________________________
Name:
Title:
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EXHIBIT II
Form of Custodial Delivery
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EXHIBIT III
Form of Power of Attorney
"Know All Men by These Presents, that Aames Capital Corporation
("Seller"), does hereby appoint ▇▇▇▇▇▇ Commercial Paper Inc. ("Buyer"), its
attorney-in-fact to act in Seller's name, place and stead in any way which
Seller could do with respect to (i) the completion of the endorsements of the
Mortgage Notes and the Assignments of Mortgages, (ii) the recordation of the
assignments of Mortgages and (iii) the enforcement of the Seller's rights under
the Mortgage Loans purchased by Buyer pursuant to an Amended and Restated Master
Repurchase Agreement Governing Purchases and Sales of Mortgage Loans dated as of
February 10, 1999 between Seller and Buyer and to take such other steps as may
be necessary or desirable to enforce Buyer's rights against such Mortgage Loans,
the related Mortgage Files and the Servicing Records to the extent that Seller
is permitted by law to act through an agent.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT
ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT
MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE
INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE
OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY,
AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLER'S ASSIGNS, HEREBY AGREES TO
INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL
CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY
HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
IN WITNESS WHEREOF Seller has caused this Power of Attorney to be
executed and the Seller's seal to be affixed this 10th day of February, 1999.
AAMES CAPITAL CORPORATION, as Seller
By: __________________________________
Name:
Title:
(Seal)
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EXHIBIT IV
Opinion Of Seller's Counsel
1. Seller is duly organized and validly existing as a corporation in
good standing under the laws of California and has power and authority to enter
into and perform its obligations under the Agreement and the Custodial
Agreement. Seller is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the business transacted by it
requires such qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets or condition
(financial or other) of Seller and its subsidiaries, considered as a whole.
2. The Agreement and the Custodial Agreement have each been duly
authorized, executed and delivered by Seller, and each constitutes a valid and
legally binding obligation of Seller enforceable against Seller in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors' rights generally and to general equity principles.
3. No consent, approval, authorization or order of any state or federal
court or government agency or body is required to be obtained by Seller for the
consummation of the transactions contemplated by the Agreement or the Custodial
Agreement.
4. The consummation of any of the transactions contemplated by the
Agreement and the Custodial Agreement will not conflict with, result in a breach
of, or constitute a default under the charter or bylaws of Seller or the terms
of any indenture or other agreement or instrument known to us to which Seller is
party or bound, or any order known to such counsel to be applicable to Seller or
any regulations applicable to Seller, of any state or federal court, regulatory
body, administrative agency, governmental body or arbitrator having jurisdiction
over Seller.
5. There is no pending or, to such counsel's knowledge, threatened
action, suit or proceeding before any court or governmental agency, authority or
body or any arbitrator involving Seller or relating to the transactions
contemplated by the Agreement or the Custodial Agreement which, if adversely
determined, would have a material adverse effect on Seller.
6. The Agreement together with (a) the delivery of such related Mortgage
Loans to Custodian; (b) the endorsement of such Mortgage Loans in blank; and (c)
the delivery of the assignments of Mortgages related to the Mortgage Loans to
the Custodian in recordable form assigning such Mortgages to Custodian, creates
a valid, perfected security interest in such Mortgage Loans in favor of Buyer.
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EXHIBIT V
Representations and Warranties Regarding Mortgage Loans.
The Seller represents and warrants to the Buyer that, with respect to
each Mortgage Loan sold in a Transaction hereunder, as of the related Purchase
Date:
(a) Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule is complete, true and correct in all material respects.
(b) Payments Current Within 59 Days; Delinquency. The Mortgage Loan (i)
together with the other Purchased Mortgage Loans subject to Transactions, would
not cause the 30+ Delinquency Percentage for all Mortgage Loans to exceed 5% and
(ii) is not more than 59 days Delinquent.
(c) No Outstanding Charges. There are no defaults in complying with the
terms of the Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
which previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item which
remains unpaid and which has been assessed but is not yet due and payable.
Seller has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly or indirectly,
for the payment of any amount required under the Mortgage Loan, except for
interest accruing from the date of the Mortgage Note or date of disbursement of
the Mortgage Loan proceeds, whichever is greater, to the day which precedes by
one month the due date of the first installment of principal and interest.
(d) Original Terms Unmodified. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any respect,
except by a written instrument which has been recorded, if necessary to protect
the interests of Buyer and which has been delivered to Buyer or its designee
(including the Custodian). The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required by
the policy, and its terms are reflected on the Mortgage Loan Schedule. No
Mortgagor has been released, in whole or in part, except in connection with an
assumption agreement approved by the title insurer, and which assumption
agreement is included in the Mortgage File delivered to Buyer or its designee
(including the Custodian) and the terms of which are reflected in the Mortgage
Loan Schedule.
