Exhibit 10(M)
___________________________________________________________________
MASTER CREDIT AND SECURITY AGREEMENT
among
SKY BANK
and
FRANKLIN CREDIT MANAGEMENT CORPORATION
and
THOSE SUBSIDIARIES WHICH RECEIVE ADVANCES HEREUNDER
Dated as of October 13, 2004
__________________________________________________________________
Master Credit and Security Agreement
This Master Credit and Security Agreement (the "Agreement") is entered
into as of October 13, 2004, between Franklin Credit Management
Corporation, a Delaware corporation (the "Company" ), having its principal
office at Six ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and Sky Bank, an
Ohio banking corporation (the "Bank"), having an office at ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. The Subsidiaries of the Company which
receive Company Subsidiary Loans under this Agreement or which have
heretofore received Company Subsidiary Loans will also become parties
hereto.
Whereas, the Bank, the Company and certain Company Subsidiaries have
previously entered into loan arrangements, whereby Bank and the Company and
each respective Company Subsidiary entered into a separate term loan and
security agreement and a promissory note;
Whereas the Bank, the Company and each Company Subsidiary which have
previously entered into a loan and security agreement, other than Tribeca
Lending Corporation, desire to amend and restate each such loan and
security agreement;
Whereas, at the request of the Company, the Bank has from time to time
extended credit to Company subsidiaries and to additional Subsidiaries of
the Company (i) to finance the purchase of residential mortgage loans, or
(ii) to consolidate and refinance such extensions of credit made earlier by
the Bank, with such extensions of credit having been secured by the loans
purchased by those Subsidiaries with the Bank's financing, and a list of
all such outstanding extensions of credit from the Bank is set forth on
Schedule I attached hereto; and
Whereas, the Company has requested the Bank, and the Bank is willing,
to amend and restate each such loan and security agreement and to continue
to extend credit to Subsidiaries of the Company from time to time to
finance the purchasing of residential mortgage loans, such extensions of
credit to be secured by the loans to be purchased with the Bank's
financing; and the parties now desire to set forth herein the terms and
conditions to which all such prior extensions of credit shall now be
subject, and under which all such future extensions of credit for those
purposes shall be made, and the security provided for the repayment
thereof;
Now, Therefore, the parties hereby agree to amended and restate each
previously existing loan and security agreement, other than any warehouse
arrangement or loan and security agreement with Tribeca Lending
Corporation, as follows:
Article ~ I
Definitions
Section~1.1. Defined Terms. Capitalized terms defined below or
elsewhere in this Agreement (including the Exhibits hereto) shall have the
following meanings:
"Administrative Services Agreement" has the meaning set forth in Section
10.1 hereof.
"Administrative Servicing Fee" means an amount to be agreed to in writing
from time to time between the Bank and the Company in consideration of the
services provided under its Administrative Servicing Agreement with its
Company Subsidiary.
"Advance" means a disbursement by the Bank under a Company Subsidiary Loan.
"Affiliate" has the meaning set forth in Rule~12b-2 of the General Rules
and Regulations under the Exchange Act.
"Agreement" means this Master Credit and Security Agreement, either as
originally executed or as it may from time to time be supplemented,
modified or amended.
"Bank" has the meaning set forth in the first paragraph of this Agreement.
Business Day" means any day excluding Saturday, Sunday and any day which
the principal offices of the Bank in Salineville, Ohio, or the Company in
New York, New York are closed for business.
"Collateral" has the meaning set forth in Section~3 hereof.
"Collateral Documents" has the meaning set forth in Exhibit~D. The Bank
shall have the right, on not less than thirty (30) Business Days' prior
written notice to the Company to modify Exhibit D to conform to current
legal requirements or Bank practices, and, as so modified, said Exhibits
shall be deemed a part hereof
"Commitment" has the meaning set forth in Section~2.1(a) hereof.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Subsidiary" means any Subsidiary of the Company, whether now
existing or hereafter organized and created, which becomes a party to this
Agreement and which has heretofore received or which hereafter receives a
Company Subsidiary Loan, provided, however, it is recognized that the
Company has as of the date of this Agreement at least one other Subsidiary
which has a "warehouse line of credit" facility from the Bank not covered
by this Agreement, and may in the future have one or more Subsidiaries
which do not have extensions of credit from the Bank.
