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Exhibit 10.19
MASTER LOAN AND SECURITY AGREEMENT
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DATED AS OF MARCH 16, 2000
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BNC MORTGAGE, INC.
AS BORROWER
AND
▇▇▇▇▇ ▇▇▇▇▇▇ REAL ESTATE SECURITIES INC.
AS LENDER
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TABLE OF CONTENTS
Page
Section 1. Definitions and Accounting Matters............................................................1
1.01 Certain Defined Terms..............................................................1
1.02 Accounting Terms and Determinations...............................................12
Section 2. Loans, Note and Prepayments..................................................................13
2.01 Loans.............................................................................13
2.02 Notes.............................................................................13
2.03 Procedure for Borrowing...........................................................13
2.04 Limitation on Types of Loans; Illegality..........................................15
2.05 Repayment of Loans; Interest......................................................15
2.06 Mandatory Prepayments or Pledge...................................................16
Section 3. Payments; Computations; Etc..................................................................16
3.01 Payments..........................................................................16
3.02 Computations......................................................................17
3.03 Requirements of Law...............................................................17
3.04 Minimum Usage.....................................................................18
Section 4. Collateral Security..........................................................................18
4.01 Collateral; Security Interest.....................................................18
4.02 Further Documentation.............................................................19
4.03 Changes in Locations, Name, etc...................................................19
4.04 Lender's Appointment as Attorney-in-Fact..........................................19
4.05 Performance by Lender of Borrower's Obligations...................................20
4.06 Proceeds..........................................................................21
4.07 Remedies..........................................................................21
4.08 Limitation on Duties Regarding Preservation of Collateral.........................22
4.09 Powers Coupled with an Interest...................................................22
4.10 Release of Security Interest......................................................22
Section 5. Conditions Precedent.........................................................................23
5.01 Initial Loan......................................................................23
5.02 Initial and Subsequent Loans......................................................24
Section 6. Representations and Warranties...............................................................25
6.01 Existence.........................................................................25
6.02 Financial Condition...............................................................26
6.03 Litigation........................................................................26
6.04 No Breach.........................................................................27
6.05 Action............................................................................27
6.06 Approvals.........................................................................27
6.07 Margin Regulations................................................................27
6.08 Taxes.............................................................................27
6.09 Investment Company Act............................................................28
6.10 Collateral; Collateral Security...................................................28
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6.11 Chief Executive Office............................................................28
6.12 Location of Books and Records.....................................................28
6.13 [Reserved.].......................................................................28
6.14 True and Complete Disclosure......................................................28
6.15 Tangible Net Worth................................................................29
6.16 ERISA.............................................................................29
Section 7. Covenants of the Borrower....................................................................29
7.01 Financial Statements..............................................................29
7.02 Litigation........................................................................31
7.03 Existence, etc....................................................................31
7.04 Prohibition of Fundamental Changes................................................32
7.05 Borrowing Base Deficiency.........................................................32
7.06 Notices...........................................................................32
7.07 [Reserved]........................................................................33
7.08 Reports...........................................................................33
7.09 Underwriting Guidelines...........................................................33
7.10 Transactions with Affiliates......................................................33
7.11 Limitation on Indebtedness........................................................33
7.12 Limitation on Liens...............................................................34
7.13 Limitation on Guarantees..........................................................34
7.14 Limitation on Distributions.......................................................34
7.15 Maintenance of Tangible Net Worth.................................................34
7.16 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth..................34
7.17 Maintenance of Profitability......................................................34
7.18 Servicer; Servicing Tape..........................................................34
7.19 Required Filings..................................................................35
7.20 No Adverse Selection..............................................................35
7.21 Maintenance of Liquidity..........................................................35
7.22 Remittance of Prepayments.........................................................35
7.23 Other Information.................................................................35
7.24 Collection Account................................................................35
7.25 Computer Systems..................................................................35
Section 8. Events of Default............................................................................35
Section 9. Remedies Upon Default........................................................................37
Section 10. No Duty of Lender............................................................................38
Section 11. Miscellaneous................................................................................38
11.01 Waiver............................................................................38
11.02 Notices...........................................................................38
11.03 Indemnification and Expenses......................................................39
11.04 Amendments........................................................................40
11.05 Successors and Assigns............................................................40
11.06 Survival..........................................................................40
11.07 Captions..........................................................................40
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11.08 Counterparts......................................................................40
11.09 Loan Agreement Constitutes Security Agreement; Governing Law......................40
11.10 Submission to Jurisdiction; Waivers...............................................40
11.11 Waiver of Jury Trial..............................................................41
11.12 Acknowledgments...................................................................41
11.13 Hypothecation or Pledge of Loans..................................................41
11.14 Servicing.........................................................................41
11.15 Periodic Due Diligence Review.....................................................43
11.16 Set-Off...........................................................................43
11.17 Intent............................................................................43
11.18 Confidential Information..........................................................43
SCHEDULES
SCHEDULE 1 Representations and Warranties for Eligible Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
SCHEDULE 3 Information to be Provided With Respect to Each Eligible Mortgage Loan
SCHEDULE 4 Applicable Margins
SCHEDULE 5 Litigation
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Notice of Request for Borrowing and Pledge
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT E-3 Form of Re-warehouse Lender's Release Letter
EXHIBIT F Reserved
EXHIBIT G Form of Blocked Account Agreement
EXHIBIT H Form of Servicer Notice
EXHIBIT I Form of Mortgage Note
EXHIBIT J Underwriting Guidelines
EXHIBIT K Approved Escrow Agents
EXHIBIT L Form of Escrow Instruction Letter
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MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of March 16, 2000
(the "Loan Agreement"), between BNC MORTGAGE, INC., a Delaware corporation, (the
"Borrower"), and ▇▇▇▇▇ ▇▇▇▇▇▇ REAL ESTATE SECURITIES INC., a Delaware
corporation (the "Lender").
RECITALS
The Borrower has requested that the Lender from time to time
make, at the Lender's sole discretion, revolving credit loans to it to finance
certain residential mortgage loans owned by the Borrower. The Lender is prepared
to consider making such loans upon the terms and conditions hereof. Accordingly,
the parties hereto agree as follows.
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 1.01
or in other provisions of this Loan Agreement in the singular to have the same
meanings when used in the plural and vice versa):
"Adjusted Net Worth" shall mean, with respect to the Borrower
at a particular date, the Consolidated Net Worth of the Borrower, minus no more
than 100% of the following amounts: (a) advances or loans to shareholders,
officers or Affiliates of the Borrower; (b) investments in Affiliates of the
Borrower which are not consolidated with the Borrower; (c) without duplication,
assets pledged to secure any liabilities not included in the Indebtedness of the
Borrower; (d) goodwill, including any amounts (however designated on the balance
sheet) representing the cost of acquisitions of Subsidiaries in excess of
underlying tangible assets; (e) patents, trademarks, copyrights; (f) leasehold
improvements not recoverable at the expiration of a lease; (g) deferred charges
(including, but not limited to, unamortized debt discount and expense,
organization expenses and experimental and development expenses, but excluding
prepaid expenses); (h) other investments which do not have a readily available
market value; (i) real estate owned (REO) or loans repurchased by the Borrower
due to breaches of representations or warranties under other lending or purchase
agreements; (j) capitalized mortgage servicing rights; (k) such other assets
which would be deemed by HUD not to be acceptable in calculating adjusted net
worth in accordance with its requirements in effect as of such date, as such
requirements appear in the "Audit Guide for Audit of Approved Non-Supervised
Mortgagees"; and (l) other assets deemed unacceptable by the Lender in its sole
reasonable discretion; plus value given for the Borrower's servicing portfolios
at a market multiple deemed reasonable by the Lender.
"Affiliate" shall mean with respect to any Person, any
"affiliate" of such Person as such term is defined in the Bankruptcy Code in
effect from time to time.
"Applicable Collateral Percentage" shall mean, with respect to
any Eligible Mortgage Loan, a percentage to be determined by the Lender in its
sole discretion. The Applicable Collateral Percentage shall be deemed to be zero
with respect to (1) each Eligible Mortgage Loan which is a Wet-Ink Mortgage Loan
for which the Custodian has failed to receive the related Mortgage Loan
Documents by the seventh (7th) Business Day following the
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applicable Funding Date (2) which is an Eligible Mortgage Loan which remains
pledged to the Lender hereunder for more than 180 days after the first Funding
Date therefor, (3) any Mortgage Loan which ceases to be an Eligible Mortgage
Loan or (4) any Delinquent Mortgage Loan.
"Applicable Margin" shall mean with respect to any Eligible
Mortgage Loans, a percentage to be determined by the Lender in its sole
discretion generally in accordance with the percentages set forth on Schedule 4
hereto.
"Assignment of Mortgage" shall mean, with respect to any
mortgage, an assignment of the mortgage, notice of transfer or equivalent
instrument in recordable form, sufficient under the laws of the jurisdiction
wherein the related mortgaged property is located to reflect the assignment and
pledge of the mortgage.
"Bank United Financing Documents" shall mean (i) the
Warehousing Credit and Security Agreement (Single Family Mortgage Loans), dated
as of February 2, 1999, between BNC Mortgage, Inc. and Bank United, as amended
by the First Amendment to Warehouse Credit and Security Agreement, dated
November 1, 1999, by and between BNC Mortgage, Inc. and Mortgage ▇▇▇▇▇.▇▇▇ and
Bank United (collectively, the "Bank United Loan Agreement"), and (ii) all other
documents or agreements executed in connection therewith, or replacement
facilities with substantially similar terms (including, but not limited to,
amounts and rates) with financial institutions approved by the Lender, provided,
that in no event shall broker-dealers or their Affiliates be acceptable
financial institutions.
"Bankruptcy Code" shall mean the United States Bankruptcy Code
of 1978, as amended from time to time.
"Blocked Account Agreement" shall mean an agreement between
the Servicer, the Borrower, the Bank and the Lender, substantially in the form
of Exhibit G hereto, as the same may be amended, supplemented or otherwise
modified from time to time, in which the Servicer acknowledges the Lender's lien
on the Collection Account, and agrees that, in the event that it receives notice
that an Event of Default hereunder has occurred and until such notice is
rescinded by the Lender, the Servicer shall only withdraw funds from the
Collection Account on instruction from the Lender, and which constitutes notice
pursuant to Section 9302 of the California Commercial Code of the Lender's
security interest in the Collection Account, which notice is intended to satisfy
the requirements of such section.
"Blocked Account Request Date" shall have the meaning provided
in Section 7.24 hereof.
"Blocked Collection Account" shall mean the collection account
established pursuant to the last sentence of Section 7.24 hereof.
"Borrower" shall have the meaning provided in the heading
hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of
all Eligible Mortgage Loans.
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"Borrowing Base Deficiency" shall have the meaning provided in
Section 2.06 hereof.
"Breakage Fee" shall mean an amount equal to the sum of (a)
the interest accrued on an "actual/360" basis, on the principal balance of any
Loan (or portion thereof) prepaid, for the period commencing on the date such
Loan is prepaid through the earlier to occur of the next Monthly Payment Date or
the related Maturity Date immediately following the date of such prepayment, at
a rate equal to the Eurodollar Rate plus the Applicable Margin, plus (b) with
respect to any voluntary prepayment, interest accrued on an "actual/360" basis,
on the principal balance of any Loan (or portion thereof) prepaid, for the
period commencing on the date such Loan is prepaid through the earlier to occur
of the next Monthly Payment Date or the related Maturity Date immediately
following the date of such prepayment, at a rate equal to the excess, if any of:
(1) the rate of the Eurodollar Rate plus the Applicable Margin, determined as of
the first day of the Interest Period during which such prepayment occurred and
(2) the rate of the Eurodollar Rate plus the Applicable Margin as of the date
such Loan is prepaid, and (c) in any case, all reasonable actual losses,
expenses and liabilities that arise from prepayment of such Loan, including
without limitation, any actual loss and expense on liabilities incurred by
reason of liquidating or reemployment of deposits or other funds required by us
to fund your Loan.
"Business Day" shall mean any day other than (i) a Saturday or
Sunday or other day on which banks located in the City of New York or the city
of the office of the Custodian are authorized or obligated by law or executive
order to be closed or (ii) a day on which Lender is closed for business.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this Loan
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Cash Equivalents" shall mean (a) securities with maturities
of 90 days or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b) certificates
of deposit and eurodollar time deposits with maturities of 90 days or less from
the date of acquisition and overnight bank deposits of any commercial bank
having capital and surplus in excess of $5,000,000, (c) repurchase obligations
of any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than seven days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d)
commercial paper of a domestic issuer rated at least A-1 or the equivalent
thereof by S&P or P-1 or the equivalent thereof by ▇▇▇▇▇'▇ and in either case
maturing within 90 days after the day of acquisition, (e) securities with
maturities of 90 days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth or
territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A by ▇▇▇▇▇'▇, (f)
securities with maturities of 90 days or less from the date of acquisition
backed by standby letters of credit issued by any
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commercial bank satisfying the requirements of clause (b) of this definition, or
(g) shares of money market, mutual or similar funds which invest exclusively in
assets satisfying the requirements of clauses (a) through (f) of this
definition.
"Certification Report" shall have the meaning assigned thereto
in the Custodial Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall have the meaning provided in Section
4.01(b) hereof.
"Collateral Value" shall mean, with respect to each Eligible
Mortgage Loan, the lesser of (a) the Applicable Collateral Percentage of the
Market Value of such Eligible Mortgage Loan, and (b) the Applicable Collateral
Percentage of the principal balance of such Eligible Mortgage Loan, provided,
that, the following additional limitations on Collateral Value apply:
(i) the aggregate Collateral Value of Eligible Mortgage Loans
that are Wet-Ink Mortgage Loans may not exceed $25,000,000;
(ii) the Collateral Value shall be deemed to be zero with
respect to each Mortgage Loan (1) in respect of which there is a breach
of a representation and warranty set forth on Schedule 1 (assuming each
representation and warranty is made as of the date Collateral Value is
determined), as applicable, (2) in respect of which there is a
delinquency in the payment of principal and/or interest which continues
for a period in excess of 29 days (without regard to any applicable
grace periods), (3) which remains pledged to the Lender hereunder later
than 180 days after the date on which it is first included in the
Collateral or (4) has been released from the possession of the
Custodian under the Custodial Agreement to the Borrower for a period in
excess of 10 days, or (5) which exceed the limitations on Collateral
Value set forth in (i) above;
(iii) notwithstanding the limitations set forth in (i) above,
the Lender and Borrower may by mutual agreement exceed the limitations
set forth in (i).
"Collection Account" shall mean one or more accounts
established by the Servicer subject to a security interest in favor of the
Lender and, after the Blocked Account Request Date, shall be the Blocked
Collection Account, into which all Collections shall be deposited by the
Servicer.
"Collections" shall mean, collectively, all collections and
proceeds on or in respect of the Eligible Mortgage Loans pledged to the Lender
hereunder, excluding collections required to be paid to the Servicer or a
mortgagor on the Eligible Mortgage Loans.
"Consolidated Net Worth" shall mean all amounts which would be
included under shareholders' equity on a consolidated balance sheet of the
Borrower in accordance with GAAP as at such date.
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"Custodial Agreement" shall mean the Custodial Agreement,
dated as of the date hereof, among the Borrower, the Custodian and the Lender,
substantially in the form of Exhibit B hereto, as the same shall be modified and
supplemented and in effect from time to time.
"Custodial Mortgage Loan Schedule" shall mean the schedule of
Mortgage Loans annotated with the Mortgage Loan Approval Code prepared by the
Custodian pursuant to the Custodial Agreement.
"Custodian" shall mean Bankers Trust Company, as custodian
under the Custodial Agreement, and its successors and permitted assigns
thereunder.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Delinquent Mortgage Loan" shall mean a Mortgage Loan which is
more than 29 days delinquent (without regard to any applicable grace period).
"Dollars" and "$" shall mean lawful money of the United States
of America.
"Due Diligence Review" shall mean the performance by the
Lender of any or all of the reviews permitted under Section 11.15 hereof with
respect to any or all of the Eligible Mortgage Loans, as desired by the Lender
from time to time.
"Effective Date" shall mean the date upon which the conditions
precedent set forth in Section 5.01 shall have been satisfied.
"Eligible Mortgage Loan" shall mean a Mortgage Loan, including
a Wet-Ink Mortgage Loan, which is secured by a first or second mortgage lien on
a one-to-four family residential property, an individual condominium unit in a
low-rise or high-rise condominium project, or an individual unit in a planned
unit development or a de minimis planned unit development which has been
originated and serviced in accordance with the Underwriting Guidelines as to
which the representations and warranties in Section 6.10 and Schedule 1 hereof
are correct.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or
business that is a member of any group of organizations (i) described in Section
414(b) or (c) of the Code of which the Borrower is a member and (ii) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of
which the Borrower is a member.
"Escrow Agent" shall mean, with respect to any Loan, any
entity set forth on Exhibit K hereto, which has been approved by Lender in its
sole discretion or any other entity approved by the Lender in its sole
discretion.
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"Escrow Instruction Letter" shall mean the Escrow Instruction
Letter from the Borrower to the Escrow Agent, in the form of Exhibit L hereto as
the same may be modified, supplemented and in effect from time to time.
"Eurodollar Rate" shall mean, with respect to each Interest
Period a Loan is outstanding, the rate per annum equal to the rate appearing at
page 5 of the Telerate Screen as one-month LIBOR on the first day of such
Interest Period, and if such rate shall not be so quoted, the rate per annum at
which the Lender is offered Dollar deposits at or about 9:00 A.M., New York City
time, on such date by prime banks in the interbank eurodollar market where the
eurodollar and foreign currency exchange operations in respect of its Loans are
then being conducted for delivery on such day for a period of 30 days and in an
amount comparable to the amount of the Loans to be outstanding on such day. The
Eurodollar Rate shall be reset by the Lender as described above and the Lender's
determination of Eurodollar Rate shall be conclusive upon the parties absent
manifest error on the part of the Lender.
"Event of Default" shall have the meaning provided in Section
8 hereof.
"Existing Financing Documents" shall mean the RFC Financing
Documents and the Bank United Financing Documents.
"Federal Funds Rate" shall mean, for any day, the rate for
federal fund transactions as used among members of the Federal Reserve System
arranged by federal funds brokers, as appearing at Page 5 of the Telerate Screen
as of the opening of business on such Business Day, or if such rate is not
published for any day which is a Business Day, the average of the quotations for
the day of such transactions received by the Lender from three federal funds
brokers of recognized standing selected by it.
"Funding Date" shall mean the date on which a Loan is made
hereunder; provided that in no event shall there be more than two (2) Funding
Dates in any calendar week.
"GAAP" shall mean generally accepted accounting principles as
in effect from time to time in the United States.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
the Borrower, any of its Subsidiaries or any of its properties.
"Guarantee" shall mean, as to any Person, any obligation of
such Person directly or indirectly guaranteeing any Indebtedness of any other
Person or in any manner providing for the payment of any Indebtedness of any
other Person or otherwise protecting the holder of such Indebtedness against
loss (whether by virtue of partnership arrangements, by agreement to keep-well,
to purchase assets, goods, securities or services, or to take-or-pay or
otherwise); provided that the term "Guarantee" shall not include (i)
endorsements for collection or deposit in the ordinary course of business, or
(ii) obligations to make servicing advances for delinquent taxes and insurance
or other obligations in respect of a Mortgaged Property, to the extent required
by the Lender. The amount of any Guarantee of a Person shall be deemed to be an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee
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is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith. The
terms "Guarantee" and "Guaranteed" used as verbs shall have correlative
meanings.