(e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense, including without
limitation
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the defense of usury, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto.
(f) Insurance Policies in Effect. The fire and casualty insurance policy
covering the Mortgaged Property (1) affords (and will afford) sufficient
insurance against fire and such other risks as are usually insured against in
the broad form of extended coverage insurance from time to time available, as
well as insurance against flood hazards if the Mortgaged Property is an area
identified by the Federal Emergency Management Agency as having special flood
hazards; (2) is a standard policy of insurance for the locale where the
Mortgaged Property is located, is in full force and effect, and the amount of
the insurance is in the amount of the full insurable value of the Mortgaged
Property on a replacement cost basis or the unpaid balance of the Mortgage
Loans, whichever is less; (3) names (and will name) the present owner of the
Mortgaged Property as the insured; and (4) contains a standard mortgagee loss
payable clause in favor of Seller. All individual insurance policies with
respect to the Mortgage Loan are the valid and binding obligation of the insurer
and contain a standard mortgage clause naming Seller, its successors and
assigns, as Mortgagee. All premiums thereon have been paid. The Mortgage
obligates the Mortgagor thereunder to maintain all such insurance policies at
the Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor.
(g) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit protection,
equal credit opportunity or disclosure laws applicable to the origination and
servicing of the Mortgage Loan have been complied with, and Seller shall
maintain in its possession, available for Buyer's inspection, and shall deliver
to Buyer upon demand, evidence of compliance with all such requirements.
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or in
part, nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission.
(i) Location and Type of Mortgaged Property. The Mortgaged Property is
located in the state identified in the Mortgage Loan Schedule and consists of a
parcel of real property with a detached single family residence erected thereon,
or a two- to four-family dwelling, or an individual condominium unit in a
condominium project, or an individual unit in a planned unit development and no
residence or dwelling is a mobile home or a manufactured dwelling (other than a
mobile home or a manufactured dwelling permanently affixed to real property). No
portion of the Mortgaged Property is used for commercial purposes (except for
home offices).
(j) Valid First or Second Lien. The Mortgage is a valid, subsisting and
enforceable first or second lien on the Mortgaged Property, including all
buildings on the Mortgaged Property and all installations and mechanical,
electrical, plumbing, heating and air conditioning
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systems located in or annexed to such buildings, and all additions, alterations
and replacements made at any time with respect to the foregoing. The lien of the
Mortgage is subject only to:
(i) the lien of current real property taxes and special
assessments not yet due and payable;
(ii) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy
delivered to the originator of the Mortgage Loan and (i) referred to or
otherwise considered in the appraisal made for the originator of the
Mortgage Loan or (ii) which do not adversely affect the appraised value
of the Mortgaged Property set forth in such appraisal;
(iii) in the case of a Mortgaged Property that is a condominium
or an individual unit in a planned unit development, liens for common
charges permitted by statute;
(iv) in the case where the Mortgage Loan is secured by a second
mortgage lien on the Mortgaged Property (and represented on the Mortgage
Loan Schedule as such), the lien of the First Mortgage; and
(v) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the security
intended to be provided by the mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related
to and delivered in connection with the Mortgage Loan establishes and creates a
valid, subsisting and enforceable first or second lien and first or second
priority security interest on the property described therein and Seller has full
right to pledge and assign the same to Buyer or its designee (including the
Custodian).
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage
are genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting the rights of creditor's
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law.) All parties to
the Mortgage Note and the Mortgage had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note and the Mortgage, and the
Mortgage Note and the Mortgage have been duly and properly executed by such
parties. The Mortgagor is a natural person or living trust who is a party to the
Mortgage Note and the Mortgage in an individual or trustee capacity,
respectively.
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(l) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan
have been fully disbursed and there is no requirement for future advances
thereunder, and any and all requirements as to completion of any on-site or
off-site improvement and as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making or closing
the Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor
is not entitled to any refund of any amounts paid or due under the Mortgage Note
or Mortgage.
(m) Ownership. Seller is the sole owner of record and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged except as provided
in this Agreement, and Seller has good and marketable title thereto, and has
full right to pledge and assign the Mortgage Loan to Buyer or its designee
(including the Custodian) free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest, and
has full right and authority subject to no interest or participation of, or
agreement with, any other party, to sell and assign each Mortgage Loan pursuant
to this Agreement.