"Company Subsidiary Loan" means a now existing or hereafter arising loan to
a Company Subsidiary pursuant to this Agreement and the related Note, to
finance the purchase of residential mortgage loans or to consolidate and
refinance loans which were granted by Bank to one or more Company
Subsidiaries to finance the purchase of residential mortgage loans.
"Company Subsidiary Loan Request" means the current form in use by the Bank
as set forth in Exhibit~B hereto. The Bank shall have the right, on not
less than thirty (30) Business Days' prior written notice to the Company,
to modify Exhibit B to conform to current legal requirements or Bank
practices, and, as so modified, said Exhibits shall be deemed a part
hereof.
"Consolidated" refers to the consolidation of accounts in accordance with
GAAP.
"Conventional Mortgage Loan" means a Mortgage Loan other than a FHA-insured
or VA-guaranteed Mortgage Loan.
"Corporate Advances" means all customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Company or
any subservicer of its servicing obligations with respect to the
preservation, restoration and protection of the mortgaged property.
"Custodial Agreement" means that certain Custodial Agreement dated as of
October 22, 2003, among the Company, U.S. Bank National Association as
Custodian, the Bank, and those Subsidiaries of the Company who have become
parties to that Agreement and who may become parties to it in the future.
Furthermore, each Company Subsidiary that becomes a party to this Agreement
by executing a counterpart signature page shall also thereby become and be
deemed to be a party to the Custodial Agreement to the same extent as if
such Company Subsidiary had executed a counterpart signature page to the
Custodial Agreement, and such Company Subsidiary shall be bound by the
terms and provisions of the Custodial Agreement.
"Custodian" means the organization which holds documents under the
Custodial Agreement relating to Mortgage Loans on the Company's behalf or
on behalf of a Company Subsidiary.
"Debt" means, with respect to any Person, at any date (a)~all indebtedness
or other obligations of such Person which, in accordance with GAAP, would
be included in determining total liabilities as shown on the liabilities
side of a balance sheet of such Person at such date; (b)~all indebtedness
or other obligations of such Person for borrowed money or for the deferred
purchase price of property or services; (c)~all indebtedness or other
obligations of any other Person for borrowed money or for the deferred
purchase price of property or services in respect of which such Person is
liable, contingently or otherwise, to pay or advance money or property as
guarantor, endorser, or otherwise (except as endorser of negotiable
instruments for collection in the ordinary course of business), or which
such Person has agreed to purchase or otherwise acquire; and (d)~all
indebtedness for borrowed money or for the deferred purchase price of
property or services secured by a Lien on any property owned or being
purchased by such Person (even though such Person has not assumed or
otherwise become liable for the payment of such indebtedness).
"Default" means the occurrence of any event or existence of any condition
which, but for the giving of notice, the lapse of time, or both, would
constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"Escrow Payment" 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.
"Event of Default" means any of the conditions or events set forth in
Section~8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
"FHA" means The Federal Housing Administration of the United States
Department of Housing and Urban Development and any successor thereto.
"FHLMC" means The Federal Home Loan Mortgage Corporation and any successor
thereto.
"Floating Rate" has the meaning set forth in Section~2.4(a) hereof.
"FNMA" means The Federal National Mortgage Association and any successor
thereto.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as
of the date of determination.
"GNMA" means Government National Mortgage Association or any successor
thereto.
"HUD" means the United States Department of Housing and Urban Development
or any successor thereto.
"Indemnified Liabilities" has the meaning set forth in Section~9.3 hereof.
"Index" has the meaning set forth in Section ~ 2.4(a) hereof.
"Insurer" means FHA, VA or a private mortgage insurer, as applicable.
"Internal Revenue Code" means the Internal Revenue Code of 1986, or any
subsequent federal income tax law or laws, as any of the foregoing have
been or may from time to time be amended.