"HUD" shall mean the Department of Housing and Urban
Development, or any successor thereto.
"Indebtedness" shall mean, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of Property to another
Person subject to an understanding or agreement, contingent or otherwise, to
repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for account of such Person; (e) Capital Lease Obligations of such Person; (f)
obligations of such Person under repurchase agreements, sale/buy back agreements
or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h)
all obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.
"Interest Period" shall mean, with respect to any Loan, (i)
initially, the period commencing on the Funding Date with respect to such Loan
and ending on the earlier of the related Maturity Date or the second Business
Day of the next succeeding month, and (ii) thereafter, each period commencing on
the second Business Day of a month and ending on the earlier of the related
Maturity Date or the second Business Day of the next succeeding month.
"Interest Rate Protection Agreement" shall mean, with respect
to any or all of the Eligible Mortgage Loans, any short sale of US Treasury
Security, or futures contract, or mortgage related security, or Eurodollar
futures contract, or options related contract, or 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 the Borrower,
and acceptable to the Lender.
"Lender" shall have the meaning provided in the heading
hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, security
interest or similar encumbrance.
"Loan" shall have the meaning provided in Section 2.01(a)
hereof.
"Loan Agreement" shall mean this Master Loan and Security
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.
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"Loan Documents" shall mean, collectively, this Loan
Agreement, the Note, the Custodial Agreement, and the Blocked Account Agreement.
"Market Value" shall mean, as of any date in respect of an
Eligible Mortgage Loan, the price at which such Eligible Mortgage Loan could
readily be sold as determined in the Lender's sole discretion, which price may
be determined to be zero. The Lender's determination of Market Value shall be
conclusive upon the parties absent manifest error on the part of the Lender.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business, operations, financial condition or prospects of
the Borrower, (b) the ability of the Borrower to perform its obligations under
any of the Loan Documents to which it is a party, (c) the validity or
enforceability of any of the Loan Documents or the security interest of the
Lender created thereby, (d) the rights and remedies of the Lender under any of
the Loan Documents, (e) the timely payment of the principal of or interest on
the Loans or other amounts payable in connection therewith or (f) the
Collateral.
"Maturity Date" shall mean such date as is determined by the
Lender in its sole discretion, or such earlier date on which this Loan Agreement
shall terminate in accordance with the provisions hereof or by operation of law.
"Maximum Credit" shall mean initially $150,000,000 and
thereafter an amount notified by the Lender to the Borrower from time to time
(and reflected in an endorsement to the Note) as the Maximum Credit, taking into
account the Adjusted Net Worth of the Borrower but determined by the Lender in
its sole discretion.
"Monthly Payment Date" shall mean the second (2nd) Business
Day.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
"Mortgage" shall mean the mortgage, deed of trust or other
instrument securing a Mortgage Note, which creates a first or second lien on the
fee in real property securing the Mortgage Note.
"Mortgage File" shall have the meaning assigned thereto in the
Custodial Agreement.
"Mortgage Loan" shall mean a mortgage loan acquired from a
Qualified Originator with either an "A", "A-" or "B/C" credit history which is
underwritten in accordance with the Underwriting Guidelines, which the Custodian
has been instructed to hold for the Lender pursuant to the Custodial Agreement,
and which Mortgage Loan includes, without limitation, (i) a Mortgage Note and
related Mortgage and (ii) all right, title and interest of the Borrower in and
to the Mortgaged Property covered by such Mortgage.
"Mortgage Loan Approval Code" shall have the meaning assigned
thereto in the Custodial Agreement.
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"Mortgage Loan Documents" shall mean, with respect to an
Eligible Mortgage Loan, the documents comprising the Mortgage File for such
Eligible Mortgage Loan.
"Mortgage Loan Schedule" shall mean a list of Eligible
Mortgage Loans to be pledged pursuant to this Loan Agreement and provided in
electronic format, setting forth, as to each Eligible Mortgage Loan, the
applicable information for each field listed on Schedule 3 hereto.
"Mortgage Loan Tape" shall mean a computer-readable file
containing information with respect to each Eligible Mortgage Loan, to be
delivered by the Borrower to the Lender pursuant to Section 2.03(a) hereof which
tape fields are identified on Annex I to the Custodial Agreement.
"Mortgage Note" shall mean the original executed promissory
note or other evidence of the indebtedness of a mortgagor/borrower with respect
to an Eligible Mortgage Loan.
"Mortgaged Property" shall mean the real property (including
all improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"Mortgagor" shall mean the obligor on a Mortgage Note.
"Multiemployer Plan" shall mean a multiemployer plan defined
as such in Section 3(37) of ERISA to which contributions have been or are
required to be made by the Borrower or any ERISA Affiliate and that is covered
by Title IV of ERISA.
"Net Income" shall mean, for any period, the net income of the
Borrower for such period as determined in accordance with GAAP.
"1934 Act" shall mean the Securities and Exchange Act of 1934,
as amended.
"Note" shall have the meaning provided for by Section 2.02(a)
hereof.
"Notice of Request for Borrowing" shall have the meaning
assigned thereto in Section 2.03 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, limited liability company,
trust, unincorporated association or government (or any agency, instrumentality
or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan
established or maintained by the Borrower or any ERISA Affiliate and covered by
Title IV of ERISA, other than a Multiemployer Plan.
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"Pledged Mortgage Loans" shall have the meaning provided in
Section 4.01(b) hereof.
"Post-Default Rate" shall mean, in respect of any principal of
any Loan or any other amount under this Loan Agreement, the Note or any other
Loan Document that is not paid when due to the Lender (whether at stated
maturity, by acceleration, by optional or mandatory prepayment or otherwise), a
rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 2.00% per annum
plus the Prime Rate.
"Prime Rate" shall mean the prime rate announced to be in
effect from time to time, as published as the base rate or average of at least
75% of the nation's 30 largest banks in the Money Rates section of The Wall
Street Journal.
"Property" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Qualified Originator" shall mean an originator of Eligible
Mortgage Loans reasonably acceptable to the Lender.
"Regulations T, U and X" shall mean Regulations T, U and X of
the Board of Governors of the Federal Reserve System (or any successor), as the
same may be modified and supplemented and in effect from time to time.
"Request for Certification" shall have the meaning assigned
thereto in the Custodial Agreement.
"Requirement of Law" shall mean as to any Person, the
certificate of incorporation and by laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" shall mean, as to any Person, the
president, the vice president, the controller, the chief executive officer or,
with respect to financial matters, the chief financial officer of such Person.
"RFC Financing Documents" shall mean (i) the Warehousing
Credit and Security Agreement (Single Family Mortgage Loans), dated as of March
1, 1999, between BNC Mortgage, Inc., Mortgage ▇▇▇▇▇.▇▇▇, Inc. and Residential
Funding Corporation, as amended by the First Amendment to Warehousing Credit and
Security Agreement, dated as of August 26, 1999, by and between BNC Mortgage,
Inc., Mortgage ▇▇▇▇▇.▇▇▇, Inc. and Residential Funding Corporation, as amended
by the Second Amendment to Warehousing Credit and Security Agreement, dated as
of February 29, 2000, by and between BNC Mortgage, Inc., Mortgage ▇▇▇▇▇.▇▇▇,
Inc. and Residential Funding Corporation (collectively, the "RFC Loan
Agreement") and (ii) all other documents or agreements executed in connection
therewith, or replacement facilities with substantially similar terms
(including, but not limited to, amounts and rates) with
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financial institutions approved by the Lender, provided, that in no event shall
broker-dealers or their Affiliates be acceptable financial institutions.
"S&P" shall mean Standard and Poor's Ratings Services, a
division of ▇▇▇▇▇▇-▇▇▇▇ Companies.
"Secured Obligations" shall have the meaning provided in
Section 4.01(c) hereof.
"Servicer" shall have the meaning provided in Section 11.14(c)
hereof.
"Servicing Agreement" shall have the meaning provided in
Section 11.14(c) hereof.
"Servicing Records" shall have the meaning provided in Section
11.14(b) hereof.
"Servicing Rights" shall mean any and all of the following:
(a) any and all rights to service the Pledged Mortgage Loans; (b) any payments
to or monies received by any Borrower for servicing the Pledged Mortgage Loans;
(c) any late fees, penalties or similar payments with respect to the Pledged
Mortgage Loans; (d) all agreements or documents creating, defining or evidencing
any such servicing rights to the extent they relate to such servicing rights and
all rights of any Borrower thereunder; (e) escrow payments or other similar
payments with respect to the Pledged Mortgage Loans and any amounts actually
collected by any Borrower with respect thereto; and (f) all accounts and other
rights to payment related to any of the property described herein.
"Submission Package" shall have the meaning assigned thereto
in the Custodial Agreement.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"System" shall mean all hardware or software, or any system
consisting of one or more thereof, including, without limitation, any and all
enhancements, upgrades, customizations, modifications, maintenance and the like
utilized by any Person for the benefit of such Person to perform its obligations
and to administer and track, store, process, provide, and where appropriate,
insert, true and accurate dates and calculations for dates and spans with
respect to the Mortgage Loans.
"Tangible Net Worth" shall mean, as of a particular date,
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(i) all amounts which would be included under capital on a
balance sheet of the Borrower at such date, determined in accordance with GAAP,
less
(ii) amounts owing to the Borrower from Affiliates, and
(iii) intangible assets.
"Test Period" shall have the meaning provided in Section 7.17
hereof.
Texas Home Equity Loan: An extension of credit described by
Section 50(a)(6), Article XVI of the Texas Constitution.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of the Borrower during such period less the amount of any
nonspecific balance sheet reserves maintained in accordance with GAAP.
"Underwriting Guidelines" shall mean underwriting guidelines
of the Borrower attached hereto as Exhibit J, as may be amended from time to
time only with the consent of the Lender, at the Lender's sole discretion.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect on the date hereof in the State of New York; provided that if
by reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection.
"Wet-Ink Mortgage Loan" shall mean an Eligible Mortgage Loan
which is pledged to the Lender simultaneously with the origination thereof by
the Qualified Originator, which origination is in accordance with the
Underwriting Guidelines and is funded in part or in whole with proceeds of a
Loan advanced directly to an Escrow Agent and held in escrow pursuant to the
Escrow Instruction Letter.
"Year 2000 Compliant" shall mean the ability of a System to
continue its normal functions following January 1, 2000 and the ability of such
System to support its continued normal usage such that neither the performance
nor the correct functioning of such System will be affected by the passing into
the year 2000.
1.02 Accounting Terms and Determinations. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lender hereunder shall be
prepared, in accordance with GAAP.
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Section 2. Loans, Note and Prepayments.
2.01 Loans.
(a) Subject to fulfillment of the conditions precedent set
forth in Sections 5.01 and 5.02 hereof, and provided that no Default shall have
occurred and be continuing hereunder, the Lender agrees to consider from time to
time the Borrower's requests that the Lender make, on the terms and conditions
of this Loan Agreement, loans to the Borrower in Dollars secured by Eligible
Mortgage Loans, from and including the Effective Date to and including the
termination of this Loan Agreement in an aggregate principal amount at any one
time outstanding not exceeding the lesser of (i) the Maximum Credit at such
time, and (ii) the Borrowing Base at such time. This Loan Agreement is not a
commitment to lend but rather sets forth the procedures to be used in connection
with periodic requests for Loans. The Borrower hereby acknowledges that the
Lender is under no obligation to agree to make, or to make, any Loan pursuant to
this Loan Agreement.
(b) Subject to the terms and conditions of this Loan
Agreement, during such period the Borrower may borrow, repay and reborrow
hereunder.
(c) In no event shall a Loan be made when any Default or Event
of Default has occurred and is continuing.
2.02 Notes.
(a) The Loans made by the Lender shall be evidenced by a
single promissory note executed by the Borrower substantially in the form of
Exhibit A hereto (the "Note"), dated the date hereof, payable to the Lender in a
principal amount equal to the aggregate amount of the Loans made pursuant to
this Loan Agreement as originally in effect and otherwise duly completed. The
Lender shall have the right to have its Note subdivided, by exchange for
promissory notes of lesser denominations or otherwise.
(b) The date, amount and interest rate of each Loan made by
the Lender to the Borrower, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of the Note, endorsed by the Lender on the schedule attached to the Note or any
continuation thereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing hereunder or under the Note in
respect of the Loans.
2.03 Procedure for Borrowing.
(a) The Borrower may request a borrowing hereunder, on any
Business Day during the period from and including the Effective Date to and
including the termination of this Loan Agreement, by delivering to the Lender,
with a copy to the Custodian, a written request for borrowing, substantially in
the form of Exhibit D attached hereto (the "Notice of Request for Borrowing"),
which request must be received by the Lender prior to 6:00 p.m., New York City
time, two (2) Business Days prior to the requested Funding Date for any Eligible
Mortgage Loans. Such request for borrowing shall (i) attach a schedule
identifying the Eligible Mortgage
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Loans which are not Wet-Ink Mortgage Loans that the Borrower proposes to pledge
to the Lender and to be included in the Borrowing Base in connection with such
borrowing, (ii) specify the requested Funding Date, (iii) include a Mortgage
Loan Tape containing information with respect to the Eligible Mortgage Loans
that the Borrower proposes to pledge to the Lender and to be included in the
Borrowing Base in connection with such borrowing, (iv) certify as to the truth
and accuracy of the representations and warranties made hereunder as required by
Section 5.02(b) hereof and (v) attach a Request for Certification (as defined in
the Custodial Agreement).
Upon the Borrower's request for a borrowing pursuant to Section 2.03(a), the
Lender may at its sole option, assuming all conditions precedent set forth in
Section 5.01 and 5.02 have been met and provided no Default shall have occurred
and be continuing, make a Loan to the Borrower on the requested Funding Date in
the amount so requested.
(b) The Borrower shall release to the Custodian, in the case
of any Eligible Mortgage Loan which is not a Wet-Ink Mortgage Loan, no later
than 11:00 a.m., New York City time, on such Funding Date, the applicable
Submission Package pertaining to each such Eligible Mortgage Loan to be pledged
to the Lender and included in the Borrowing Base on such requested Funding Date,
in accordance with the terms and conditions hereof and of the Custodial
Agreement. With respect to each Wet-Ink Mortgage Loan pledged to the Lender and
included in the Borrowing Base on a requested Funding Date:
(i) The Borrower shall deliver the applicable Submission
Package related to all Wet-Ink Mortgage Loans to be included in the
Borrowing Base on such requested Funding Date and the original Escrow
Instruction Letter to the Custodian, for receipt by the Custodian no
later than 11.00 a.m., New York City time, five (5) Business Days
following the Funding Date; and
(ii) the Borrower shall cause the Escrow Agent to send the
Lender a facsimile of the associated executed Escrow Instruction Letter
on each Funding Date.
(c) Pursuant to the Custodial Agreement, the Custodian shall
deliver to the Lender and the Borrower, no later than 5:30 p.m., New York City
time, on a Funding Date (and with respect to each Wet-Ink Mortgage Loan, on the
Business Day of receipt of the applicable Submission Package), a Trust Receipt
(as defined in the Custodial Agreement) in respect of all Eligible Mortgage
Loans pledged to the Lender on such Funding Date, attaching a Custodial Mortgage
Loan Schedule. Subject to Sections 2.01 and 5 hereof, such borrowing will then
be made available to the Borrower by the Lender transferring, via wire transfer,
to the account specified by the Borrower in accordance with the Borrower Release
Letter in the form of Exhibit E-1 hereto, not later than 6:00 p.m. New York City
time on such Funding Date, in the aggregate amount of such borrowing in funds
immediately available to the Borrower with respect to each Pledged Mortgage Loan
which is not a Wet-Ink Mortgage Loan; provided that if such Pledged Mortgage
Loan is subject to any prior interest, encumbrance, equity, participation
interest, lien, pledge, charge, claim or security interest (any such Eligible
Mortgage Loan, "Release Collateral"), the Lender shall make available the
portion of such borrowing relating to such Release Collateral in accordance with
the written instructions of the holder of such interest, encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest. With
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respect to each Pledged Mortgage Loan which is a Wet-Ink Mortgage Loan, subject
to Sections 2.01 and 5 hereof, such borrowing will then be made available to the
Borrower by the Lender transferring, via wire transfer, to the account of the
applicable Escrow Agent in accordance with the instructions set forth in the
Escrow Instruction Letter, not later than 6:00 p.m. New York City time on such
Funding Date, in the aggregate amount of such borrowing in funds immediately
available to the Escrow Agent.
2.04 Limitation on Types of Loans; Illegality. Anything herein
to the contrary notwithstanding, if, on or prior to the determination of any
Eurodollar Rate:
(a) the Lender determines in good faith, which determination
shall be conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Rate" in Section 1.01 hereof are
not being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Loans as provided herein; or
(b) the Lender determines, which determination shall be
conclusive, that the relevant rate of interest referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for Loans is to be determined is not likely to cover the cost to the
Lender of making or maintaining Loans; or
(c) it becomes unlawful for the Lender to honor its obligation
to make or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrower prompt notice thereof and, so long as
such condition remains in effect, the Lender shall be under no obligation to
consider making additional Loans, and the Borrower shall, either prepay all such
Loans as may be outstanding or pay interest on such Loans at a rate per annum
equal to the Federal Funds Rate plus 2.00%.
2.05 Repayment of Loans; Interest.
(a) The Borrower hereby promises to repay in full on the
applicable Maturity Date the then aggregate outstanding principal amount of the
related Loans.
(b) The Borrower hereby promises to pay to the Lender interest
on the unpaid principal amount of each Loan for the period from and including
the date of such Loan to but excluding the date such Loan shall be paid in full,
at a rate per annum equal to the Eurodollar Rate plus the Applicable Margin.
Notwithstanding the foregoing, the Borrower hereby promises to pay to the Lender
interest at the applicable Post-Default Rate on any principal of any Loan and on
any other amount payable by the Borrower hereunder or under the Note that shall
not be paid in full when due (whether at stated maturity, by acceleration or by
mandatory prepayment or otherwise) for the period from and including the due
date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable monthly in arrears, if applicable, on the
second Business Day of each month and for the last month of the Loan Agreement
on the second Business Day of such last month and on the related Maturity Date,
except that interest payable at the Post-Default Rate shall accrue daily and
shall be payable upon such accrual.
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(c) It is understood and agreed that, unless and until a
Default shall have occurred and be continuing, the Borrower shall be entitled to
the proceeds of the Eligible Mortgage Loans pledged to the Lender hereunder.
(d) In addition to any other amounts payable hereunder, the
Borrower shall pay a fee to the Lender on the Second Business Day of each month
and the related Maturity Date when such interest would be due under Section
2.05(b) above equal to the imputed interest on that portion of any Loan
requested by the Borrower pursuant to a Notice of Request for Borrowing which
has been accepted by the Lender but has not been fully utilized by the Borrower.
Such imputed accrued interest shall accrue at the Applicable Margin for the
period of time from the proposed funding date specified in the Notice of Request
for Borrowing until the earlier to occur of (x) the Maturity Date specified in
the Notice of Request for Borrowing, and (y) the actual date the related Loan is
fully utilized by the Borrower.
2.06 Mandatory Prepayments or Pledge.
If at any time the aggregate outstanding principal amount of
Loans exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined
by the Lender in good faith and notified to the Borrower on any Business Day,
the Borrower shall no later than one Business Day after receipt of such notice,
either prepay the Loans in part or in whole or pledge additional Eligible
Mortgage Loans (which Collateral shall be in all respects acceptable to the
Lender) to the Lender, such that after giving effect to such prepayment or
pledge the aggregate outstanding principal amount of the Loans does not exceed
the Borrowing Base.