(n) Doing Business. All parties which have had any interest in the
Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (2) organized under the
laws of such state, or (3) qualified to do business in such state, or (4)
federal savings and loan associations or national banks having principal offices
in such state, or (5) not doing business in such state.
(o) Loan-to-Value Ratio. No Mortgage Loan has a Loan-to-Value Ratio of
more than 90%. The Mortgage Loans subject to Transactions do not have a weighted
average cumulative Loan-to-Value Ratio in excess of 85%.
(p) Title Insurance. The Mortgage Loan is covered by an ALTA mortgage
title insurance policy or such other form of policy acceptable to FNMA or FHLMC,
issued by and constituting the valid and binding obligation of a title insurer
generally acceptable to prudent mortgage lenders that regularly originate or
purchase mortgage loans comparable to the Mortgage Loans for sale to prudent
investors in the secondary market that invest in mortgage loans such as the
Mortgage Loans and qualified to do business in the jurisdiction where the
Mortgaged Property is located, insuring Seller, its successors and assigns, as
to the first priority lien of the Mortgage in the case of a First Mortgage Loan
secured by a First Mortgage and the second priority lien of the Mortgage in the
case of a Mortgage Loan secured by a second lien on the related Mortgaged
Property, in the original principal amount of the Mortgage Loan. Seller is the
sole named insured of such mortgage title insurance policy, the assignment to
Buyer or the Custodian as assignee of Buyer of Seller's interest in such
mortgage title insurance policy does not require the consent of or notification
to the insurer or the same has been obtained, and such mortgage title insurance
policy is in full force and effect and will be in full force and effect and
inure to the benefit of Buyer upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such mortgage
title insurance policy and no prior
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holder of the related Mortgage, including Seller, has done, by act or omission,
anything that would impair the coverage of such mortgage title insurance policy.
(q) No Defaults. Other than a payment default, there is no default,
breach, violation or event of acceleration existing under the Mortgage or the
Mortgage Note and no event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration, and neither Seller nor its predecessors have
waived any default, breach, violation or event of acceleration.
(r) No Mechanics' Liens. There are no mechanics' or similar liens or
claims which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage.
(s) Location of Improvements; No Encroachments. All improvements which
were considered in determining the appraised value of the mortgaged property lay
wholly within the boundaries and building restriction lines of the mortgaged
property and no improvements on adjoining properties encroach upon the mortgaged
property. No improvement located on or being part of the mortgaged property is
in violation of any applicable zoning law or regulation.
(t) Origination. The Mortgage Loan was originated by Seller, an
affiliate of Seller or by an originator not affiliated with the Seller licensed
to originate such Mortgage Loan. The documents, instruments and agreements
submitted for loan underwriting were not falsified and contain no untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the information and statements therein not
misleading.
(u) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure. There is no homestead or other exemption available to a
Mortgagor which would interfere with the right to sell the Mortgaged Property at
a trustee's sale or the right to foreclose the Mortgage.
(v) Occupancy of the Mortgaged Property. As of the related Purchase Date
the Mortgaged Property is capable of being lawfully occupied under applicable
law. All inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of the Mortgaged Property and, with
respect to the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, have been made or
obtained from the appropriate authorities. Either that the Mortgagor represented
at the time of origination of the Mortgage Loan that the Mortgagor would occupy
the Mortgaged Property as the Mortgagor's primary residence or second home or
the Mortgaged Property is capable of being occupied pursuant to terms that
approximate current standard market rental terms and rates.
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(w) No Additional Collateral. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in (j) above.
(x) Deeds of Trust. In the event the Mortgage constitutes a deed of
trust, a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by Buyer to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
Mortgagor.
(y) Acceptable Investment. Seller has no knowledge of any circumstances
or conditions with respect to the Mortgage, the Mortgaged Property, the
Mortgagor (other than the Mortgagor's credit standing) that can reasonably be
expected to cause private institutional investors that regularly invest in
subprime or high loan-to-value mortgage loans similar to the Mortgage Loans to
regard the Mortgage Loan as an unacceptable investment or adversely affect the
value or marketability of the Mortgage Loan to other similar institutional
investors.
(z) Purchase of Mortgage Documents. The Mortgage File and any other
documents required by Buyer to be delivered for the Mortgage Loan by Seller
under this Agreement have been delivered (or with respect to Wet Ink Mortgage
Loans, will be delivered within seven Business Days) to the Custodian. Seller is
in possession of a complete, true and accurate Mortgage File except for such
documents the originals of which have been delivered to the Buyer or its
designee (including the Custodian). Each of the documents and instruments
included in the Mortgage File is duly executed and in due and proper form and
each such document or instrument is in a form generally acceptable to prudent
institutional mortgage lenders that regularly originate and purchase subprime or
high loan-to-value mortgage loans.