"Investor" means a financially responsible institution purchasing Mortgage
Loans from the Company or from a Company Subsidiary pursuant to a Purchase
Commitment.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind, including without limitation any
conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest.
"Lock-box Agreement" has the meaning set forth in Section 3.4 hereof.
"Margin Stock" has the meaning assigned to that term in Regulation~U of the
Board of Governors of the Federal Reserve System as in effect from time to
time.
"Mortgage" means either (1)~a first-lien mortgage, deed of trust, security
deed or similar instrument on improved real property; or (2)~a second-lien
mortgage, deed of trust, security deed or similar instrument on improved
real property.
"Mortgage Loan" means any loan evidenced by a Mortgage Note. A Mortgage
Loan, unless otherwise expressly stated herein, means a Residential
Mortgage Loan.
"Mortgage Loan Documents" means the Mortgage, Mortgage Note, credit and
closing packages, disclosures, and all other files, records and documents.
"Mortgage Loan Principal Balance" means, as of any date of determination,"
the outstanding principal balance of such Mortgage Loan as calculated
pursuant to the Mortgage Loan Documents.
"Mortgage Note" means a note secured by a Mortgage and evidencing a
Mortgage Loan.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section~4001(a)(3) of ERISA which is maintained for employees of the
Company or a Subsidiary of the Company.
"Net Worth" mean, with respect to the Company and its Subsidiaries at any
date of determination, (a) Consolidated total assets of the Company and its
Subsidiaries at such date less (b) the sum of (i) Consolidated total
liabilities of the Company and its Subsidiaries at such date and (ii) the
liquidation value of any redeemable preferred stock of the Company and its
Subsidiaries at such date, in each case as determined in accordance with
GAAP.
"Note" has the meaning set forth in Section~2.3 hereof.
"Notices" has the meaning set forth in Section~11.3 hereof.
"Officers' Certificate" means a certificate executed on behalf of the
Company or of a Company Subsidiary by its vice president, cashier or other
appropriate officer.
"Person" means and includes natural persons, corporations, limited
liability companies, partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust land trusts, business trusts
or other organizations, whether or not legal entities, and companies,
governmental agencies and political subdivisions thereof.
"Plans" has the meaning set forth in Section ~ 5.1(l) hereof.
"Pledged Mortgage Loans" has the meaning set forth in Section ~ 3.1(a)
hereof.
"Post-Default Rate" means in respect of any day (a "Post-Default Day") an
Event of Default has occurred and is continuing hereunder, a rate per annum
on a 360 day per year basis equal to 2% per annum plus the applicable
Floating Rate on such Post-Default Day.
"Purchase Commitment" means a written commitment, issued in favor of the
Company or of a Company Subsidiary by an Investor pursuant to which that
Investor commits to purchase one or more Mortgage Loans, or whole loan
purchase agreement by and between the Company or a Company Subsidiary and
the Investor, governing the terms and conditions of any such purchases.
"Redemption Amount" has the meaning set forth in Section ~ 3.3 hereof.
"Residential Mortgage Loan" means a Mortgage Loan secured by a Mortgage
covering improved real property containing a one- to four-family residence.
"Statement Date" has the meaning set forth in Sections ~ 4.1(h) and
6.1(b)(ii) hereof.
"Subsidiary" means any corporation, association or other business entity in
which more than fifty percent (50%) of the total voting power or shares of
stock entitled to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more of the other Subsidiaries of that Person or a
combination thereof.
"Success Fees" has the meaning set forth in Section 2.10.
"Taxes" means an amount to be agreed to in writing from time to time
between the Bank and the Company to be used to pay income taxes for the
Company and/or Company Subsidiary.
"Underwriting Standards" has the meaning set forth in Exhibits C. The Bank
shall have the right, on not less than thirty (30) Business Days' prior
written notice to the Company to modify Exhibits C to conform to current
legal requirements or Bank practices, and, as so modified, said Exhibits
shall be deemed a part hereof
"VA" means the Department of Veterans Affairs and any successor thereto.