The Borrower may not prepay Loans hereunder other than as
specifically provided herein. In connection with any prepayment of a Loan, the
Borrower shall be required to pay a Breakage Fee to the Lender in addition to
any other amounts due hereunder.
Section 3. Payments; Computations; Etc.
3.01 Payments.
(a) Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrower
under this Loan Agreement and the Note, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender at
the following account maintained by the Lender: Account No. ▇▇▇-▇-▇▇▇▇▇▇, for
the account of PaineWebber Conduit Funding, The Chase Manhattan Bank, ABA No.
▇▇▇▇▇▇▇▇▇) not later than 1:00 p.m., New York City time, on the date on which
such payment shall become due (and each such payment made after such time on
such due date shall be deemed to have been made on the next succeeding Business
Day). The Borrower acknowledges that it has no rights of withdrawal from the
foregoing account.
(b) Except to the extent otherwise expressly provided herein,
if the due date of any payment under this Loan Agreement or the Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
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3.02 Computations. Interest on the Loans shall be computed on
the basis of a 360-day year for the actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
3.03 Requirements of Law.
(a) If any Requirement of Law (other than with respect to any
amendment made to the Lender's certificate of incorporation and by-laws or other
organizational or governing documents) or any change in the interpretation or
application thereof or compliance by the Lender with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i) shall subject the Lender to any tax of any kind whatsoever
with respect to this Loan Agreement, the Note or any Loan made by it (excluding
net income taxes) or change the basis of taxation of payments to the Lender in
respect thereof;
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory Loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, Loans or other
extensions of credit by, or any other acquisition of funds by, any office of the
Lender which is not otherwise included in the determination of the Eurodollar
Rate hereunder;
(iii) shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by
an amount which the Lender deems to be material, of making, continuing or
maintaining any Loan or to reduce any amount due or owing hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay the Lender such
additional amount or amounts as will compensate the Lender for such increased
cost or reduced amount receivable.
(b) If the Lender shall have determined that the adoption of
or any change in any Requirement of Law (other than with respect to any
amendment made to the Lender's certificate of incorporation and by-laws or other
organizational or governing documents) regarding capital adequacy or in the
interpretation or application thereof or compliance by the Lender or any
corporation controlling the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on the Lender's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which the Lender
or such corporation (taking into consideration the Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
the Lender to be material, then from time to time, the Borrower shall promptly
pay to the Lender such additional amount or amounts as will compensate the
Lender for such reduction.
(c) If the Lender becomes entitled to claim any additional
amounts pursuant to this Section, it shall promptly notify the Borrower of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this Section submitted by the Lender to
the Borrower shall be conclusive in the absence of manifest error.
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3.04 Minimum Usage. In the event the Borrower fails to
maintain the average aggregate principal balance of Loans outstanding hereunder
over any three-month period equal to at least $50,000,000, the Lender may
permanently reduce the Maximum Credit to an amount equal to the average
aggregate principal balance of Loans outstanding during such three-month period
by delivering notice thereof to the Borrower.
Section 4. Collateral Security.
4.01 Collateral; Security Interest.
(a) Pursuant to the Custodial Agreement, the Custodian shall
hold the Mortgage Loan Documents as exclusive bailee and agent for the Lender
pursuant to terms of the Custodial Agreement and shall deliver to the Lender
Trust Receipts (as defined in the Custodial Agreement) each to the effect that
it has reviewed such Mortgage Loan Documents in the manner and to the extent
required by the Custodial Agreement and identifying any deficiencies in such
Mortgage Loan Documents as so reviewed.
(b) All of the Borrower's right, title and interest in, to and
under each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, is hereinafter
referred to as the "Collateral":
(i) all Mortgage Loans identified on a Notice of Request for
Borrowing and Pledge delivered by the Borrower to the Lender ("Pledged
Mortgage Loans") and all Servicing Rights thereto;
(ii) all Mortgage Loan Documents, including without limitation
all promissory notes, and all Servicing Records (as defined in Section
11.14(b) below), servicing agreements and any other collateral pledged
or otherwise relating to such Pledged Mortgage Loans, together with all
files, documents, instruments, surveys, certificates, correspondence,
appraisals, computer programs, computer storage media, accounting
records and other books and records relating thereto;
(iii) all mortgage guaranties and insurance (issued by
governmental agencies or otherwise) and any mortgage insurance
certificate or other document evidencing such mortgage guaranties or
insurance relating to any Pledged Mortgage Loan and all claims and
payments thereunder;
(iv) all other insurance policies and insurance proceeds
relating to all of the foregoing or any related Mortgaged Property;
(v) all Interest Rate Protection Agreements;
(vi) the Collection Account and all monies from time to time
on deposit in the Collection Account, and the Blocked Collection
Account and all monies from time to time on deposit in the Blocked
Collection Account;
(vii) any purchase agreements covering or relating to any or
all of the foregoing;
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(viii) all collateral, however defined, under any other
agreement between the Borrower or any of its Affiliates on the one hand
and the Lender or any of its Affiliates on the other hand;
(ix) all "general intangibles", "accounts" and "chattel paper"
as defined in the Uniform Commercial Code relating to or constituting
any and all of the foregoing; and
(x) any and all replacements, substitutions, distributions on
or proceeds of any and all of the foregoing.
(c) The Borrower hereby assigns, pledges and grants a security
interest in all of its right, title and interest in, to and under the Collateral
to the Lender to secure the repayment of principal of and interest on all Loans
and all other amounts owing to the Lender hereunder, under the Note and under
the other Loan Documents (collectively, the "Secured Obligations"). The Borrower
agrees to ▇▇▇▇ its computer records and tapes to evidence the interests granted
to the Lender hereunder.
4.02 Further Documentation. At any time and from time to time,
upon the written request of the Lender, and at the sole expense of the Borrower,
the Borrower will promptly and duly execute and deliver, or will promptly cause
to be executed and delivered, such further instruments and documents and take
such further action as the Lender may reasonably request for the purpose of
obtaining or preserving the full benefits of this Loan Agreement and of the
rights and powers herein granted, including, without limitation, the filing of
any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction with respect to the Liens created hereby. The
Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of the Borrower to the extent
permitted by applicable law. A carbon, photographic or other reproduction of
this Loan Agreement shall be sufficient as a financing statement for filing in
any jurisdiction.
4.03 Changes in Locations, Name, etc. The Borrower shall not
(i) change the location of its chief executive office/chief place of business
from that specified in Section 6 hereof or (ii) change its name, identity or
corporate structure (or the equivalent) or change the location where it
maintains its records with respect to the Collateral unless it shall have given
the Lender at least 15 days prior written notice thereof and shall have
delivered to the Lender all Uniform Commercial Code financing statements and
amendments thereto as the Lender shall request and taken all other actions
deemed necessary by the Lender to continue its perfected status in the
Collateral with the same or better priority.
4.04 Lender's Appointment as Attorney-in-Fact.
(a) The Borrower hereby irrevocably constitutes and appoints
the Lender and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of the Borrower and in the name of the Borrower or in its
own name, from time to time in the Lender's discretion, for the purpose of
carrying out the terms of this Loan Agreement, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to
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accomplish the purposes of this Loan Agreement, and, without limiting the
generality of the foregoing, the Borrower hereby gives the Lender the power and
right, on behalf of the Borrower, without assent by, but with notice to, the
Borrower, if an Event of Default shall have occurred and be continuing, to do
the following:
(i) in the name of the Borrower or its own name, or otherwise,
to take possession of and endorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys due
under any mortgage insurance or with respect to any other Collateral
and to file any claim or to take any other action or proceeding in any
court of law or equity or otherwise deemed appropriate by the Lender
for the purpose of collecting any and all such moneys due under any
such mortgage insurance or with respect to any other Collateral
whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B) to
ask or demand for, collect, receive payment of and receipt for, any and
all moneys, claims and other amounts due or to become due at any time
in respect of or arising out of any Collateral; (C) to sign and endorse
any invoices, assignments, verifications, notices and other documents
in connection with any of the Collateral; (D) to commence and prosecute
any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any portion thereof
and to enforce any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against the Borrower with
respect to any Collateral; and (F) to settle, compromise or adjust any
suit, action or proceeding described in clause (E) above and, in
connection therewith, to give such discharges or releases as the Lender
may deem appropriate.
The Borrower hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. This power of attorney is a
power coupled with an interest and shall be irrevocable.
(b) The Borrower also authorizes the Lender, at any time and
from time to time, to execute, in connection with any sale provided for in
Section 4.07 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
(c) The powers conferred on the Lender are solely to protect
the Lender's interests in the Collateral and shall not impose any duty upon the
Lender to exercise any such powers. The Lender shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and neither the Lender nor any of its officers, directors, or employees shall be
responsible to the Borrower for any act or failure to act hereunder, except for
its own gross negligence or willful misconduct.
4.05 Performance by Lender of Borrower's Obligations. If the
Borrower fails to perform or comply with any of its agreements contained in the
Loan Documents and the
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Lender may itself perform or comply, or otherwise cause performance or
compliance, with such agreement, the expenses of the Lender incurred in
connection with such performance or compliance, together with interest thereon
at a rate per annum equal to the Post-Default Rate, shall be payable by the
Borrower to the Lender on demand and shall constitute Secured Obligations.
4.06 Proceeds. If an Event of Default shall occur and be
continuing, (a) all proceeds of Collateral received by the Borrower consisting
of cash, checks and other near-cash items shall be held by the Borrower in trust
for the Lender, segregated from other funds of the Borrower, and shall forthwith
upon receipt by the Borrower be turned over to the Lender in the exact form
received by the Borrower (duly endorsed by the Borrower to the Lender, if
required) and (b) any and all such proceeds received by the Lender (whether from
the Borrower or otherwise) may, in the sole discretion of the Lender, be held by
the Lender as collateral security for, and/or then or at any time thereafter may
be applied by the Lender against, the Secured Obligations (whether matured or
unmatured), such application to be in such order as the Lender shall elect. Any
balance of such proceeds remaining after the Secured Obligations shall have been
paid in full and this Loan Agreement shall have been terminated shall be paid
over to the Borrower or to whomsoever may be lawfully entitled to receive the
same. For purposes hereof, proceeds shall include, but not be limited to, all
principal and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other income
and all other amounts received with respect to the Collateral.
4.07 Remedies. If a Default shall occur and be continuing, the
Lender may, at its option, enter into one or more Interest Rate Protection
Agreements covering all or a portion of the Eligible Mortgage Loans pledged to
the Lender hereunder, and the Borrower shall be responsible for all damages,
judgments, costs and expenses of any kind which may be imposed on, incurred by
or asserted against the Lender relating to or arising out of such Interest Rate
Protection Agreements; including without limitation any losses resulting from
such Interest Rate Protection Agreements. If an Event of Default shall occur and
be continuing, the Lender may exercise, in addition to all other rights and
remedies granted to it in this Loan Agreement and in any other instrument or
agreement securing, evidencing or relating to the Secured Obligations, all
rights and remedies of a secured party under the Uniform Commercial Code.
Without limiting the generality of the foregoing, the Lender without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon the
Borrower or any other Person (each and all of which demands, presentments,
protests, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of the Lender or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as the Lender deems
appropriate, for cash or on credit or for future delivery without assumption of
any credit risk. The Lender shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold, free of any right
or equity of redemption in the Borrower, which right or equity is hereby waived
or released. The Borrower hereby further agrees, at the Lender's request, to
assemble the Collateral and make it available to
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the Lender at places which the Lender shall reasonably select, whether at the
Borrower's premises or elsewhere. The Lender shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Lender hereunder, including
without limitation reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Secured Obligations, in such order as the Lender may
elect, and only after such application and after the payment by the Lender of
any other amount required or permitted by any provision of law, including
without limitation Section 9-504(1)(c) of the Uniform Commercial Code, need the
Lender account for the surplus, if any, to the Borrower. To the extent permitted
by applicable law, the Borrower waives all claims, damages and demands it may
acquire against the Lender arising out of the exercise by the Lender of any of
its rights hereunder, other than those claims, damages and demands arising from
the gross negligence or willful misconduct of the Lender. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition. The Borrower shall remain liable for any
deficiency (plus accrued interest thereon as contemplated pursuant to Section
2.05(b) hereof) if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay the Secured Obligations and the fees and
disbursements of any attorneys employed by the Lender to collect such
deficiency.
4.08 Limitation on Duties Regarding Preservation of
Collateral. The Lender's duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code or otherwise, shall be to deal with it in the
same manner as the Lender deals with similar property for its own account.
Neither the Lender nor any of its directors, officers or employees shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrower or
otherwise.
4.09 Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
4.10 Release of Security Interest. Upon termination of this
Loan Agreement and repayment to the Lender of all Secured Obligations and the
performance of all obligations under the Loan Documents the Lender shall
promptly release its security interest in any remaining Collateral including the
filing of any UCC statements reasonably required to release such interest;
provided that if any payment, or any part thereof, of any of the Secured
Obligations is rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation or similar
reorganization of the Borrower, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or a trustee or similar officer for, the
Borrower or any substantial part of its Property, or otherwise, this Loan
Agreement, all rights hereunder and the Liens created hereby shall continue to
be effective, or be reinstated, as though such payments had not been made.
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Section 5. Conditions Precedent.
5.01 Initial Loan. If the Lender agrees to make a Loan to the
Borrower pursuant to the terms of this Loan Agreement, the obligation of the
Lender to make its initial Loan hereunder is additionally subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan,
of the condition precedent that the Lender shall have received all of the
following documents, each of which shall be satisfactory to the Lender and its
counsel in form and substance:
(a) Loan Documents. The Loan Documents, duly completed and
executed.
(i) Note. The Note, duly completed and executed;
(ii) Custodial Agreement. The Custodial Agreement, duly
executed and delivered by the Borrower and the Custodian. In addition,
the Borrower shall have taken such other action as the Lender shall
have requested in order to perfect the security interests created
pursuant to the Loan Agreement;
(iii) Blocked Account Agreement. A Blocked Account Agreement,
duly executed by the parties thereto;
(b) Organizational Documents. A good standing certificate and
certified copies of the charter and by-laws (or equivalent documents) of the
Borrower and of all corporate or other authority for the Borrower with respect
to the execution, delivery and performance of the Loan Documents and each other
document to be delivered by the Borrower from time to time in connection
herewith (and the Lender may conclusively rely on such certificate until it
receives notice in writing from the Borrower to the contrary);
(c) Legal Opinion. A legal opinion of outside counsel to the
Borrower, substantially in the form attached hereto as Exhibit C;
(d) Custodial Mortgage Loan Schedule. A Custodial Mortgage
Loan Schedule, dated the Effective Date, from the Custodian, duly completed;
(e) Servicing Agreement(s). Any Servicing Agreement, certified
as a true, correct and complete copy of the original, with a letter attached
thereto acknowledged by the applicable Servicer directing the Servicer to remit
all payments on account of the Eligible Mortgage Loans directly to the Lender
upon receipt of notice from the Lender of the occurrence of an Event of Default;
(f) Custodian Legal Opinion. A legal opinion of counsel to the
Custodian, in form and substance satisfactory to the Lender;
(g) Consents and Waivers. Any and all irrevocable consents and
waivers required under the Existing Financing Documents;
(h) Existing Financing Documents. Copies of the Existing
Financing Documents, certified to be true and complete copies thereof by a
Responsible Officer of the Borrower; and
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(i) Other Documents. Such other documents as the Lender may
reasonably request.
5.02 Initial and Subsequent Loans. If the Lender agrees to
make a Loan to the Borrower, the making of each Loan to the Borrower (including
the initial Loan) on any Business Day is subject to the satisfaction of the
following further conditions precedent, both immediately prior to the making of
such Loan and also after giving effect thereto and to the intended use thereof:
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) both immediately prior to the making of such Loan and also
after giving effect thereto and to the intended use thereof, the representations
and warranties made by the Borrower in Section 6 hereof, and elsewhere in each
of the Loan Documents, shall be true, correct and complete on and as of the date
of the making of such Loan in all material respects (in the case of the
representations and warranties in Section 6.10 and Schedule 1, solely with
respect to Eligible Mortgage Loans included in the Borrowing Base) with the same
force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date). The Lender shall have received a
Notice of Request for Borrowing and Pledge signed by a Responsible Officer of
the Borrower, substantially in the form of Exhibit D attached hereto, which
shall certify as to the truth, accuracy and completeness of the above, which
Notice of Request for Borrowing and Pledge shall specifically include a
statement that the Borrower is in compliance with all governmental licenses and
authorizations and is qualified to do business and in good standing in all
required jurisdictions in which the failure to be qualified and in good standing
would have a Material Adverse Effect, and the parties hereto have complied with
Section 2.03 hereof with respect to such Loan.
(c) the aggregate outstanding principal amount of the Loans
shall not exceed the Borrowing Base;
(d) subject to the Lender's right to perform one or more Due
Diligence Reviews pursuant to Section 11.15 hereof, the Lender shall have
completed its due diligence review of the Mortgage Loan Documents for each Loan
and such other documents, records, agreements, instruments, mortgaged properties
or information relating to such Loans as the Lender in its sole discretion deems
appropriate to review and such review shall be satisfactory to the Lender in its
sole discretion;
(e) the Lender shall have received from the Custodian a Trust
Receipt attaching a Custodial Mortgage Loan Schedule in respect of Eligible
Mortgage Loans to be pledged hereunder on such Business Day; provided that with
respect to each Wet-Ink Mortgage Loan, the Custodian shall deliver such Trust
Receipt on the day of receipt of the related Submission Package;
(f) the Lender shall have received from the Borrower (or from
the applicable warehouse lender) a Re-warehouse Lender's Release Letter
substantially in the form of Exhibit E-3 hereto (or such other form acceptable
to the Lender), a Warehouse Lender's Release Letter
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substantially in the form of Exhibit E-2 hereto (or such other form acceptable
to the Lender) or a Borrower Release Letter substantially in the form of Exhibit
E-1 hereto (or such other form acceptable to the Lender) covering each Eligible
Mortgage Loan to be pledged to the Lender;
(g) the Lender shall have received from the Borrower copies of
each Servicing Agreement relating to the Eligible Mortgage Loans and the Lender
shall have reviewed and approved each such Servicing Agreement in its sole
discretion;
(h) none of the following shall have occurred and/or be
continuing:
(i) an event or events shall have occurred resulting in the
effective absence of a "repo market" or comparable "lending market" for
financing debt obligations secured by mortgage loans or securities or
an event or events shall have occurred resulting in the Lender not
being able to finance any Eligible Mortgage Loans through the "repo
market" or "lending market" with traditional counterparties at rates
which would have been reasonable prior to the occurrence of such event
or events;
(ii) an event or events shall have occurred resulting in the
effective absence of a "securities market" for securities backed by
mortgage loans or an event or events shall have occurred resulting in
the Lender not being able to sell securities backed by mortgage loans
at prices which would have been reasonable prior to such event or
events; or
(iii) there shall have occurred a material adverse change in
the "repo market" or comparable "lending market" or in the financial
condition of the Lender which effects (or can reasonably be expected to
effect) materially and adversely the ability of the Lender to fund its
obligations under this Loan Agreement;
(i) for each Wet-Ink Mortgage Loan, the Lender shall have
received the Escrow Instruction Letter and an insured closing letter from each
Escrow Agent that is not title insurance company;
(j) The Lender shall have received from the Borrower a
Certification Report with respect to each Mortgage Loan which does not have a
Mortgage Loan Approval Code; and
(k) The Lender shall have received all fees and expenses of
counsel to the Lender as contemplated by Section 11.03(b), which amount, at the
Lender's option, may be netted from any Loan advanced under this Agreement.