(aa) Condominiums/Planned Unit Developments. If the Mortgaged Property
is a condominium unit or a planned unit development (other than a de minimus
planned unit development) such condominium or planned unit development project
meets Seller's Underwriting Guidelines.
(bb) Transfer of Mortgage Loans. The assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
(cc) Due on Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the Mortgagee thereunder.
(dd) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions pursuant to which
monthly payments are paid or partially paid with funds deposited in any separate
account established by Seller, the Mortgagor or anyone on behalf of the
mortgagor, or paid by any source other than the Mortgagor nor does it
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contain any other similar provisions currently in effect which may constitute a
"buydown" provision. The Mortgage Loan is not a graduated payment mortgage loan
and the Mortgage Loan does not have a shared appreciation or other contingent
interest feature.
(ee) Consolidation of Future Advances. Any future advances made prior to
the Purchase Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
or second lien priority, as the case may be, by a title insurance policy or an
endorsement to the policy insuring the mortgagee's consolidated interest. The
consolidated principal amount does not exceed the original principal amount of
the Mortgage Loan.
(ff) Mortgaged Property Undamaged. There is no proceeding pending or, to
Seller's knowledge, threatened for the total or partial condemnation of the
Mortgaged Property. The Mortgaged Property is undamaged by waste, fire,
earthquake or earth movement, windstorm, flood, tornado or other casualty so as
to affect adversely the value of the Mortgaged Property as security for the
Mortgage Loan or the use for which the premises were intended.
(gg) Collection Practices; Escrow Deposits; Interest Rate Adjustments.
The origination and collection practices used with respect to the Mortgage Loan
have been in all respects in accordance with industry custom and practice, and
have been in all respects legal and proper. With respect to escrow deposits and
escrow payments, all such payments are in the possession of Seller and there
exist no deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made. All escrow payments have been
collected in full compliance with state and federal law. If an escrow of funds
has been established, it is not prohibited by applicable law and has been
established in an amount sufficient to pay for every item that remains unpaid
and has been assessed but is not yet due and payable. No escrow deposits or
escrow payments or other charges or payments due Seller have been capitalized
under the Mortgage or the Mortgage Note. All mortgage interest rate adjustments
have been made in strict compliance with state and federal law and the terms of
the related Mortgage Note. Any interest required to be paid pursuant to state
and local law has been properly paid and credited.
(hh) Conversion to Fixed Interest Rate. With respect to the aggregate
outstanding principal balance of the Mortgage Loans on the related Purchase
Date, no more than 50% of the Mortgage Notes contain a provision allowing the
Mortgagor to convert the Mortgage Note from an adjustable interest rate Mortgage
Note to a fixed interest rate Mortgage Note for the remaining term thereof all
in accordance with the terms of a rider to the related Mortgage Note.
(ii) Appraisal. The Mortgage File for each Mortgage Loan contains an
appraisal of the related Mortgaged Property signed prior to the approval of the
Mortgage Loan application by a qualified appraiser, duly appointed by the
originator of the Mortgage Loan, who had no interest, direct or indirect in the
mortgaged property or in any loan made on the security thereof, other than as an
employee of the lender, and whose compensation is not affected by the approval
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or disapproval of the Mortgage Loan, and the appraisal and appraiser both
satisfy the requirements of Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated.
(jj) Soldiers' and Sailors' Relief Act. The Mortgagor has not notified
Seller, and Seller has no knowledge of any relief requested or allowed to the
Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940.
(kk) Environmental Matters. To the best of Seller's knowledge based on
customary residential mortgage industry practices the mortgaged Property is free
from any and all toxic or hazardous substances and there exists no violation of
any local, state or federal environmental law, rule or regulation.
(ll) Seller Origination The Mortgage Loan was originated by Seller or an
Affiliate of Seller or was purchased and reunderwritten by Seller.
(mm) Balloon Mortgage Loans. Each Balloon Mortgage Loan has an original
term of not less than 7 years and which provides for level monthly payments
based on a thirty (30) year amortization schedule and a final Monthly Payment
substantially greater than the preceding Monthly Payments.
(nn) No Construction Loans. No Mortgage Loan is a construction loan or
relates to manufactured housing which is not permanently affixed to real
property.
(oo) Selection by Seller. No Mortgage Loan was selected for inclusion
under this Agreement on any basis which was intended to have a material adverse
effect on Buyer.