Section~1.2. Other Definitional Provisions. (a)~ Accounting terms not
otherwise defined herein shall have the meanings given them under GAAP.
(b) Defined terms may be used in the singular or the plural, as the context
requires.
Article~II
The Credit
Section~2.1. The Commitment. (a)~ Subject to the terms and conditions
of this Agreement and the Conditions Precedent described in Section 4.1
below, and provided no Default has occurred and is continuing, the Bank
agrees, from time to time during the period from the date hereof to the
expiration date as provided in Section ~2.6 hereof, to make Company
Subsidiary Loans to, or on behalf of, Company Subsidiaries, provided,
however, that the total aggregate principal amount which is outstanding at
any one time of all such Company Subsidiary Loans shall not exceed the
lesser of (i) the aggregate approved principal amount of all Company
Subsidiary Loans which have been approved by Bank under this Agreement from
time to time, or (ii) the amount permitted by the lesser of (a) the loan
policy guidelines adopted by the Bank from time to time or (b) any
regulatory limitations applicable to the Bank which are now or hereafter in
effect (the "Commitment").
(b) Company Subsidiary Loans approved by Bank from time to time as
provided herein shall be used by Company Subsidiaries solely for the
purpose of funding or financing the purchase of Mortgage Loans, or for the
consolidation and refinancing of then existing Company Subsidiary Loans
against the pledge of such Mortgage Loans.
(c) All Company Subsidiary Loans outstanding prior to the date of this
Agreement for the purpose of funding or financing the purchase of Pledged
Mortgage Loans shall be treated as having been issued under, and shall be
subject to the covenants of, this Agreement. The Company shall cause all of
its Subsidiaries which have such Company Subsidiary Loans outstanding to
become parties to this Agreement by executing counterpart signature pages
in the form of Exhibit E. In the event that the terms of this Agreement
shall conflict with the terms of the loan documentation for such a Company
Subsidiary Loan, the terms of this Agreement shall prevail, except for
interest rate terms, which shall not be affected by the terms of this
Agreement, and except that any Default under any such loan, which has not
been cured or waived, shall remain in effect.
(d) The warehousing credit line extended by the Bank to Tribeca
Lending Corporation, a New York corporation and a Subsidiary of the Company
shall be separate from and shall not be subject to this Agreement except as
specifically otherwise provided in this Agreement.
Section~2.2. Procedures for Obtaining Advances. Each Company
Subsidiary Loan Request is subject to Bank's approval. Such Bank approval
is subject to the Conditions Precedent set forth in Section 4.1. Bank shall
reasonably endeavor to provide a conditional approval or denial within four
(4) Business Days for requests of less than $1,000,000.00 and within five
(5) Business Days for requests of $1,000,000.00 or more. Before providing
final approval and funding any Company Subsidiary Loan, the Bank shall have
a reasonable amount of time (not less than five (5) Business Days) to
examine the Collateral Documents required to be delivered to Bank or to
Custodian, as set forth in Section 4.1, and may reject such of them as do
not meet the requirements of this Agreement, and/or may reduce the amount
of such Company Subsidiary Loan. Bank, in all events, reserves the right to
reject any Company Subsidiary Loan Request to finance the purchase of, or
which includes Advances for the purchase of a "high cost mortgage" as
defined in Section 152(a) of the Home Ownership and Equity Protection Act
of 1994, or if it is in violation of any corresponding state or local law.
Section~2.3. Note. Each Company Subsidiary Loan, and the corresponding
Company Subsidiary's obligation to pay the principal of, and interest on
the Company Subsidiary Loan to it made by the Bank, shall hereafter be
evidenced by a promissory note of the Company Subsidiary payable to the
Bank, and being substantially in the form of Exhibit~A attached hereto. All
existing promissory notes evidencing Company Subsidiary Loans heretofore
granted by Bank to a Company Subsidiary shall remain in full force and
effect. The term "Note" or "Notes" shall mean each and all such existing
promissory notes evidencing a Company Subsidiary Loan, and all promissory
notes hereafter executed and delivered by a Company Subsidiary to evidence
Company Subsidiary Loans granted hereunder, and shall include all
extensions, renewals and modifications, and all substitutions therefor.