Each request for a borrowing by the Borrower hereunder shall
constitute a certification by the Borrower that all the conditions set forth in
this Section 5 have been satisfied (both as of the date of such request and as
of the date of such borrowing).
Section 6. Representations and Warranties. The Borrower
represents and warrants to the Lender that throughout the term of this Loan
Agreement:
6.01 Existence. The Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has all
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requisite corporate or other power, and has all governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted, except where the lack
of such licenses, authorizations, consents and approvals would not be reasonably
likely to have a Material Adverse Effect; and (c) is qualified to do business
and is in good standing in all other jurisdictions in which the nature of the
business conducted by it makes such qualification necessary, except where
failure so to qualify would not be reasonably likely (either individually or in
the aggregate) to have a Material Adverse Effect.
6.02 Financial Condition. The Borrower has heretofore
furnished to the Lender a copy of (a) its consolidated balance sheet and the
consolidated balance sheets of its consolidated Subsidiaries for the fiscal year
of the Borrower ended June 30, 1999 and the related consolidated statements of
income and retained earnings and of cash flows for the Borrower and its
consolidated Subsidiaries for such fiscal period, setting forth in comparative
form the figures for the previous year, with the opinion thereon of Ernst &
Young or another nationally recognized accounting firm, and (b) its consolidated
balance sheet and the consolidated balance sheets of its consolidated
Subsidiaries for the quarterly fiscal periods of the Borrower ended September
30, 1999 and December 31, 1999 and the related consolidated statements of income
and retained earnings and of cash flows for the Borrower and its consolidated
Subsidiaries for such quarterly fiscal periods, setting forth in each case in
comparative form the figures for the previous quarter. All such financial
statements are complete and correct and fairly present, in all material
respects, the consolidated financial condition of the Borrower and its
Subsidiaries and the consolidated results of their operations as at such dates
and for such fiscal periods, all in accordance with GAAP applied on a consistent
basis. Since June 30, 1999, there has been no material adverse change in the
consolidated business, operations or financial condition of the Borrower and its
consolidated Subsidiaries taken as a whole from that set forth in said financial
statements.
6.03 Litigation. Except as set forth on Schedule 5 hereto,
there are no actions, suits, arbitrations, investigations (including, without
limitation, any of the foregoing which are pending or to the Borrower's
knowledge threatened) or other legal or arbitrable proceedings affecting the
Borrower or any of its Subsidiaries or affecting any of the Property of any of
them before any Governmental Authority that (i) questions or challenges the
validity or enforceability of any of the Loan Documents or any action to be
taken in connection with the transactions contemplated hereby, (ii) makes a
claim or claims in an aggregate amount greater than $1,000,000, (iii) which,
individually or in the aggregate, if adversely determined, could reasonably be
likely to have a Material Adverse Effect, or (iv) requires filing with the
Securities and Exchange Commission in accordance with the 1934 Act or any rules
thereunder. The Borrower is not (i) in violation of any applicable law which
violation materially adversely affects or may reasonably be expected to
materially adversely affect the business, operations, properties, assets or
condition (financial or otherwise) of the Borrower, or (ii) subject to or in
default with respect to any final judgment, writ, injunction, decree, rule or
regulation of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which would have a Material Adverse Effect. Notwithstanding anything
herein to the contrary, it is acknowledged and agreed by the parties hereto that
the Lender is explicitly preserving any and all of its rights arising out of or
resulting from the litigation listed on Schedule 5 attached hereto, including,
without limitation, the right to determine whether the existence of such
litigation, or its consequences, constitutes a Material
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Adverse Change or an event of default hereunder. The Lender reserves the right
to make such determination at any time.
6.04 No Breach. Neither (a) the execution and delivery of the
Loan Documents nor (b) the consummation of the transactions therein contemplated
in compliance with the terms and provisions thereof will (i) conflict with or
result in a breach of the charter or by-laws of the Borrower, or any material
applicable law, rule or regulation, or any order, writ, injunction or decree of
any Governmental Authority, or any Servicing Agreement or other material
agreement or instrument to which the Borrower or any of its Subsidiaries is a
party or by which any of them or any of their Property is bound or to which any
of them is subject, (ii) constitute a default under any such material agreement
or instrument or result in the creation or imposition of any Lien (except for
the Liens created pursuant to this Loan Agreement) upon any Property of the
Borrower or any of its Subsidiaries pursuant to the terms of any such agreement
or instrument or (iii) constitute an event of default or an event which, with
the passage of time or expiration of any grace period, would constitute an event
of default under the Existing Financing Documents.
6.05 Action. The Borrower has all necessary corporate power,
authority and legal right to execute, deliver and perform its obligations under
each of the Loan Documents; the execution, delivery and performance by the
Borrower of each of the Loan Documents have been duly authorized by all
necessary corporate action on its part; and each Loan Document has been duly and
validly executed and delivered by the Borrower and constitutes a legal, valid
and binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms except as such enforcement may be limited by
bankruptcy, insolvency, conservatorship, reorganization, moratorium or other
laws relating to or affecting the rights of creditors generally and general
principles of equity regardless of whether considered in a proceeding in equity
or at law.
6.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority or any
securities exchange are necessary for the execution, delivery or performance by
the Borrower of the Loan Documents or for the legality, validity or
enforceability thereof, except for filings and recordings in respect of the
Liens created pursuant to this Loan Agreement.
6.07 Margin Regulations. Neither the making of any Loan
hereunder, nor the use of the proceeds thereof, will violate or be inconsistent
with the provisions of Regulations T, U or X.
6.08 Taxes. The Borrower and its Subsidiaries have filed (or
have obtained extensions for filing) all Federal income tax returns and all
other material tax returns that are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received by
any of them, except for any such taxes as are being appropriately contested in
good faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves have been provided. The charges, accruals and reserves
on the books of the Borrower and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Borrower, adequate.
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6.09 Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.10 Collateral; Collateral Security.
(a) The Borrower has not assigned, pledged, or otherwise
conveyed or encumbered any of the Collateral to any other Person, and
immediately prior to the pledge of such Collateral to the Lender, the Borrower
was the sole owner of such Collateral and had good and marketable title thereto,
and has full right and authority to pledge or assign such Collateral free and
clear of all Liens, in each case except for Liens to be released simultaneously
with the Liens granted in favor of the Lender hereunder. No Mortgage Loan
pledged to the Lender hereunder was acquired (by purchase or otherwise) by the
Borrower from an Affiliate of the Borrower. All Mortgage Notes evidencing each
Mortgage Loan are substantially in the form of Exhibit I hereto.
(b) The provisions of this Loan Agreement are effective to
create in favor of the Lender a valid security interest in all right, title and
interest of the Borrower in, to and under the Collateral.
(c) Upon receipt by the Custodian of each Mortgage Note
endorsed in blank by a duly authorized officer of the Borrower, the Lender shall
have a fully perfected first priority security interest therein, in the Mortgage
Loan and in the Borrower's interest in the related Mortgaged Property.
(d) Upon the filing of financing statements on Form UCC-1
naming the Lender as "Secured Party" and the Borrower as "Debtor", and
describing the Collateral, in the jurisdictions and recording offices listed on
Schedule 2 attached hereto, the security interests granted hereunder in the
Collateral will constitute fully perfected first priority security interests
under the Uniform Commercial Code in all right, title and interest of the
Borrower in, to and under such Collateral which can be perfected by filing under
the Uniform Commercial Code.
6.11 Chief Executive Office. On the Effective Date, and during
the four months immediately preceding the Effective Date, the Borrower's chief
executive office and principal place of business is located at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
6.12 Location of Books and Records. The location where the
Borrower keeps its books and records, including all computer tapes and records
relating to the Collateral is its chief executive office.
6.13 [Reserved.]
6.14 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Borrower to the Lender in connection with the negotiation,
preparation or delivery of this Loan Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole, do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in
light of the circumstances
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under which they were made, not misleading. All written information furnished
after the date hereof by or on behalf of the Borrower to the Lender in
connection with this Loan Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby will be true, complete and accurate
in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to a Responsible Officer of the Borrower, after due
inquiry, that could reasonably be expected to have a Material Adverse Effect
that has not been disclosed herein, in the other Loan Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lender for use in connection with the transactions contemplated
hereby or thereby.
6.15 Tangible Net Worth. On the Effective Date, the aggregate
Tangible Net Worth of the Borrower is not less than $25,000,000.
6.16 ERISA. Each Plan to which the Borrower or its
Subsidiaries make direct contributions, and, to the knowledge of the Borrower,
each other Plan and each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
State law. No event or condition has occurred and is continuing as to which the
Borrower would be under an obligation to furnish a report to the Lender under
Section 7.01(d) hereof.
Section 7. Covenants of the Borrower. The Borrower hereby
covenants and agrees with the Lender that, so long as any Loan is outstanding
and until payment in full of all Secured Obligations:
7.01 Financial Statements. The Borrower shall deliver to the
Lender:
(a) as soon as available and in any event within 45 days after
the end of each of the first three quarterly fiscal periods of each fiscal year
of the Borrower, the unaudited consolidated balance sheets of the Borrower and
its consolidated Subsidiaries as at the end of such period and the related
unaudited consolidated statements of income and retained earnings and of cash
flows for the Borrower and its consolidated Subsidiaries for such period and the
portion of the fiscal year through the end of such period, setting forth in each
case in comparative form the figures for the previous year or quarter,
accompanied by a certificate of a Responsible Officer of the Borrower, which
certificate shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations of the
Borrower and its consolidated Subsidiaries in accordance with GAAP, consistently
applied, as at the end of, and for, such period (subject to normal year-end
audit adjustments);
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, the consolidated balance sheets of
the Borrower and its consolidated Subsidiaries as at the end of such fiscal year
and the related consolidated statements of income and retained earnings and of
cash flows for the Borrower and its consolidated Subsidiaries for such year,
setting forth in each case in comparative form the figures for the previous
year, accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall not be
qualified as to scope of audit or going concern and shall state that said
consolidated financial statements fairly present the consolidated financial
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condition and results of operations of the Borrower and its consolidated
Subsidiaries as at the end of, and for, such fiscal year in accordance with
GAAP, and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge, except as
specifically stated, of any Default or Event of Default;
(c) from time to time such other information regarding the
financial condition, operations, or business of the Borrower as the Lender may
reasonably request;
(d) as soon as reasonably possible, and in any event within
thirty (30) days after a Responsible Officer of the Borrower knows, or with
respect to any Plan or Multiemployer Plan to which the Borrower or any of its
Subsidiaries makes direct contributions, has reason to believe, that any of the
events or conditions specified below with respect to any Plan or Multiemployer
Plan has occurred or exists, a statement signed by a senior financial officer of
the Borrower setting forth details respecting such event or condition and the
action, if any, that the Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by the Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a Plan, as
to which PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within thirty (30) days of the
occurrence of such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA,
including without limitation the failure to make on or before its due
date a required installment under Section 412(m) of the Code or Section
302(e) of ERISA, shall be a reportable event regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code); and any
request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041(c) of ERISA of a
notice of intent to terminate any Plan or any action taken by the
Borrower or an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the receipt by the Borrower or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrower or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the
receipt by the Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
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(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant
to Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Borrower or an ERISA Affiliate fails to provide timely
security to such Plan in accordance with the provisions of said
Sections.
The Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraphs (a) and (b) above, a certificate of
a Responsible Officer of the Borrower solely in his or her capacity as a
Responsible Officer and not personally to the effect that, to the best of such
Responsible Officer's knowledge, the Borrower during such fiscal period or year
has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Loan Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate (and, if any Default or Event of Default
has occurred and is continuing, describing the same in reasonable detail and
describing the action the Borrower has taken or proposes to take with respect
thereto).
7.02 Litigation. The Borrower will promptly, and in any event within 10
days after service of process on any of the following, give to the Lender notice
of all litigation, actions, suits, arbitrations, investigations (including,
without limitation, any of the foregoing which are pending or threatened) or
other legal or arbitrable proceedings affecting the Borrower or any of its
Subsidiaries or affecting any of the Property of any of them before any
Governmental Authority that (i) questions or challenges the validity or
enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby, (ii) makes a claim or
claims in an aggregate amount greater than $1,000,000, (iii) which, individually
or in the aggregate, if adversely determined, could be reasonably likely to have
a Material Adverse Effect, or (iv) requires filing with the Securities and
Exchange Commission in accordance with the 1934 Act and any rules thereunder.
7.03 Existence, etc. The Borrower will:
(a) preserve and maintain (i) its legal existence and (ii) all of its
rights, privileges, licenses and franchises the loss of which would result in a
Material Adverse Effect (provided that nothing in this Section 7.03(a) shall
prohibit any transaction expressly permitted under Section 7.04 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such requirements
would be reasonably likely (either individually or in the aggregate) to have a
Material Adverse Effect;
(c) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied;
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(d) not move its chief executive office from the address referred to in
Section 6.11 unless it shall have fulfilled each of the conditions specified in
Section 4.03;
(e) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its Property
prior to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained; and
(f) permit representatives of the Lender, during normal business hours,
to examine, copy and make extracts from its books and records, to inspect any of
its Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by the Lender.
7.04 Prohibition of Fundamental Changes. Neither the Borrower nor any
of its Subsidiaries shall enter into any transaction of merger or consolidation
or amalgamation, or similar transaction or liquidate, wind up or dissolve itself
(or suffer any liquidation, winding up or dissolution) or sell all or
substantially all of its assets, without the prior written consent of the
Lender.
7.05 Borrowing Base Deficiency. If at any time there exists a Borrowing
Base Deficiency the Borrower shall cure same in accordance with Section 2.06
hereof.
7.06 Notices. The Borrower shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the occurrence of
any Default or Event of Default;
(b) with respect to any Eligible Mortgage Loan pledged to the Lender
hereunder, within one Business Day of receipt by the Borrower of any principal
prepayment (in full or partial) of such pledged Eligible Mortgage Loan;
(c) with respect to any Eligible Mortgage Loan pledged to the Lender
hereunder, within one Business Day of receipt of notice or knowledge that the
underlying Mortgaged Property has been damaged by waste, fire, earthquake or
earth movement, windstorm, flood, tornado or other casualty, or otherwise
damaged so as to affect adversely the Collateral Value of such pledged Eligible
Mortgage Loan; and
(d) promptly upon receipt of notice or knowledge of (i) any default
related to any Collateral, (ii) any Lien or security interest (other than
security interests created hereby or by the other Loan Documents) on, or claim
asserted against, any of the Collateral or (iii) any event or change in
circumstances which could reasonably be expected to have a Material Adverse
Effect;
(e) upon any material amendment to the Existing Financing Documents,
any decrease in the gross amount available to be borrowed thereunder, or any
change in custodian or custodial arrangements relating thereto; or
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(f) upon any event of default or event which, with the passage of time
or expiration of any grace periods, would constitute an event of default under
the Existing Financing Documents.
Each notice pursuant to this Section shall be accompanied by a
statement of a Responsible Officer of the Borrower solely in his or her capacity
as a Responsible Officer and not personally setting forth details of the
occurrence referred to therein and stating what action the Borrower has taken or
proposes to take with respect thereto.
7.07 [Reserved]
7.08 Reports. The Borrower shall provide the Lender with a monthly
report, which report shall include, among other items, a summary of the
Borrower's delinquency and loss experience with respect to mortgage loans
serviced by the Borrower, any Servicer or any designee of either, plus any such
additional reports as the Lender may reasonably request with respect to the
Borrower's or any Servicer's servicing portfolio or pending originations of
mortgage loans.
7.09 Underwriting Guidelines. The Borrower shall not make any material
amendment or modification to the Underwriting Guidelines without the prior
written consent of the Lender and the Borrower shall promptly deliver to the
Lender a complete copy of the amended or modified Underwriting Guidelines.
7.10 Transactions with Affiliates. The Borrower will not enter into any
transaction, including without limitation any purchase, sale, lease or exchange
of property or the rendering of any service, with any Affiliate unless such
transaction is (a) otherwise permitted under this Loan Agreement, (b) in the
ordinary course of the Borrower's business and (c) upon fair and reasonable
terms no less favorable to the Borrower than it would obtain in a comparable
arm's length transaction with a Person which is not an Affiliate, or make a
payment that is not otherwise permitted by this Section 7.08 to any Affiliate.
In no event shall the Borrower pledge to the Lender hereunder any Eligible
Mortgage Loan acquired by the Borrower from an Affiliate of the Borrower.
7.11 Limitation on Indebtedness. The Borrower will not create, assume
or suffer to exist any Indebtedness, except:
(a) Indebtedness in respect of the loans under the Loan Agreement;
(b) Indebtedness of the Borrower to any Subsidiary;
(c) Indebtedness of the Borrower and any of its Subsidiaries incurred
solely to finance the acquisition of new fixed or capital assets in an aggregate
principal amount not exceeding, as to the Borrower and its Subsidiaries taken
together, $5,000,000 at any time outstanding; provided that, the Borrower shall
not be subject to such limitation on the aggregate principal amount if the
Borrower's Tangible Net Worth is in compliance with Section 7.15 hereof;
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(d) Indebtedness of a corporation which becomes a Subsidiary after the
date hereof, provided that (1) such Indebtedness existed at the time such
corporation became a Subsidiary and was not created in anticipation of the
acquisition and (2) immediately after giving effect to the acquisition of such
corporation by the Borrower, no Default or Event of Default shall have occurred
and be continuing; and
(e) Indebtedness under the Existing Financing Documents.
7.12 Limitation on Liens. The Borrower will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien,
security interest or claim on or to the Collateral, other than the security
interests created under this Loan Agreement, and the Borrower will defend the
right, title and interest of the Lenders in and to any of the Collateral against
the claims and demands of all persons whomsoever.
7.13 Limitation on Guarantees. The Borrower shall not create, incur,
assume or suffer to exist any Guarantees.
7.14 Limitation on Distributions. Upon the occurrence and only during
the continuation of any Event of Default under Section 8(a), (b), (f), (g), (h),
(k) and (l) hereof, the Borrower shall not make any payment on account of, or
set apart assets for a sinking or other analogous fund for the purchase,
redemption, defeasance, retirement or other acquisition of, any equity or
partnership interest of the Borrower, whether now or hereafter outstanding, or
make any other distribution in respect of the foregoing or to any shareholder or
equity owner of the Borrower, either directly or indirectly, whether in cash or
property or in obligations of the Borrower or any of the Borrower's consolidated
Subsidiaries.
7.15 Maintenance of Tangible Net Worth. The Borrower shall maintain a
Tangible Net Worth which shall be not less than $25,000,000 measured on a
quarterly basis (as at the end of each month).
7.16 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth.
The Borrower shall not permit the ratio of Total Indebtedness to Tangible Net
Worth any time to be greater than 15:1.
7.17 Maintenance of Profitability. The Borrower shall not permit, for
any period of three consecutive fiscal quarters (each such period, a "Test
Period"), Net Income for such Test Period, before income taxes for such Test
Period and distributions made during such Test Period, to be less than $1.00.