(pp) Second Mortgages. With respect to each Mortgage Loan secured by a
second lien on the related Mortgaged Property:
(i) if the Loan-to-Value Ratio is higher than 70%, either the
related first lien does not provide for a balloon payment or the
maturity date of each Mortgage Loan with respect to which a first lien
on the related Mortgaged Property provides for a balloon payment is
prior to the maturity date of the mortgage loan relating to such first
lien;
(ii) the related first lien on any Mortgaged Property with
respect to which the related Mortgage Loan secured by a second lien does
not provide for negative amortization;
(iii) either no consent for the Mortgage Loan secured by a second
lien on the related Mortgaged Property is required by the holder of the
related first lien or such consent has been obtained and is contained in
the Mortgage File;
(iv) the related first lien is not held by an individual;
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(v) if such Mortgage Loan has a Loan-to-Value Ratio greater than
90% and less than 95%, the Purchase Price of such Mortgage Loan together
with the Purchase Price of Purchased Mortgage Loans secured by a second
lien on the related Mortgaged Properties subject to then outstanding
Transactions having a Loan-to-Value Ratio greater than 90% and less than
95% does not exceed 3% of the aggregate Purchase Price for all Mortgage
Loans which are subject to then outstanding Transactions; and
(vi) the Purchase Price of such Mortgage Loan together with the
Purchase Price of Purchased Mortgage Loans subject to then outstanding
Transactions secured by a second lien on the related Mortgaged
Properties does not exceed 10% of the aggregate Purchase Price for all
Mortgage Loans subject to then outstanding Transactions.
(qq) CERCLA. To the best of the Seller's knowledge, no Mortgaged
Property was, as of the Purchase Date or, with respect to Additional Loans or
Substitute Mortgage Loans, as of the related date of addition or substitution,
located within a one-mile radius of any site listed in the National Priorities
List as defined under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or on any similar state list of hazardous
waste sites which are known to contain any hazardous substance or hazardous
waste.
(rr) No Bankruptcy of Mortgagor. None of the Mortgage Loans are subject
to a bankruptcy plan.
(ss) Conformance to Underwriting Standards. Each Mortgage Loan was
underwritten in accordance with the underwriting guidelines supplied to Buyer by
Seller.
(tt) Qualified Mortgage. Each Mortgage Loan constitutes a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code.
(uu) Balloon Loan Concentration. If the Mortgage Loan is a Balloon Loan,
it, together with the other Purchased Mortgage Loans which are Balloon Loans
subject to Transactions, constitutes less than 10% of the aggregate outstanding
Repurchase Price of all Purchased Mortgage Loans subject to Transactions.
(vv) No Short Maturity Balloon Loans. The Mortgage Loan is not a Balloon
Loan with a maturity date occurring within five years from its origination date
of the related Purchase Date.
(ww) Owner Occupied. In the event the Purchased Mortgage Loan relates to
a Mortgaged Property which is non-owner occupied, it, together with the other
Purchased Mortgage Loans subject to Transactions relating to Mortgaged
Properties which are non-owner occupied, does not exceed 20% of the aggregate
outstanding Repurchase Price of all Purchased Mortgage Loans subject to
Transactions.
(xx) Payment Terms. With respect to adjustable rate Mortgage Loans,
following any applicable initial fixed rate period of 2, 3 or 5 years, the
mortgage interest rate is adjusted annually or semi-annually on each interest
rate adjustment date to equal the index plus the gross
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margin, rounded up or down to the nearest 1/8%, subject to the mortgage interest
rate cap. With respect to fixed rate Mortgage Loans, the mortgage note is
payable each month in equal monthly installments of principal and interest. With
respect to adjustable rate Mortgage Loans, installments of interest are subject
to change due to the adjustments to the mortgage interest rate on each interest
rate adjustment date, with interest calculated and payable in arrears,
sufficient to amortize the Mortgage Loan fully by the stated maturity date, over
an original term of not more than thirty years from commencement of
amortization.
(yy) Securitization Standards. Each of the Mortgage Loans conforms to
the then current standards of securitization applicable to similar assets as
determined in the reasonable judgment of Buyer.
(zz) Wet Ink Mortgage Loans. The Purchase Price of a Wet Ink Mortgage
Loan together with the Purchase Price of Purchased Mortgage Loans which are Wet
Ink Mortgage Loans does not exceed, during the first and last week of each
month, 25% of the aggregate Purchase Price for all Mortgage Loans which are
subject to then outstanding Transactions and, at all other time, 15% of the
aggregate Purchase Price for all Purchased Mortgage Loans subject to then
outstanding Transactions.
It is understood and agreed that the representations and warranties set
forth in this Exhibit V shall survive delivery of the respective Mortgage Files
to the Custodian on behalf of Buyer.
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