7.18 Servicer; Servicing Tape. The Borrower shall provide or cause to
be provided to the Lender on the twentieth Business Day of each month a computer
readable magnetic tape containing servicing information, including without
limitation those fields specified by the Lender from time to time, on a
loan-by-loan basis and in the aggregate, with respect to the Eligible Mortgage
Loans serviced under the Servicing Agreement by the Borrower or any Servicer.
The Borrower shall not cause the Eligible Mortgage Loans to be serviced by any
servicer other than a servicer expressly approved in writing by the Lender.
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7.19 Required Filings. The Borrower shall, promptly provide the Lender
with copies of all documents which the Borrower or any Affiliate of the Borrower
is required to file with the Securities and Exchange Commission in accordance
with the 1934 Act or any rules thereunder.
7.20 No Adverse Selection. The Borrower has not selected the Collateral
in a manner so as to adversely affect the Lender's interests.
7.21 Maintenance of Liquidity. The Borrower shall ensure that, as of
the end of each calendar month, it has unencumbered Cash Equivalents in an
amount of not less than $7,000,000.
7.22 Remittance of Prepayments. The Borrower shall remit, with
sufficient detail to enable the Lender to appropriately identify the Eligible
Mortgage Loan to which any amount remitted applies, to the Lender on each
Thursday (or the next Business Day if such Thursday is not a Business Day) all
principal prepayments that the Borrower has received during the previous week.
7.23 Other Information. The Borrower shall furnish to the Lender,
promptly, as soon as available, copies of any and all financial statements and
all registration statements filed with the Securities and Exchange Commission,
or any Governmental Authority which supervises the issuance of securities by the
Borrower.
7.24 Collection Account. The Borrower shall deposit, or shall cause to
be deposited, each Monthly Payment into the Collection Account within one
Business Day of receipt thereof. Notwithstanding any other provisions herein,
the Lender shall have the right, in its sole and absolute discretion, to request
at any time that the Collection Account be established as a separate account
subject to the Blocked Account Agreement. Within one Business Day of the date
(the "Blocked Account Request Date") the Lender makes such a request the
Borrower shall cause any and all funds relating to the Collateral to be
transferred by wire transfer in immediately available funds to the Collection
Account described in the immediately preceding sentence. The Borrower shall
deliver the executed Blocked Account Agreement and establish the related account
prior to the Closing Date.
7.25 Computer Systems. The Borrower shall maintain its System in a
manner that permits the Borrower to be Year 2000 Compliant.
Section 8. Events of Default. Each of the following events shall
constitute an event of default (an "Event of Default") hereunder:
(a) the Borrower shall default in the payment of any principal of or
interest on any Loan when due (whether at stated maturity, upon acceleration or
at mandatory or optional prepayment); or
(b) the Borrower shall default in the payment of any other amount
payable by it hereunder or under any other Loan Document after notification by
the Lender of such default, and such default shall have continued unremedied for
two Business Days; or
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(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Document by the Borrower or any certificate
furnished to the Lender pursuant to the provisions hereof or thereof shall prove
to have been false or misleading in any material respect as of the time made or
furnished (other than the representations and warranties set forth in Schedule
1, which shall be considered solely for the purpose of determining the
Collateral Value of the Eligible Mortgage Loans; unless the Borrower shall have
made any such representations and warranties with knowledge that they were
materially false or misleading at the time made); or (ii) any such
representations and warranties have been determined by the Lender in its sole
discretion and in good faith to be materially false or misleading on a regular
basis); or
(d) the Borrower shall fail to comply with the requirements of Section
7.03(a), Section 7.04, Section 7.05, Section 7.06, or Sections 7.09 through 7.24
hereof; or the Borrower shall otherwise fail to comply with the requirements of
Section 7.03 hereof and such default shall continue unremedied for a period of
three Business Days; or the Borrower shall fail to observe or perform any other
covenant or agreement contained in this Loan Agreement or any other Loan
Document and such failure to observe or perform shall continue unremedied for a
period of five Business Days; or
(e) a final judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered against the Borrower or any of its
Affiliates by one or more courts, administrative tribunals or other bodies
having jurisdiction and the same shall not be satisfied, discharged (or
provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within 30 days from the date of entry
thereof, and the Borrower or any such Affiliate shall not, within said period of
30 days, or such longer period during which execution of the same shall have
been stayed or bonded, appeal therefrom and cause the execution thereof to be
stayed during such appeal; or
(f) the Borrower shall admit in writing its inability to pay its debts
as such debts become due; or
(g) the Borrower or any of its Affiliates shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator or the like of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the Bankruptcy Code,
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or
winding-up, or composition or readjustment of debts, (v) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take any
corporate or other action for the purpose of effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the application or
consent of the Borrower or any of its Affiliates, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner, liquidator or the like of the Borrower or any such Affiliate
or of all or any substantial part of its property, or (iii) similar relief in
respect of the Borrower or any such
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Affiliate under any law relating to bankruptcy, insolvency, reorganization,
liquidation, dissolution, arrangement or winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more days; or
an order for relief against the Borrower or any such Affiliate shall be entered
in an involuntary case under the Bankruptcy Code; or
(i) the Custodial Agreement or any Loan Document shall for whatever
reason be terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by the Borrower; or
(j) the Borrower shall grant, or suffer to exist, any Lien on any
Collateral except the Liens contemplated hereby; or the Liens contemplated
hereby shall cease to be first priority perfected Liens on the Collateral in
favor of the Lender or shall be Liens in favor of any Person other than the
Lender; or
(k) any materially adverse change in the Property, business, financial
condition or prospects of the Borrower or any of its Affiliates shall occur, in
each case as determined by the Lender in its sole discretion, or any other
condition shall exist which, in the Lender's sole discretion, constitutes a
material impairment of the Borrower's ability to perform its obligations under
this Loan Agreement, the Note or any other Loan Document; or
(l) the Borrower or any of the Borrower's Affiliates shall be in
default beyond any applicable grace period under any note, indenture, loan
agreement, guaranty, swap agreement or any other contract to which it is a
party, which default constitutes an amount equal to or in excess of $1,000,000
and (i) involves the failure to pay a matured obligation, or (ii) permits the
acceleration of the maturity of obligations by any other party to or beneficiary
of such note, indenture, loan agreement, guaranty, swap agreement or other
contract; or
(m) the discovery by the Lender of a condition or event which existed
at or prior to the execution hereof and which the Lender, in its sole
discretion, determines materially and adversely affects: (i) the condition
(financial or otherwise) of the Borrower, its Subsidiaries or Affiliates; or
(ii) the ability of either the Borrower or the Lender to fulfill its respective
obligations under this Loan Agreement; or
(n) upon any event of default or event which, with the passage of time
or expiration of any grace periods, would constitute an event of default under
the Existing Financing Documents;
(o) any of the events specified in Section 5.02(h) hereof have
occurred.
Section 9. Remedies Upon Default.
(a) An Event of Default shall be deemed to be continuing unless
expressly waived by the Lender in writing. Upon the occurrence of one or more
Events of Default hereunder, the Lender's obligation to consider making
additional Loans to the Borrower shall automatically terminate without further
action by any Person. Upon the occurrence of one or more Events of Default other
than those referred to in Section 8(g) or (h), the Lender may immediately
declare
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the principal amount of the Loans then outstanding under the Note to be
immediately due and payable, together with all interest thereon and fees and
expenses accruing under this Loan Agreement. Upon the occurrence of an Event of
Default referred to in Sections 8(g) or (h), such amounts shall immediately and
automatically become due and payable without any further action by any Person.
Upon such declaration or such automatic acceleration, the balance then
outstanding on the Note shall become immediately due and payable, without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrower.
(b) Upon the occurrence of one or more Events of Default, and if the
Borrower or any Affiliate of the Borrower is the Servicer, the Lender shall have
the right to obtain physical possession of the Servicing Records and all other
files of the Borrower relating to the Collateral and all documents relating to
the Collateral which are then or may thereafter come in to the possession of the
Borrower or any third party acting for the Borrower and the Borrower shall
deliver to the Lender such assignments as the Lender shall request. The Lender
shall be entitled to specific performance of all agreements of the Borrower
contained in this Loan Agreement.
Section 10. No Duty of Lender. The powers conferred on the Lender
hereunder are solely to protect the Lender's interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Lender shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrower for any act or failure
to act hereunder, except for its or their own gross negligence or willful
misconduct.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Lender to exercise and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under any Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under any
Loan Document preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
11.02 Notices. Except as otherwise expressly permitted by this Loan
Agreement, all notices, requests and other communications provided for herein
and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or thereof); or, as to
any party, at such other address as shall be designated by such party in a
written notice to each other party. Except as otherwise provided in this Loan
Agreement and except for notices given under Section 2 (which shall be effective
only on receipt), all such communications shall be deemed to have been duly
given when transmitted by telex or telecopy or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
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11.03 Indemnification and Expenses.
(a) The Borrower agrees to hold the Lender, and its Affiliates and
their officers, directors, employees, agents and advisors (each, an "Indemnified
Party") harmless from and indemnify any Indemnified Party against all
liabilities, losses, damages, judgments, costs and expenses of any kind which
may be imposed on, incurred by or asserted against such Indemnified Party
(collectively, the "Costs") relating to or arising out of this Loan Agreement,
the Note, any other Loan Document or any transaction contemplated hereby or
thereby, or any amendment, supplement or modification of, or any waiver or
consent under or in respect of, this Loan Agreement, the Note, any other Loan
Document or any transaction contemplated hereby or thereby, that, in each case,
results from anything other than any Indemnified Party's gross negligence or
willful misconduct. Without limiting the generality of the foregoing, the
Borrower agrees to hold any Indemnified Party harmless from and indemnify such
Indemnified Party against all Costs with respect to all Eligible Mortgage Loans
relating to or arising out of any violation or alleged violation of any
securities law, environmental law, rule or regulation or any consumer credit
laws, including without limitation the Truth in Lending Act and/or the Real
Estate Settlement Procedures Act, that, in each case, results from anything
other than such Indemnified Party's gross negligence or willful misconduct. In
any suit, proceeding or action brought by an Indemnified Party in connection
with any Eligible Mortgage Loan for any sum owing thereunder, or to enforce any
provisions of any Eligible Mortgage Loan, the Borrower will save, indemnify and
hold such Indemnified Party harmless from and against all expense, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or obligor thereunder,
arising out of a breach by the Borrower of any obligation thereunder or arising
out of any other agreement, indebtedness or liability at any time owing to or in
favor of such account debtor or obligor or its successors from the Borrower. The
Borrower also agrees to reimburse an Indemnified Party as and when billed by
such Indemnified Party for all such Indemnified Party's costs and expenses
incurred in connection with the enforcement or the preservation of such
Indemnified Party's rights under this Loan Agreement, the Note, any other Loan
Document or any transaction contemplated hereby or thereby, including without
limitation the reasonable fees and disbursements of its counsel. The Borrower
hereby acknowledges that, notwithstanding the fact that the Note is secured by
the Collateral, the obligation of the Borrower under the Note is a recourse
obligation of the Borrower.
(b) The Borrower agrees to pay as and when billed by the Lender all of
the out-of-pocket costs and expenses (including the reasonable fees and expenses
of counsel) incurred by the Lender in connection with the drafting, development,
preparation, negotiation and execution of, and any amendment, supplement or
modification to, this Loan Agreement, the Note, any other Loan Document or any
other documents prepared in connection herewith or therewith. The Borrower
agrees to pay as and when billed by the Lender all of the out-of-pocket costs
and expenses incurred in connection with the consummation and administration of
the transactions contemplated hereby and thereby including without limitation
(i) all the reasonable fees, disbursements and expenses of counsel to the
Lender, and (ii) all the due diligence inspection, testing and review costs and
expenses incurred by the Lender with respect to Collateral under this Loan
Agreement, including, but not limited to, those costs and expenses incurred by
the Lender pursuant to Sections 11.03(a), 11.14 and 11.15 hereof.
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11.04 Amendments. Except as otherwise expressly provided in this Loan
Agreement, any provision of this Loan Agreement may be modified or supplemented
only by an instrument in writing signed by the Borrower and the Lender and any
provision of this Loan Agreement may be waived by the Lender.
11.05 Successors and Assigns. This Loan Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Survival. The obligations of the Borrower under Section 3.03,
Section 11.03 hereof shall survive the repayment of the Loans and the
termination of this Loan Agreement. In addition, each representation and
warranty made or deemed to be made by a request for a borrowing, herein or
pursuant hereto shall survive the making of such representation and warranty,
and the Lender shall not be deemed to have waived, by reason of making any Loan,
any Default that may arise because any such representation or warranty shall
have proved to be false or misleading, notwithstanding that the Lender may have
had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
11.07 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Loan Agreement.
11.08 Counterparts. This Loan Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Loan Agreement by
signing any such counterpart.
11.09 Loan Agreement Constitutes Security Agreement; Governing Law.
This Loan Agreement shall be governed by New York law without reference to
choice of law doctrine, and shall constitute a security agreement within the
meaning of the Uniform Commercial Code.
11.10 SUBMISSION TO JURISDICTION; WAIVERS. THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT
IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT OR
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\THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES
NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS
ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH
THE LENDER SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
11.11 Waiver of Jury Trial. EACH OF THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
11.12 Acknowledgments. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Loan Agreement, the Note and the other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrower, and the
relationship between the Borrower and the Lender is solely that of debtor and
creditor; and
(c) no joint venture exists between the Lender and the Borrower.
11.13 Hypothecation or Pledge of Loans. The Lender shall have free and
unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude the Lender from engaging in repurchase transactions with the Collateral
or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrower.
11.14 Servicing.
(a) The Borrower covenants to maintain or cause the servicing of the
Eligible Mortgage Loans to be maintained in conformity with accepted and prudent
servicing practices in the industry for the same type of mortgage loans as the
Eligible Mortgage Loans and in a manner at least equal in quality to the
servicing the Borrower provides for mortgage loans which it owns. In the event
that the preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an
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Event of Default, (ii) the date on which all the Secured Obligations have been
paid in full or (iii) the transfer of servicing approved by the Borrower.
(b) If the Eligible Mortgage Loans are serviced by the Borrower, (i)
the Borrower agrees that the Lender is the collateral assignee 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 Eligible Mortgage Loans (the "Servicing Records"),
and (ii) the Borrower grants the Lender a security interest in all in all
servicing fees and Servicing Rights relating to the Eligible Mortgage Loans and
all Servicing Records to secure the obligation of the Borrower or its designee
to service in conformity with this Section and any other obligation of the
Borrower to the Lender. The Borrower covenants to safeguard such Servicing
Records and to deliver them promptly to the Lender or its designee (including
the Custodian) at the Lender's request.
(c) If the Eligible Mortgage Loans are serviced by a third party
servicer (such third party servicer, the "Servicer"), the Borrower (i) shall
provide a copy of the servicing agreement to the Lender, which shall be in form
and substance acceptable to the Lender (the "Servicing Agreement"); (ii) shall
provide a Servicer Notice to the Servicer substantially in the form of Exhibit H
hereto; and (iii) hereby irrevocably assigns to the Lender and the Lender's
successors and assigns all right, title, interest of the Borrower in, to and
under, and the benefits of, any Servicing Agreement with respect to the Eligible
Mortgage Loans. Any successor to the Servicer shall be approved in writing by
the Lender prior to such successor's assumption of servicing obligations with
respect to the Eligible Mortgage Loans.
(d) If the servicer of the Eligible Mortgage Loans is the Borrower or
the Servicer is an Affiliate of the Borrower, the Borrower shall provide to the
Lender a letter from the Borrower or the Servicer, as the case may be, to the
effect that upon the occurrence of an Event of Default, the Lender may terminate
any Servicing Agreement and transfer servicing to its designee, at no cost or
expense to the Lender, it being agreed that the Borrower will pay any and all
fees required to terminate the Servicing Agreement and to effectuate the
transfer of servicing to the designee of the Lender.
(e) After the Funding Date, until the pledge of any Eligible Mortgage
Loan is relinquished by the Custodian, the Borrower will have no right to modify
or alter the terms of such Eligible Mortgage Loan and the Borrower will have no
obligation or right to repossess such Eligible Mortgage Loan or substitute
another Eligible Mortgage Loan, except as provided in the Custodial Agreement.
(f) In the event the Borrower or its Affiliate is servicing the
Eligible Mortgage Loans, the Borrower shall permit the Lender to inspect the
Borrower's or its Affiliate's servicing facilities, as the case may be, for the
purpose of satisfying the Lender that the Borrower or its Affiliate, as the case
may be, has the ability to service the Eligible Mortgage Loans as provided in
this Loan Agreement.
(g) The Borrower shall ensure that the Servicer will maintain the
Servicer's System in a manner that permits the Servicer to be Year 2000
Compliant.
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11.15 Periodic Due Diligence Review. The Borrower acknowledges that the
Lender has the right to perform continuing due diligence reviews with respect to
the Eligible Mortgage Loans, for purposes of verifying compliance with the
representations, warranties and specifications made hereunder, or otherwise, and
the Borrower agrees that upon reasonable (but no less than one (1) Business
Day's) prior notice to the Borrower, the Lender or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Mortgage Files and any and all
documents, records, agreements, instruments or information relating to any
Eligible Mortgage Loans in the possession or under the control of the Borrower
and/or the Custodian. The Borrower shall make available to the Lender a
knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Mortgage Files and the Eligible Mortgage Loans. Without
limiting the generality of the foregoing, the Borrower acknowledges that the
Lender may make Loans to the Borrower based solely upon the information provided
by the Borrower to the Lender in the Eligible Mortgage Loan Tape and the
representations, warranties and covenants contained herein, and that the Lender,
at its option, has the right at any time to conduct a partial or complete due
diligence review on some or all of the Eligible Mortgage Loans securing such
Loan, including without limitation ordering new credit reports and new
appraisals on the related Mortgaged Properties and otherwise re-generating the
information used to originate such Eligible Mortgage Loan. The Lender may
underwrite such Eligible Mortgage Loans itself or engage a mutually agreed upon
third party underwriter to perform such underwriting. The Borrower agrees to
cooperate with the Lender and any third party underwriter in connection with
such underwriting, including, but not limited to, providing the Lender and any
third party underwriter with access to any and all documents, records,
agreements, underwriting reports, instruments or information relating to such
Eligible Mortgage Loans in the possession, or under the control, of the
Borrower.
The Borrower further agrees that the Borrower shall reimburse
the Lender for any and all out-of-pocket costs and expenses incurred by the
Lender in connection with the Lender's activities pursuant to this Section
11.15.
11.16 Set-Off. In addition to any rights and remedies of the Lender
provided by this Loan Agreement and by law, the Lender shall have the right,
without prior notice to the Borrower, any such notice being expressly waived by
the Borrower to the extent permitted by applicable law, upon the Borrower's
failure to pay any amount when due and payable by the Borrower hereunder
(whether at the stated maturity, by acceleration or otherwise) to set-off and
appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Lender or any Affiliate thereof to or for the credit or the account
of the Borrower. The Lender agrees promptly to notify the Borrower after any
such set-off and application made by the Lender; provided that the failure to
give such notice shall not affect the validity of such set-off and application.
11.17 Intent. The parties recognize that each Loan is a "securities
contract" as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.
11.18 Confidential Information.
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(a) Lender hereby acknowledges and agrees that all written or
computer-readable information provided by the Borrower to the Lender regarding
the Borrower or the Collateral (the "Borrower Confidential Information"), shall
be kept confidential and each of their respective contents will not be divulged
to any party without the Borrower's consent except to the extent that (i) the
Lender deems appropriate to do so in working with legal counsel, auditors,
taxing authorities or other governmental agencies or regulatory bodies or in
order to comply with any applicable federal or state laws, (ii) any portion of
the Borrower Confidential Information is in the public domain other than due to
a breach of this covenant, (iii) the Lender deems appropriate in connection with
exercising any or all of the Lender's rights or remedies or complying with any
obligations under any of the Loan Documents.
(b) The Borrower hereby acknowledges and agrees that all written or
computer-readable information provided by the Lender to the Borrower regarding
the Lender (the "Lender Confidential Information"), shall be kept confidential
and each of their respective contents will not be divulged to any party without
Lender's consent except to the extent that (i) the Borrower deems appropriate to
do so in working with legal counsel, auditors, taxing authorities or other
governmental agencies or regulatory bodies or in order to comply with any
applicable federal or state laws, (ii) any portion of the Lender Confidential
Information is in the public domain other than due to a breach of this covenant,
(iii) the Borrower deems appropriate in connection with exercising any or all of
the Borrower's rights or remedies or complying with any obligations under any of
the Loan Documents.
(c) The provisions set forth in this Section 11.18 shall survive the
termination of this Loan Agreement for a period of two years following such
termination.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed and delivered as of the day and year first above
written.
BORROWER
BNC MORTGAGE, INC.
By: __________________________________
Name:
Title:
Address for Notices:
BNC MORTGAGE, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
LENDER
▇▇▇▇▇ ▇▇▇▇▇▇ REAL ESTATE SECURITIES INC.
By: __________________________________
Name:
Title:
Address For Notices:
▇▇▇▇▇ ▇▇▇▇▇▇ REAL ESTATE SECURITIES, INC.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
50
STATE OF )
) ss.:
COUNTY OF )
On the _____ day of ____________, 2000 before me, a Notary
Public in and for said State, personally appeared ____________, known to me to
be ______________ of BNC Mortgage, Inc., the corporation that executed the
within instrument and also known to me to be the person who executed it on
behalf of said corporation, and acknowledged to me that such corporation
executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my
office seal the day and year in this certificate first above written.
_____________________________
Notary Public
_____________________________
My Commission expires
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
) ss.:
COUNTY OF NEW YORK )
On the _____ day of _______________, 2000 before me, a Notary Public in
and for said State, personally appeared ____________, known to me to be
_____________ of ▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc. the corporation that
executed the within instrument and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal
the day and year in this certificate first above written.
_________________________________
Notary Public
_________________________________
My Commission expires
52
SCHEDULE 1
PART I. REPRESENTATIONS AND WARRANTIES FOR MORTGAGE LOANS
As to each Mortgage Loan included in the Borrowing Base on a Funding
Date (and the related Mortgage, Mortgage Note, Assignment of Mortgage and
Mortgaged Property), the Borrower shall be deemed to make the following
representations and warranties to the Lender as of such date and as of each date
Collateral Value is determined (certain defined terms used herein and not
otherwise defined in the Loan Agreement appearing in Part II to Schedule 1):
(a) Mortgage Loans as Described. The information set forth in the
Mortgage Loan Schedule with respect to the Mortgage Loan is complete, true and
correct in all material respects.
(b) Payments Current. All payments required to be made up to the
Funding Date for the Mortgage Loan under the terms of the Mortgage Note have
been made and credited. No payment required under the Mortgage Loan is
delinquent nor has more than any one payment under the Mortgage Loan been
delinquent thirty days or more in the twelve months preceding the date of
determination. In no event has a payment been more than 59 days delinquent for
such Mortgage Loan. The first Monthly Payment shall be made, or shall have been
made, with respect to the Mortgage Loan on its Due Date or within the grace
period, all in accordance with the terms of the related Mortgage Note.
(c) No Outstanding Charges. There are no defaults in complying with the
terms of the Mortgage securing the Mortgage Loan, 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. Neither the Borrower nor the Qualified Originator from which
the Borrower acquired the Mortgage Loan has 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 proceeds of the Mortgage Loan, whichever is
earlier, to the day which precedes by one month the Due Date of the first
installment of principal and interest thereunder.
(d) Original Terms Unmodified. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of origination; except by a written instrument which has been
recorded, if necessary to protect the interests of the Lender, and which has
been delivered to the Custodian and the terms of which are reflected in the
Mortgage Loan Schedule. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required, and
its terms are reflected on the Mortgage Loan Schedule. No Mortgagor in respect
of the Mortgage Loan has been released, in whole or in part, except in
connection with an assumption agreement approved by the title insurer, to the
extent required by such policy, and which assumption agreement is part
Schedule 1-1
53
of the Mortgage File delivered to 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 and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor
in any state or Federal bankruptcy or insolvency proceeding at the time the
Mortgage Loan was originated. The Borrower has no knowledge nor has it received
any notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any
state or federal bankruptcy or insolvency proceeding.
(f) Hazard Insurance. The Mortgaged Property is insured by a fire and
extended perils insurance policy, issued by a Qualified Insurer, and such other
hazards as are customary in the area where the Mortgaged Property is located,
and to the extent required by the Borrower as of the date of origination
consistent with the Underwriting Guidelines, against earthquake and other risks
insured against by Persons operating like properties in the locality of the
Mortgaged Property, in an amount not less than the greatest of (i) 100% of the
replacement cost of all improvements to the Mortgaged Property, (ii) the
outstanding principal balance of the Mortgage Loan (together, in the case of a
Second Lien Mortgage Loan, with the outstanding Principal Balance of the First
Lien Mortgage Loan) with respect to each Mortgage Loan, or (iii) the amount
necessary to avoid the operation of any co-insurance provisions with respect to
the Mortgaged Property, and consistent with the amount that would have been
required as of the date of origination in accordance with the Underwriting
Guidelines. If any portion of the Mortgaged Property is in an area identified by
any federal Governmental Authority as having special flood hazards, and flood
insurance is available, a flood insurance policy meeting the current guidelines
of the Federal Insurance Administration is in effect with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(1) the outstanding principal balance of the Mortgage Loan, (2) the full
insurable value of the Mortgaged Property, and (3) the maximum amount of
insurance available under the Flood Disaster Protection Act of 1973, as amended.
All such insurance policies (collectively, the "hazard insurance policy")
contain a standard mortgagee clause naming the Borrower, its successors and
assigns (including without limitation, subsequent owners of the Mortgage Loan),
as mortgagee, and may not be reduced, terminated or canceled without 30 days'
prior written notice to the mortgagee. No such notice has been received by the
Borrower. All premiums on such insurance policy have been paid. The related
Mortgage obligates the Mortgagor to maintain all such insurance and, at such
Mortgagor's failure to do so, authorizes the mortgagee to maintain such
insurance at the Mortgagor's cost and expense and to seek reimbursement therefor
from such Mortgagor. Where required by state law or regulation, the Mortgagor
has been given an opportunity to choose the carrier of the required hazard
insurance, provided the policy is not a "master" or "blanket" hazard insurance
policy covering a condominium, or any hazard insurance policy covering the
common facilities of a planned unit development. The hazard insurance policy is
the valid and binding obligation of the insurer and is in full force and effect.
The Borrower has not engaged in, and has no knowledge of the Mortgagor's having
engaged in, any act or omission which would impair the coverage of any such
policy, the benefits of the endorsement provided for herein, or the validity and
binding effect of either including, without
Schedule 1-2
54
limitation, no unlawful fee, commission, kickback or other unlawful compensation
or value of any kind has been or will be received, retained or realized by any
attorney, firm or other Person, and no such unlawful items have been received,
retained or realized by the Borrower.
(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 Mortgage Loan have
been complied with in all material respects, the consummation of the
transactions contemplated hereby will not involve the violation of any such laws
or regulations, and the Borrower shall maintain or shall cause its agent to
maintain in its possession, available for the inspection of the Lender, and
shall deliver to the Lender, 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. The Borrower has not waived the
performance by the Mortgagor of any action, if the Mortgagor's failure to
perform such action would cause the Mortgage Loan to be in default, nor has the
Borrower waived any default resulting from any action or inaction by the
Mortgagor.
(i) Location and Type of Mortgaged Property. The Mortgaged Property is
located in an Acceptable State as identified in the Mortgage Loan Schedule and
consists of a single 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 low-rise or high-rise condominium project, or an
individual unit in a planned unit development or a de minimis planned unit
development, provided, however, that any condominium unit or planned unit
development shall conform with the applicable FNMA and FHLMC requirements
regarding such dwellings and that no residence or dwelling is a mobile home or a
manufactured dwelling. No portion of the Mortgaged Property is used for
commercial purposes.
(j) Valid Lien. The Mortgage is a valid, subsisting, enforceable and
perfected first lien and first priority interest with respect to each Mortgage
Loan which is indicated by the Borrower to be a First Lien Mortgage Loan (as
reflected on the Mortgage Loan Tape), or (B) second lien and second priority
security interest with respect to each Mortgage Loan which is indicated by the
Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage Loan
Tape), in either case, on the property included in the Mortgaged Property,
including all buildings on the Mortgaged Property and all installations and
mechanical, electrical, plumbing, heating and air conditioning 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:
(1) the lien of current real property taxes and assessments not
yet due and payable;
(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of recording
acceptable to prudent mortgage lending
Schedule 1-3
55
institutions generally and specifically referred to in the lender's title
insurance policy delivered to the originator of the Mortgage Loan and (a)
referred to or otherwise considered in the appraisal made for the originator of
the Mortgage Loan or (b) which do not adversely affect the Appraised Value of
the Mortgaged Property set forth in such appraisal; or
(3) 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;
(4) with respect to each Mortgage Loan which is indicated by the
Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage Loan
Tape) a single prior mortgage lien on the 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 lien and first priority security interest with
respect to each Mortgage Loan which is indicated by the Borrower to be a First
Lien Mortgage Loan (as reflected on the Mortgage Loan Tape), or (B) second lien
and second priority security interest with respect to each Mortgage Loan which
is indicated by the Borrower to be a Second Lien Mortgage Loan (as reflected on
the Mortgage Loan Tape), on the property described therein and the Borrower has
full right to pledge and assign the same to the Lender. The Mortgaged Property
was not, as of the date of origination of the Mortgage Loan, subject to a
mortgage, deed of trust, deed to secure debt or other security instrument
creating a lien subordinate to the lien of the Mortgage.
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage
and any other agreement executed and delivered by a Mortgagor or guarantor, if
applicable, in connection with a Mortgage Loan are genuine, and each is the
legal, valid and binding obligation of the maker thereof enforceable in
accordance with its terms. All parties to the Mortgage Note, the Mortgage and
any other such related agreement had legal capacity to enter into the Mortgage
Loan and to execute and deliver the Mortgage Note, the Mortgage and any such
agreement, and the Mortgage Note, the Mortgage and any other such related
agreement have been duly and properly executed by such related parties. No
fraud, error, omission, misrepresentation, negligence or similar occurrence with
respect to a Mortgage Loan has taken placed on the part of any Person,
including, without limitation, the Mortgagor, any appraiser, any builder or
developer, or any other party involved in the origination of the Mortgage Loan.
The Borrower has reviewed all of the documents constituting the Servicing File
and has made such inquiries as it deems necessary to make and confirm the
accuracy of the representations set forth herein.
(l) Full Disbursement of Proceeds. The Mortgage Loan has been closed
and the proceeds of the Mortgage Loan have been fully disbursed and there is no
further 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.
Schedule 1-4
56
(m) Ownership. The Borrower is the sole owner and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged, and the Borrower
has good, indefeasible and marketable title thereto, and has full right to
transfer, pledge and assign the Mortgage Loan to the Lender 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 assign, transfer and
pledge each Mortgage Loan pursuant to this Loan Agreement and following the
pledge of each Mortgage Loan, the Lender will hold such Mortgage Loan free and
clear of any encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest except any such security interest created pursuant to
the terms of this Loan 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) (i) in
compliance with any and all applicable licensing requirements of the laws of the
state wherein the Mortgaged Property is located, and (ii) either (A) organized
under the laws of such state, (B) qualified to do business in such state if
failure to so qualify would have a Material Adverse Effect, (C) a federal
savings and loan association, a savings bank or a national bank having a
principal office in such state, or (D) not doing business in such state.
(o) LTV; PMI Policy. No Mortgage Loan has an LTV greater than 95%.
Except as expressly disclosed by the Borrower to the Lender, the original LTV of
each Mortgage Loan either was not more than 80% or the excess over 80% is and
will be insured as to payment defaults by a PMI Policy until the LTV of such
Mortgage Loan is reduced to 80%. All provisions of such PMI Policy have been and
are being complied with, such policy is valid and remains in full force and
effect, and all premiums due thereunder have been paid. No action, inaction, or
event has occurred and no state of facts exists that has resulted, or will
result, in the exclusion from, denial of, or defense to coverage by the PMI
Policy. Any Mortgage Loan subject to a PMI Policy obligates the Mortgagor
thereunder to maintain the PMI Policy and to pay all premiums and charges in
connection therewith. The Mortgage Interest Rate for each Mortgage Loan as set
forth on the Mortgage Loan Schedule is net of any such insurance premium. No
Second Lien Mortgage has a CLTV greater than 100%.
(p) Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title, the form and substance of
which is acceptable to prudent mortgage lending institutions making mortgage
loans in the area wherein the Mortgaged Property is located or (ii) an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA or FHLMC and each such title insurance policy is
issued by a title insurer acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged Property is located, insuring
the Borrower, its successors and assigns, as to the first (or second, if the
Mortgage Loan is a Second Lien Mortgage Loan) priority lien of the Mortgage in
the original principal amount of the Mortgage Loan (or to the extent a Mortgage
Note provides for negative amortization, the maximum amount of negative
amortization in accordance with the Mortgage), subject only to the exceptions
contained in clauses (1), (2) and (3) and, with respect to each Mortgage Loan
which is indicated by the Borrower to be a Second Lien Mortgage Loan (as
reflected on the Mortgage Loan Tape) clause (4) of paragraph (j) of this Part I
of Schedule 1, and in the case of adjustable rate Mortgage
Schedule 1-5
57
Loans, against any loss by reason of the invalidity or unenforceability of the
lien resulting from the provisions of the Mortgage providing for adjustment to
the Mortgage Interest Rate and Monthly Payment. Where required by state law or
regulation, the Mortgagor has been given the opportunity to choose the carrier
of the required mortgage title insurance. Additionally, such lender's title
insurance policy affirmatively insures ingress and egress and against
encroachments by or upon the Mortgaged Property or any interest therein. The
title policy does not contain any special exceptions (other than the standard
exclusions) for zoning and uses and has been marked to delete the standard
survey exception or to replace the standard survey exception with a specific
survey reading. The Borrower, its successors and assigns, are the sole insureds
of such lender's title insurance policy, and such lender's title insurance
policy is valid and remains in full force and effect and will be in force and
effect upon the consummation of the transactions contemplated by this Loan
Agreement. No claims have been made under such lender's title insurance policy,
and no prior holder or servicer of the related Mortgage, including the Borrower
has done, by act or omission, anything which would impair the coverage of such
lender's title insurance policy, including, without limitation, no unlawful fee,
commission, kickback or other unlawful compensation or value of any kind has
been or will be received, retained or realized by any attorney, firm or other
Person, and no such unlawful items have been received, retained or realized by
the Borrower.
(q) No Defaults. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event has
occurred 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 the Borrower nor its predecessors have waived any
default, breach, violation or event of acceleration. With respect to each
Mortgage Loan which is indicated by the Borrower to be a Second Lien Mortgage
Loan (as reflected on the Mortgage Loan Tape) (i) the first lien is in full
force and effect, (ii) there is no default, breach, violation or event of
acceleration existing under such first lien or the related mortgage note, (iii)
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 thereunder, and either (A) the first lien contains a provision
which allows or (B) applicable law requires, the mortgagee under the Second Lien
Mortgage Loan to receive notice of, and affords such mortgagee an opportunity to
cure any default by payment in full or otherwise under the first lien. For
purposes of this clause (q), a delinquent payment of less than 30 days pursuant
to a Mortgage Note or a Mortgage Loan in and of itself shall not be considered a
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 lie
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 and building law, ordinance or
regulation.
Schedule 1-6
58
(t) Origination; Payment Terms. The Mortgage Loan was originated by or
in conjunction with a mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Sections 203 and 211 of the National Housing Act, a
savings and loan association, a savings bank, a commercial bank, credit union,
insurance company or similar banking institution which is supervised and
examined by a federal or state authority. Principal payments on the Mortgage
Loan commenced no more than 60 days after funds were disbursed in connection
with the Mortgage Loan. The Mortgage Interest Rate is adjusted, with respect to
adjustable rate Mortgage Loans, on each Interest Rate Adjustment Date to equal
the Index plus the Gross Margin, subject to the Mortgage Interest Rate Cap. The
Mortgage Note is payable on the first day of each month in equal monthly
installments of principal and interest, which installments of interest, with
respect to adjustable rate Mortgage Loans, 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 30 years from commencement of amortization. The due date of the first
payment under the Mortgage Note is no more than 60 days from the date of the
Mortgage Note.
(u) Customary Provisions. The Mortgage Note has a stated maturity. 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. Upon default by a
Mortgagor on a Mortgage Loan and foreclosure on, or trustee's sale of, the
Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage
Loan will be able to deliver good and merchantable title to the Mortgaged
Property. 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) Conformance with Underwriting Guidelines and Agency Standards. The
Mortgage Loan was underwritten in accordance with the Underwriting Guidelines.
The Mortgage Note and Mortgage are on forms similar to those used by FHLMC or
FNMA and the Borrower has not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used.
(w) Occupancy of the Mortgaged Property. As of the Funding Date the
Mortgaged Property is 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. The Borrower has not received notification from any
Governmental Authority that the Mortgaged Property is in material non-compliance
with such laws or regulations, is being used, operated or occupied unlawfully or
has failed to have or obtain such inspection, licenses or certificates, as the
case may be. The Borrower has not received notice of any violation or failure to
conform with any such law, ordinance, regulation, standard, license or
certificate. 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.
Schedule 1-7
59
(x) 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 clause (j) above.
(y) Deeds of Trust. In the event the Mortgage constitutes a deed of
trust, a trustee, authorized and 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 the Custodian or
the Lender to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Mortgagor.
(z) Delivery of Mortgage Documents. The Mortgage Note, the Mortgage,
the Assignment of Mortgage and any other documents required to be delivered
under the Custodial Agreement for each Mortgage Loan have been delivered to the
Custodian. The Borrower or its agent is in possession of a complete, true and
accurate Mortgage File in compliance with the Custodial Agreement, except for
such documents the originals of which have been delivered to the Custodian.
(aa) Transfer of Eligible 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.
(bb) 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.
(cc) 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 the Borrower, the Mortgagor, or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor nor does it contain
any other similar provisions 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.
(dd) Consolidation of Future Advances. Any future advances made to the
Mortgagor prior to the Funding 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. With
respect to each Mortgage Loan, the lien of the Mortgage securing the
consolidated principal amount is expressly insured as having (A) first lien
priority with respect to each Mortgage Loan which is indicated by the Borrower
to be a First Lien Mortgage Loan (as reflected on the Mortgage Loan Tape), or
(B) second lien priority with respect to each Mortgage Loan which is indicated
by the Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage
Loan Tape), in either case, by a title insurance policy, an endorsement to the
policy insuring the mortgagee's consolidated interest or by other title evidence
acceptable to FNMA and FHLMC. The consolidated principal amount does not exceed
the original principal amount of the Mortgage Loan.
Schedule 1-8
60
(ee) Mortgaged Property Undamaged. 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
and each Mortgaged Property is in good repair. There have not been any
condemnation proceedings with respect to the Mortgaged Property and the Borrower
has no knowledge of any such proceedings.
(ff) Collection Practices; Escrow Deposits; Interest Rate Adjustments.
The origination and collection practices used by the originator, each servicer
of the Mortgage Loan and the Borrower with respect to the Mortgage Loan have
been in all respects in compliance with Accepted Servicing Practices, applicable
laws and regulations, 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, or under the control of, the Borrower (other than with respect to
each Mortgage Loan which is indicated by the Borrowers to be a Second Lien
Mortgage Loan and for which the mortgagee under the First Lien Mortgage Loan is
collecting Escrow Payments (as reflected on the Mortgage Loan Tape), 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. An escrow of funds 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 the Borrower 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, federal and
local law has been properly paid and credited.
(gg) Conversion to Fixed Interest Rate. With respect to adjustable rate
Mortgage Loans, the Mortgage Loan is not convertible to a fixed interest rate
Mortgage Loan.
(hh) Other Insurance Policies. No action, inaction or event has
occurred and no state of facts exists or has existed that has resulted or will
result in the exclusion from, denial of, or defense to coverage under any
applicable special hazard insurance policy, PMI Policy or bankruptcy bond,
irrespective of the cause of such failure of coverage. In connection with the
placement of any such insurance, no commission, fee, or other compensation has
been or will be received by the Borrower or by any officer, director, or
employee of the Borrower or any designee of the Borrower or any corporation in
which the Borrower or any officer, director, or employee had a financial
interest at the time of placement of such insurance.
(ii) Soldiers' and Sailors' Civil Relief Act. The Mortgagor has not
notified the Borrower, and the Borrower has no knowledge, of any relief
requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil
Relief Act of 1940.
(jj) Appraisal. The Mortgage File 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 Borrower, who had no interest,
direct or indirect in the Mortgaged Property or in any loan made on the security
thereof, and whose compensation is not affected by the approval or disapproval
of the Mortgage Loan, and the appraisal and appraiser both satisfy the
requirements of FNMA or FHLMC and Title XI of the Federal Institutions
Schedule 1-9
61
Reform, Recovery, and Enforcement Act of 1989 as amended and the regulations
promulgated thereunder, all as in effect on the date the Mortgage Loan was
originated.
(kk) Construction or Rehabilitation of Mortgaged Property. No Mortgage
Loan was made in connection with the construction or rehabilitation of a
Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged
Property.
(ll) Disclosure Materials. The Mortgagor has executed a statement to
the effect that the Mortgagor has received all disclosure materials required by
applicable law with respect to the making of adjustable rate mortgage loans, and
the Borrower maintains such statement in the Mortgage File.
(mm) No Defense to Insurance Coverage. No action has been taken or
failed to be taken, no event has occurred and no state of facts exists or has
existed on or prior to the Funding Date (whether or not known to the Borrower on
or prior to such date) which has resulted or will result in an exclusion from,
denial of, or defense to coverage under any private mortgage insurance
(including, without limitation, any exclusions, denials or defenses which would
limit or reduce the availability of the timely payment of the full amount of the
loss otherwise due thereunder to the insured) whether arising out of actions,
representations, errors, omissions, negligence, or fraud of the Borrower, the
related Mortgagor or any party involved in the application for such coverage,
including the appraisal, plans and specifications and other exhibits or
documents submitted therewith to the insurer under such insurance policy, or for
any other reason under such coverage, but not including the failure of such
insurer to pay by reason of such insurer's breach of such insurance policy or
such insurer's financial inability to pay.
(nn) Capitalization of Interest. The Mortgage Note does not by its
terms provide for the capitalization or forbearance of interest. None of the
Mortgage Loans provides for Negative Amortization.
(oo) No Equity Participation. No document relating to the Mortgage Loan
provides for any contingent or additional interest in the form of participation
in the cash flow of the Mortgaged Property or a sharing in the appreciation of
the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage
Note is not convertible to an ownership interest in the Mortgaged Property or
the Mortgagor and the Borrower has not financed, nor does it own directly or
indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(pp) Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have
not been and shall not be used to satisfy, in whole or in part, any debt owed or
owing by the Mortgagor to the Borrower or any Affiliate or correspondent of the
Borrower.
(qq) No Exception. The Custodian has not noted any material exceptions
on an Exception Report (as defined in the Custodial Agreement) with respect to
the Mortgage Loan which would materially adversely affect the Mortgage Loan or
the Lender's security interest, granted by the Borrower, in the Mortgage Loan.
(rr) Qualified Originator. The Mortgage Loan has been originated by,
and, if applicable, purchased by the Borrower from, a Qualified Originator.
Schedule 1-10
62
(ss) ▇▇▇▇▇▇ Act. None of the Mortgage Loans are classified as "high
cost" loans under the Home Ownership and Equity Protection Act of 1994.
(tt) Mortgage Submitted for Recordation. The Mortgage either has been
or will promptly be submitted for recordation in the appropriate governmental
recording office of the jurisdiction where the Mortgaged Property is located.
(uu) Disclosure Materials. The Mortgagor has executed a statement to
the effect that the Mortgagor has received all disclosure materials required by
and the Qualified Originator has complied with all applicable law with respect
to the making of the Mortgage Loans. The Borrower shall maintain such statement
in the Mortgage File.
(vv) Section 32 Loans. The Mortgage Loan is not a "High Rate, High
Cost" loan or Section 226.32 loan as described in Regulation Z of the Truth in
Lending Act.
(ww) Texas Home Equity Loans. With respect to any Mortgage Loan which
is a Texas Home Equity Loan, any and all requirements of Section 50, Article XVI
of the Texas Constitution applicable to Texas Home Equity Loans which were in
effect at the time of the origination of the Mortgage Loan have been complied
with.
(xx) Wet-Ink Mortgage Loans. With respect to each Mortgage Loan that is
a Wet-Ink Mortgage Loan, the Escrow Agent has been instructed in writing by the
Borrower to hold the related Mortgage Loan Documents as agent and bailee for the
Lender or the Lender's agent and to promptly forward such Mortgage Loan
Documents in accordance with the provisions of the Escrow Instruction Letter and
the Escrow Agent has acknowledged and agreed to such instructions.
Notwithstanding the representations and warranties set forth in paragraphs
(u)(x) or (mm) hereof, a Mortgage Loan (a) which is an interest only Mortgage
Loan, or (b) is a Negative Amortization Mortgage Loan or (c) of which the
related Mortgaged Property is improved with a second home or investment
property, may be considered an Eligible Mortgage Loan if (i) the Borrower has
received the prior written consent of the Lender with respect to the inclusion
of such Mortgage Loan, and (ii) the related Mortgage Loan Schedule identifies
such Mortgage Loan as being an interest only Mortgage Loan, a second home or
investment property, or a Negative Amortization Mortgage Loan.
Schedule 1-11
63
PART II. DEFINED TERMS
In addition to terms defined elsewhere in the Loan Agreement,
the following terms shall have the following meanings when used in Schedule 1:
"Acceptable State" shall mean any state notified by the
Borrower to the Lender from time to time and approved in writing by the Lender,
which approval has not been revoked by the Lender in their sole discretion, any
such notice of revocation to be given no later than 10 Business Days prior to
its intended effective date.
"Accepted Servicing Practices" shall mean, with respect to any
Mortgage Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loans in the jurisdiction where the related Mortgaged Property is located.
"ALTA" means the American Land Title Association.
"Appraised Value" shall mean the value set forth in an
appraisal made in connection with the origination of the related Mortgage Loan
as the value of the Mortgaged Property.
"Best's" means Best's Key Rating Guide, as the same shall be
amended from time to time.
"Cut-off Date" means the first day of the month in which the
related Funding Date occurs.
"Combined LTV" or "CLTV" shall mean with respect to any
Mortgage Loan that is a Second Lien Mortgage Loan, the ratio of (a) the
outstanding principal balance on the date of origination of (i) the Mortgage
Loan constituting the first lien plus (ii) the Mortgage Loan constituting the
second lien to (b) the lesser of (i) the Appraised Value of the Mortgaged
Property and (ii) if the Mortgaged Property was purchased within 6 months of the
origination of the Mortgage Loan, the purchase price of the Mortgaged Property.
"Due Date" means the day of the month on which the Monthly
Payment is due on a Mortgage Loan, exclusive of any days of grace.
"Escrow Payments" means with respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or
any successor thereto.
Schedule 1-12
64
"First Lien Mortgage Loan" shall mean a Mortgage Loan secured
by the lien on the related Mortgaged Property, subject to no prior liens on such
Mortgaged Property.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"Gross Margin" means with respect to each adjustable rate
Mortgage Loan, the fixed percentage amount set forth in the related Mortgage
Note.
"Index" means with respect to each adjustable rate Mortgage
Loan, the index set forth in the related Mortgage Note for the purpose of
calculating the interest rate thereon.
"Insurance Proceeds" means with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
"Interest Rate Adjustment Date" means with respect to each
adjustable rate Mortgage Loan, the date, specified in the related Mortgage Note
and the Mortgage Loan Schedule, on which the Mortgage Interest Rate is adjusted.
"Loan-to-Value Ratio" or "LTV" means with respect to any
Mortgage Loan, the ratio of the original outstanding principal amount of the
Mortgage Loan to the lesser of (a) the Appraised Value of the Mortgaged Property
at origination or (b) if the Mortgaged Property was purchased within 12 months
of the origination of the Mortgage Loan, the purchase price of the Mortgaged
Property.
"Monthly Payment" means the scheduled monthly payment of
principal and interest on a Mortgage Loan as adjusted in accordance with changes
in the Mortgage Interest Rate pursuant to the provisions of the Mortgage Note
for an adjustable rate Mortgage Loan.
"Mortgage Interest Rate" means the annual rate of interest
borne on a Mortgage Note, which shall be adjusted from time to time with respect
to adjustable rate Mortgage Loans.
"Mortgage Interest Rate Cap" means with respect to an
adjustable rate Mortgage Loan, the limit on each Mortgage Interest Rate
adjustment as set forth in the related Mortgage Note.
"Mortgagee" means the Borrower or any subsequent holder of a
Mortgage Loan.
"Negative Amortization" means a gradual increase in the
mortgage debt that occurs when the monthly fixed installment is not sufficient
for full application to both principal and interest. The interest shortage is
added to the unpaid principal balance to create "negative" amortization.
"Origination Date" shall mean, with respect to each Mortgage
Loan, the date of the Mortgage Note relating to such Mortgage Loan, unless such
information is not provided by the Borrower with respect to such Mortgage Loan,
in which case the Origination Date shall be deemed to be the date that is 40
days prior to the date of the first payment under the Mortgage Note relating to
such Mortgage Loan.
Schedule 1-13
65
"PMI Policy" or "Primary Insurance Policy" means a policy of
primary mortgage guaranty insurance issued by a Qualified Insurer.
"Qualified Insurer" means an insurance company duly qualified
as such under the laws of the states in which the Mortgaged Property is located,
duly authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, and approved as an insurer by FNMA
and FHLMC and whose claims paying ability is rated in the two highest rating
categories by any of the rating agencies with respect to primary mortgage
insurance and in the two highest rating categories by Best's with respect to
hazard and flood insurance.
"Qualified Originator" means an originator of Mortgage Loans
reasonably acceptable to the Lender.
"Second Lien Mortgage Loan" shall mean an Eligible Mortgage
Loan secured by a lien on the Mortgaged Property, subject to one prior lien on
such Mortgaged Property.
"Servicing File" means with respect to each Mortgage Loan,
the file retained by the Borrower consisting of originals of all documents in
the Mortgage File which are not delivered to a Custodian and copies of the
Mortgage Loan Documents set forth in Section 2 of the Custodial Agreement.
Schedule 1-14
66
SCHEDULE 2
FILING JURISDICTIONS AND OFFICES
Office of the Secretary of State of California
Office of the Secretary of State of Delaware
Schedule 2-1
67
SCHEDULE 3
INFORMATION TO BE PROVIDED WITH RESPECT TO EACH
ELIGIBLE MORTGAGE LOAN
Schedule 3-1
68
SCHEDULE 4
APPLICABLE MARGINS
MORTGAGE LOAN MARGIN
Eligible Mortgage Loans which are not Wet-Ink Mortgage Loans 1.00%
Eligible Mortgage Loans which are Wet-Ink Mortgage Loans 1.00%
Schedule 4-1
69
SCHEDULE 5
LITIGATION
1. ▇▇▇▇▇▇▇▇ ▇▇▇ v. BNC Mortgage, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇: Orange
County Superior Court, Case No. 00CC02196 (filed Feb. 15, 2000).
2. ▇▇▇▇▇ ▇▇▇▇▇▇ v. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and BNC Mortgage,
Delaware Court of Chancery, New Castle County, Civil Action No.
17808NC.
3. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ v. ▇▇▇▇ ▇▇▇▇▇▇▇, BNC Mortgage, Inc., BNC Equity
Investors, LLC and Does 1 through 50; Orange County Superior Court,
Case No. 00CC02654 (filed February 28, 2000).
Schedule 5-1
70
EXHIBIT A
FORM OF PROMISSORY NOTE
$______________ ______________, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
FOR VALUE RECEIVED, BNC MORTGAGE, INC., a Delaware corporation
(the "Borrower"), HEREBY PROMISES TO PAY, to the order of ▇▇▇▇▇ ▇▇▇▇▇▇ REAL
ESTATE SECURITIES INC. (the "Lender"), at the principal office of the Lender at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, in lawful money of the
United States, and in immediately available funds, the principal sum of
_______________ Dollars ($[___________]) (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Lender to the
Borrower under the Loan Agreement), on the dates and in the principal amounts
provided in the Loan Agreement, and to pay interest on the unpaid principal
amount of each such Loan, at such office, in like money and funds, for the
period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Loan Agreement.
The date, amount and interest rate of each Loan made by the
Lender to the Borrower, and each payment made on account of the principal
thereof, shall be recorded by the Lender on its books and, prior to any transfer
of this Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof; provided, that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower to
make a payment when due of any amount owing under the Loan Agreement or
hereunder in respect of the Loans made by the Lender.
This Note is the Note referred to in the Master Loan and
Security Agreement dated as of March 16, 2000 (as amended, supplemented or
otherwise modified and in effect from time to time, the "Loan Agreement")
between the Borrower and the Lender, and evidences Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective meanings
assigned to them in the Loan Agreement.
The Borrower agrees to pay all the Lender's costs of
collection and enforcement (including reasonable attorneys' fees and
disbursements of Lender's counsel) in respect of this Note when incurred,
including, without limitation, reasonable attorneys' fees through appellate
proceedings.
Notwithstanding the pledge of the Collateral, the Borrower
hereby acknowledges, admits and agrees that the Borrower's obligations under
this Note are recourse obligations of the Borrower to which the Borrower pledges
its full faith and credit.
The Borrower, and any endorsers or guarantors hereof, (a)
severally waive diligence, presentment, protest and demand and also notice of
protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that
this Note, or any payment hereunder, may be extended from time to time, and
consent to the acceptance of further Collateral, the release of any Collateral
for this Note, the release of any party primarily or secondarily liable hereon,
and
A-1
71
(c) expressly agree that it will not be necessary for the Lender, in order to
enforce payment of this Note, to first institute or exhaust the Lender's
remedies against the Borrower or any other party liable hereon or against any
Collateral for this Note. No extension of time for the payment of this Note, or
any installment hereof, made by agreement by the Lender with any person now or
hereafter liable for the payment of this Note, shall affect the liability under
this Note of the Borrower, even if the Borrower is not a party to such
agreement; provided, however, that the Lender and the Borrower, by written
agreement between them, may affect the liability of the Borrower.
Any reference herein to the Lender shall be deemed to include
and apply to every subsequent holder of this Note. Reference is made to the Loan
Agreement for provisions concerning optional and mandatory prepayments,
Collateral, acceleration and other material terms affecting this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF
THE STATE OF NEW YORK (WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE) WHOSE LAWS
THE BORROWER EXPRESSLY ELECTS TO APPLY TO THIS NOTE. THE BORROWER AGREES THAT
ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS NOTE MAY BE
COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN,
OR IN ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ FOR THE SOUTHERN DISTRICT OF NEW
YORK.
BNC MORTGAGE, INC.
By_________________________________
Name:
Title:
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SCHEDULE OF LOANS
This Note evidences Loans made under the within-described Loan
Agreement to the Borrower, on the dates, in the principal amounts and bearing
interest at the rates set forth below, and subject to the payments and
prepayments of principal set forth below:
DATE PRINCIPAL AMOUNT INTEREST AMOUNT PAID OR UNPAID PRINCIPAL NOTATION
MADE OF LOAN RATE PREPAID AMOUNT MADE BY
---- ------- ---- ------- ------ -------
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EXHIBIT B
[FORM OF CUSTODIAL AGREEMENT]
B-1
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EXHIBIT C
FORM OF OPINION OF COUNSEL TO BORROWER
(date)
▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Dear Sirs and Mesdames:
You have requested [our] [my] opinion, as counsel to BNC
Mortgage, Inc., a Delaware corporation (the "Borrower"), with respect to certain
matters in connection with that certain Master Loan and Security Agreement,
dated _______________ (the "Loan and Security Agreement"), by and between the
Borrower and ▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc. (the "Lender"), being
executed contemporaneously with a Promissory Note dated March 16, 2000 from the
Borrower to the Lender (the "Note"), a Custodial Agreement, dated as of
_______________ (the "Custodial Agreement"), by and among the Borrower, Bankers
Trust Company (the "Custodian"), and the Lender. Capitalized terms not otherwise
defined herein have the meanings set forth in the Loan and Security Agreement.
[We] [I] have examined the following documents:
1. the Loan and Security Agreement;
2. the Note;
3. Custodial Agreement;
4. unfiled copies of the financing statements listed on
Schedule 1 (collectively, the "Financing Statements") naming the Borrower as
Debtor and the Lender as Secured Party and describing the Collateral (as defined
in the Loan and Security Agreement) as to which security interests may be
perfected by filing under the Uniform Commercial Code of the States listed on
Schedule 1 (the "Filing Collateral"), which [We] [I] understand will be filed in
the filing offices listed on Schedule 1 (the "Filing Offices");
5. the reports listed on Schedule 1 as to UCC financing
statements (collectively, the "UCC Search Report"); and
6. such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
To the extent [we] [I] have deemed necessary and proper, [we]
[I] have relied upon the representations and warranties of the Borrower
contained in the Loan and Security Agreement. [We] [I] have assumed the
authenticity of all documents submitted to [us] [me] as
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originals, the genuineness of all signatures, the legal capacity of natural
persons and the conformity to the originals of all documents.
Based upon the foregoing, it is [our] [my] opinion that:
1. The Borrower is a Delaware corporation, duly organized,
validly existing and in good standing under the laws of Delaware and is
qualified to transact business in, and is in good standing under, the laws of
Delaware.
2. The Borrower has the power to engage in the transactions
contemplated by the Loan and Security Agreement, the Note, and the Custodial
Agreement and all requisite power, authority and legal right to execute and
deliver the Loan and Security Agreement, the Note, and the Custodial Agreement
and observe the terms and conditions of such instruments. The Borrower has all
requisite power to borrow under the Loan and Security Agreement and to grant a
security interest in the Collateral pursuant to the Loan and Security Agreement.
3. The execution, delivery and performance by the Borrower of
the Loan and Security Agreement, the Note, and the Custodial Agreement, and the
borrowings by the Borrower and the pledge of the Collateral under the Loan and
Security Agreement have been duly authorized by all necessary corporate action
on the part of the Borrower. Each of the Loan and Security Agreement, the Note
and the Custodial Agreement have been executed and delivered by the Borrower and
are legal, valid and binding agreements, enforceable in accordance with their
respective terms against the Borrower, subject to bankruptcy laws and other
similar laws of general application affecting rights of creditors and subject to
the application of the rules of equity, including those respecting the
availability of specific performance, none of which will materially interfere
with the realization of the benefits provided thereunder or with the Lender's
security interest in the Collateral.
4. No consent, approval, authorization or order of, and no
filing or registration with, any court or governmental agency or regulatory body
is required on the part of the Borrower for the execution, delivery or
performance by the Borrower of the Loan and Security Agreement, the Note and the
Custodial Agreement or for the borrowings by the Borrower under the Loan and
Security Agreement or the granting of a security interest to the Lender in the
Collateral pursuant to the Loan and Security Agreement.
5. The execution, delivery and performance by the Borrower of,
and the consummation of the transactions contemplated by, the Loan and Security
Agreement, the Note and the Custodial Agreement do not and will not (a) violate
any provision of the Borrower's charter or by-laws, (b) violate any applicable
law, rule or regulation, (c) violate any order, writ, injunction or decree of
any court or governmental authority or agency or any arbitral award applicable
to the Borrower of which I have knowledge (after due inquiry) or (d) result in a
breach of, constitute a default under, require any consent under, or result in
the acceleration or required prepayment of any indebtedness pursuant to the
terms of, any agreement or instrument of which I have knowledge (after due
inquiry) to which the Borrower is a party or by which it is bound or to which it
is subject, or (except for the Liens created pursuant to the Loan and Security
Agreement) result in the creation or imposition of any Lien upon any Property of
the Borrower pursuant to the terms of any such agreement or instrument.
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76
6. There is no action, suit, proceeding or investigation
pending or, to the best of [our] [my] knowledge, threatened against the Borrower
which, in [our] [my] judgment, either in any one instance or in the aggregate,
would be reasonably likely to result in any material adverse change in the
properties, business or financial condition, or prospects of the Borrower or in
any material impairment of the right or ability of the Borrower to carry on its
business substantially as now conducted or in any material liability on the part
of the Borrower or which would draw into question the validity of the Loan and
Security Agreement, the Note, the Custodial Agreement, the Eligible Mortgage
Loans or of any action taken or to be taken in connection with the transactions
contemplated thereby, or which would be reasonably likely to impair materially
the ability of the Borrower to perform under the terms of the Loan and Security
Agreement, the Note, the Custodial Agreement or the Eligible Mortgage Loans.
7. The Loan and Security Agreement is effective to create, in
favor of the Lender, a valid security interest under the Uniform Commercial Code
in all of the right, title and interest of the Borrower in, to and under the
Collateral as collateral security for the payment of the Secured Obligations (as
defined in the Loan and Security Agreement), except that (a) such security
interests will continue in Collateral after its sale, exchange or other
disposition only to the extent provided in Section 9-306 of the Uniform
Commercial Code, (b) the security interests in Collateral in which the Borrower
acquires rights after the commencement of a case under the Bankruptcy Code in
respect of the Borrower may be limited by Section 552 of the Bankruptcy Code.
8. When the Mortgage Notes are delivered to the Custodian,
endorsed in blank by a duly authorized officer of the Borrower, the security
interest referred to in paragraph 7 above in the Mortgage Notes will constitute
a fully perfected first priority security interest in all right, title and
interest of the Borrower therein, in the Mortgage Loan evidenced thereby and in
the Borrower's interest in the related Mortgaged Property.
9. (a) Upon the filing of financing statements on Form UCC-1
naming the Lender as "Secured Party" and the Borrower as "Debtor", and
describing the filing Collateral, in the jurisdictions and recording offices
listed on Schedule 1 attached hereto, the security interests referred to in
paragraph 7 above will constitute fully perfected security interests under the
Uniform Commercial Code in all right, title and interest of the Borrower in, to
and under the filing Collateral.
(b) The UCC Search Report sets forth the proper filing offices
and the proper debtors necessary to identify those Persons who have on file in
the jurisdictions listed on Schedule 1 financing statements covering the Filing
Collateral as of the dates and times specified on Schedule 1. The UCC Search
Report identifies no Person who has filed in any Filing Office a financing
statement describing the Filing Collateral prior to the effective dates of the
UCC Search Report.
9. The Assignments of Mortgage are in recordable form, except
for the insertion of the name of the assignee, and upon the name of the assignee
being inserted, are acceptable for recording under the laws of the state where
each related Mortgaged Property is located.
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Very truly yours,
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78
EXHIBIT D
FORM OF NOTICE OF REQUEST FOR BORROWING AND PLEDGE
Master Loan and Security Agreement, dated as of March 16, 2000
(the "Loan and Security Agreement"), by and between the Borrower and ▇▇▇▇▇
▇▇▇▇▇▇ Real Estate Securities Inc. (the "Lender"),
Lender: ▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc.
Borrower: BNC Mortgage, Inc.
Requested Funding Date:
Number of Eligible Mortgages
Loans to be Pledged:
Original UPB: $
Current UPB: $
UPB: $
Number of Other Mortgage
Assets to be Pledged: _________________________________
UPB: $
Requested Wire Amount: $
Requested Maturity Date:
Applicable Margin for
Eligible Mortgage Loans
(other than Wet-Ink
Mortgage Loans): __________ basis points (_____%)
Applicable Margin for
Wet-Ink
Mortgage Loans: __________ basis points (_____%)
Wire Instructions:
[I] hereby certify as an [Officer of BNC Mortgage, Inc.] that the
following conditions are true and accurate:
1. No Default or Event of Default has occurred and is continuing
on the date hereof nor will occur after giving effect to such
Loan as a result of such Loan.
D-1
79
2. Each of the representations and warranties made by the Borrower
in or pursuant to the Loan Documents is true and correct in all
material respects on and as of such date (in the case of the
representations and warranties in respect of Eligible Mortgage
Loans, solely with respect to Eligible Mortgage Loans being
included the Borrowing Base on the Funding Date) as if made on
and as of the date hereof (or, if any such representation or
warranty is expressly stated to have been made as of a specific
date, as of such specific date).
3. The Borrower is in compliance with all governmental licenses
and authorizations and is qualified to do business and is in
good standing in all required jurisdictions.
All Capitalized terms used herein shall have the meanings set forth in
that certain Master Loan and Security Agreement, dated as of March 16,
2000, between the Borrower and the Lender.
Requested and certified to by:
BNC MORTGAGE, INC.
By: _____________________________________________________
Name:
Title:
ACCEPTED AND AGREED:
▇▇▇▇▇ ▇▇▇▇▇▇ REAL ESTATE
SECURITIES INC.
By
Name:
Title:
Date:
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SCHEDULE OF
ASSETS TO BE PLEDGED
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81
EXHIBIT E-1
FORM OF BORROWER'S RELEASE LETTER
[Date]
▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re:
Master Loan and Security Agreement, dated as of March 16, 2000 (the
"Loan and Security Agreement"), by and between BNC Mortgage, Inc. (the
"Borrower") and ▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc. (the "Lender")
Ladies and Gentlemen:
With respect to the mortgage loans described in the attached
Schedule A (the "Eligible Mortgage Loans") (a) we hereby certify to you that the
Eligible Mortgage Loans are not subject to a lien of any third party and (b) we
hereby release all right, interest or claim of any kind with respect to such
Eligible Mortgage Loans, such release to be effective automatically without
further action by any party upon payment from ▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate
Securities Inc., of the amount of the Loan contemplated under the Loan and
Security Agreement (calculated in accordance with the terms thereof) in
accordance with the wiring instructions set forth below.
Wiring Instructions:
_________________________
_________________________
_________________________
Very truly yours,
BNC MORTGAGE, INC.
By: ______________________________________
Name:
Title:
▇-▇-▇
▇▇
▇▇▇▇▇▇▇ ▇-▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ LENDER'S RELEASE LETTER
(Date)
▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re:
Certain Eligible Mortgage Loans Identified on Schedule A hereto and
owned by BNC Mortgage, Inc.
The undersigned hereby releases all right, interest, lien or
claim of any kind with respect to the mortgage loan(s) described in the attached
Schedule A, such release to be effective automatically without any further
action by any party upon payment in one or more installments, in immediately
available funds of $__________________, in accordance with the following wire
instructions:
________________________
________________________
Very truly yours,
[WAREHOUSE LENDER]
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
▇-▇-▇
▇▇
▇▇▇▇▇▇▇ ▇-▇
▇▇▇▇ ▇▇ ▇▇-▇▇▇▇▇▇▇▇▇ LENDER'S RELEASE LETTER
(Date)
▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re:
Certain Eligible Mortgage Loans Identified on Schedule A hereto and
owned by [____________]
The undersigned hereby releases all right, interest, lien or
claim of any kind with respect to the mortgage loan(s) described in the attached
Schedule A, such release to be effective automatically without any further
action by any party upon payment in one or more installments, in immediately
available funds of $__________________, in accordance with the following wire
instructions:
________________________
________________________
Very truly yours,
[RE-WAREHOUSE LENDER]
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
▇-▇-▇
▇▇
▇▇▇▇▇▇▇ ▇
[RESERVED]
85
EXHIBIT G
FORM OF BLOCKED ACCOUNT AGREEMENT
March 16, 2000
Mellon Bank, N.A.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
Option One Mortgage Corporation
3 Ada
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Re: Collection Account Established by Option One Mortgage Corporation
("Servicer") at Mellon Bank, N.A. (the "Bank") in accordance with
the instructions of BNC Mortgage, Inc. (the "Borrower") pursuant
to that Certain Servicing Agreement (as amended, supplemented or
otherwise modified from time to time, the "Servicing Agreement"),
dated October 10 1995, between the Servicer and Borrower
BNC Mortgage, Inc. ("BNC") hereby notifies the Bank that we have
collaterally assigned ownership and exclusive control of and all right, title
and interest in and to our demand deposit account number ___________________,
entitled "Option One Mortgage Corporation in trust for BNC Mortgage
Corporation", ABA# ▇▇▇-▇▇▇-▇▇▇ maintained with the Bank (the "Collection
Account"), and all funds from time to time credited to such account, to ▇▇▇▇▇
▇▇▇▇▇▇ Real Estate Securities, Inc., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, att: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ (the "Lender"), and agree with the Bank and
the Servicer as follows:
Pursuant to the Servicer Notice dated as of March 16, 1999, the
Servicer will upon notice from ▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc. (the
"Lender"), from time to time, deposit funds received into the Collection Account
with respect to Mortgage Loans serviced pursuant to the Servicing Agreement. The
Lender has established a secured loan arrangement with BNC. By BNC's execution
of this letter, BNC acknowledges that BNC has granted a security interest in all
of its right, title and interest in and to the Collection Account and any funds
from time to time on deposit therein, that such funds are received by the
Servicer in trust
G-1
86
for the benefit of Lender and, except as provided below, are for application
against BNC's liabilities to Lender.
The Collection Account shall be under the exclusive dominion and
control of the Lender. Neither BNC nor any other Person claiming on behalf of or
through BNC shall have any right or authority, whether express or implied, to
close or make use of, or withdraw any funds from, the Collection Account, except
as expressly provided herein. Although the Servicer has the right to withdraw
money from the account, they shall only do so at the instruction of the Lender
and in accordance with the terms of this letter.
The Lender shall be irrevocably entitled (until the Lender shall notify
the Servicer to the contrary) to exercise any and all rights (without notice to
BNC or further consent by BNC) in respect of or in connection with the
Collection Account including, without limitation, the right to prevent BNC from
withdrawing funds from the Collection Account, to specify when transfers of
funds are to be made out of or in connection with the Collection Account and to
make withdrawals of funds therefrom. If the Lender shall at any time instruct
the Servicer to make transfers of funds from the Collection Account directly to
the Lender, such transfers shall be made to such account as the Lender shall
specify.
At the request of the Lender, the Servicer shall provide to the Lender
a report of all amounts credited to the Collection Account not later than the
close of business on the next such business day.
All fees, expenses and other charges arising out of or in connection
with the Collection Account shall remain BNC's obligation; provided that the
Lender shall be notified by the Servicer of any default in our payment of such
obligation and the Lender shall be entitled to cure any such default within a
reasonable period of time after its receipt of such notice.
In the event that any provision of any instrument, certificate or other
document delivered in connection with the Collection Account shall be
inconsistent with any provision of this letter agreement, the provisions of this
letter agreement shall govern.
Each of the Bank and the Servicer hereby waive any right that they may
now or hereafter have to security interests, bank's or other possessory liens,
rights to offset or other claims against the funds in the Collection Account
except as specifically set forth herein. The Bank and the Servicer agree to hold
the funds in the Collection Account as the bailee and custodian for the benefit
of the Lender, to indicate on their records the assignment of the funds in the
Collection Account in favor of the Lender and to provide the Lender, at the
request of the Lender, with information concerning the amounts on deposit in the
Collection Account. Each of the Bank and the Servicer agree not to pay to BNC
all or any part of the funds in the Collection Account or any income,
distributions, profits or proceeds of the funds in the Collection Account
without the prior written consent of the Lender.
Notwithstanding anything contained herein to the contrary, the Bank
agrees and the Lender agrees that the Bank shall be entitled to be reimbursed
from funds in the Collection Account for the Bank's fees related to its services
in connection with the Collection Account and
G-2
87
for amounts in respect of returned and otherwise uncollected items previously
credited to the Collection Account.
By the Bank's execution of this letter, it agrees and acknowledges that
this letter constitutes notice pursuant to Section 9302 of the California
Commercial Code of the Lender's security interest in the Collection Account and
such notice is intended to satisfy the requirements of such section. The Bank
further acknowledges that (a) it has not received notice from any other party
(each a "Third Party") of a Third Party's interest in the Collection Account and
(b) it shall deliver prompt written notice to the Lender of its receipt of any
notice from any Third Party of such Third Party's interest in the Collection
Account.
By the Servicer's execution of this letter, it agrees: (a) that all
funds from time to time hereafter in the Collection Account are the property of
the Borrower held in trust for the benefit of the Lender and that unless and
until 2 Business Days after the Lender sends notice by facsimile that an event
of default has occurred and is continuing under the Lender's secured lending
arrangement with the Borrower (a "Notice of Event of Default"), the Servicer
shall transfer funds from the Collection Account in accordance with the
instructions of the Borrower; (b) that Servicer will not exercise any right of
set-off, banker's lien or any similar right in connection with such funds
provided, that in the event any check is returned to the Servicer because of
insufficient funds (or is otherwise unpaid) or to the extent that such rights
would directly relate to the Servicer's rights under the terms of the Servicing
Agreement and to the extent such rights relate to the Mortgage Loans, the
Servicer shall be entitled to set off such amounts; (c) that until the Servicer
receives written notification from the Lender to the contrary, the Servicer will
not withdraw (other than as expressly set forth in the Servicing Agreement or
herein) or permit any person or entity to withdraw or transfer funds from the
Collection Account; and (d) that if the Servicer receives a Notice of Event of
Default from the Lender, the Servicer shall not withdraw or permit the Borrower
to withdraw or transfer funds from the Collection Account and shall cause or
permit withdrawals from the Collection Account only in the manner as the Lender
may instruct.
By its acknowledgment and acceptance of this letter agreement, the
Lender hereby instructs the Bank, until such instruction is rescinded by the
Lender or superseded by a different instruction from the Lender, that BNC shall
have the right to withdraw collected amounts then standing to the credit of the
Collection Account from time to time.
All bank statements in respect to the Collection Account shall be sent
to the Borrower with copies to:
▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
All notices to the Servicer should be sent to:
Option One Mortgage Corporation
3 Ada
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No:
G-3
88
Kindly acknowledge your agreement with the terms of this agreement by
signing the enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
BNC MORTGAGE, INC.
By: ______________________________________
Name:
Title:
Agreed and acknowledged:
OPTION ONE MORTGAGE CORPORATION
as Servicer
By: ______________________________________
Name:
Title:
Agreed and acknowledged:
MELLON BANK, N.A.
as Bank
By: ______________________________________
Name:
Title:
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89
EXHIBIT H
FORM OF SERVICER NOTICE
March 16, 2000
Option One Mortgage Corporation
3 Ada
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Re: Master Loan and Security Agreement, dated as of March 16, 2000
(the "Loan and Security Agreement"), by and between BNC Mortgage,
Inc. (the "Borrower") and ▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities
Inc. (the "Lender")
Ladies and Gentlemen:
Option One Mortgage Corporation (the "Servicer") is servicing certain
mortgage loans for the Borrower pursuant to certain Servicing Agreements between
the Servicer and the Borrower. Pursuant to the Loan Agreement between the Lender
and the Borrower, the Servicer is hereby notified that the Borrower has pledged
to the Lender certain mortgage loans which are serviced by Servicer which are
subject to a security interest in favor of the Lender.
Within 2 business days of the Lender's sending notice to the Servicer
in which the Lender shall identify the mortgage loans which are then pledged to
Lender under the Loan Agreement (the "Eligible Mortgage Loans"), the Servicer
shall segregate all amounts collected on account of such Eligible Mortgage
Loans, hold them in trust for the sole and exclusive benefit of the Lender, and
remit such collections on a daily basis to the demand deposit account number
___________________, entitled "Option One Mortgage Corporation in trust for BNC
Mortgage Corporation", ABA# ▇▇▇-▇▇▇-▇▇▇ maintained with Mellon Bank, N.A. (the
"Blocked Collection Account") and subject to the Blocked Account Agreement,
dated as of March 16, 2000, among the Lender, the Borrower, the Servicer and
Mellon Bank, N.A. Following such notice, Servicer shall follow the instructions
of Lender with respect to the Eligible Mortgage Loans, and shall deliver to
Lender any information with respect to the Eligible Mortgage Loans reasonably
requested by Lender.
Notwithstanding any contrary information which may be delivered to the
Servicer by the Borrower, the Servicer may conclusively rely on any information
or notice delivered by the Lender, and the Borrower, shall indemnify and hold
the Servicer harmless for any and all claims asserted against it for any actions
taken in good faith by the Servicer in connection with the delivery of such
information or notice.
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Please acknowledge receipt of this instruction letter by signing in the
signature block below and forwarding an executed copy to the Lender promptly
upon receipt. Any notices to the Servicer pursuant to this Servicer notice shall
be delivered to Servicer at the notice address set forth below under the
Servicer's acknowledgment. Any notices to the Lender should be delivered to the
following address:
▇▇▇▇▇ ▇▇▇▇▇▇ Real Estate Securities Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Very truly yours,
BNC MORTGAGE, INC.
By: __________________________________
Name:
Title:
ACKNOWLEDGED AND AGREED:
OPTION ONE MORTGAGE CORPORATION, as Servicer
By: __________________________________
Name:
Title:
Option One Mortgage Corporation
3 Ada
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone:
Facsimile:
H-2
91
EXHIBIT I
FORM OF MORTGAGE NOTE
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EXHIBIT J
UNDERWRITING GUIDELINES
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93
EXHIBIT K
APPROVED ESCROW AGENTS
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EXHIBIT L
FORM OF ESCROW INSTRUCTION LETTER
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