Section~2.4. Interest and Transaction Fees. (a)~ The unpaid principal
balance of each Company Subsidiary Loan shall bear interest, payable
monthly, on the fifth (5th) day of each month, from the date of such
Advance until paid in full, at a floating per annum rate of interest (the
"Floating Rate") based upon an index which will be the Federal Home Loan
Bank of Cincinnati 30 day advance rate (the "Index"), plus the applicable
margin in accordance with the following matrix:
Base Rate Index Bank Margin
<201 350
201 - 475 325
Greater than 300 475
The interest rate charged herein shall be adjusted monthly, effective
on the first (1st) day of each month, based upon the Index in effect on the
last Business Day of the then prior month. The Federal Home Loan Bank of
Cincinnati 30 day advance rate shall mean the highest rate of interest as
published daily by Bloomberg under the symbol FHL5LBR1. If the Index
becomes unavailable during the term of this Agreement, the Bank may
designate a substitute Index which is reasonably comparable after notice to
the Company and each Company Subsidiary. Interest will be calculated on the
basis of actual days elapsed over a 360 day year (365/360 basis), and
principal and interest payments will be billed monthly and will be due on
the fifth day of each month.
If an Event of Defaults has occurred and is continuing hereunder, the
Company and Company Subsidiary shall be obligated to pay to Bank interest
on the outstanding principal balance of each Company Subsidiary Loan at a
rate per annum equal to the Post-Default Rate until such Company Subsidiary
Loan is paid in full or such Event of Default is cured or waived by the
Bank.
(b) At the time of closing of each Company Subsidiary Loan, such
Company Subsidiary or the Company shall pay the Bank a transaction fee
equal to one percent (1.0%) of the amount of such Company Subsidiary Loan
(unless otherwise mutually agreed to by Bank and such Company Subsidiary).
(c) The books and records of Bank, absent manifest error, shall
constitute prima facie evidence of the principal balance of each Company
Subsidiary Loan and the date and amount of each payment of principal and
interest and applicable interest rates and other information with respect
thereto.
Section~2.5. Payments. (a)~The Company and each Company Subsidiary
which becomes a party to this Agreement shall ensure that any and all
payments on the Pledged Mortgage Loans shall be made as specified in
Section 3.4. The Bank shall receive, record and forward to the Company or
the Company Subsidiary the record of all payments made by Pledged Mortgage
Loan obligors in accordance with the Lock Box Agreement. So long as no
Event of Default shall have occurred and be continuing, Pledged Mortgage
Loan payments with the exception of any Escrow Payments deposited in the
lockbox or otherwise received by the Company or the Company Subsidiary
shall be delivered to the Bank and shall be applied, on or about the 5th,
12th, 19th and 26th day of each month as follows:
First, (i) all amounts received in respect of a particular Mortgage Pool
shall be distributed to the related Mortgage Pool in the following order up
to an amount equal to:
(A) the related Pool Percentage Interest of any accrued and
unpaid Taxes, Administrative Servicing Fees and any Corporate Advances
for such month;
(B) any accrued and unpaid interest and Success Fees due on all
Company Subsidiary Loans related to such Mortgage Pool; and
(C) the required Principal Payment for such Mortgage Pool;
(ii) all remaining amounts after the allocations set forth in
clauses 2.5(a)(i)(A) through (C) above from all Mortgage Pools in the
aggregate shall be distributed to all Mortgage Pools in the following order
, in each case to the extent not distributed to such Mortgage Pool
pursuant to clause 2.5(a)(i) above, up to an amount equal to:
(A) any accrued and unpaid Taxes, Administrative Servicing Fees
and any Corporate Advances for such month for each Mortgage Pool, pro
rata based on their remaining entitlement pursuant to clause
2.5(a)(i)(A) above after all allocations pursuant to clause
2.5(a)(i)(A) above;
(B) any accrued and unpaid interest and Success Fees due on all
Company Subsidiary Loans for each Mortgage Pool, pro rata based on
their remaining entitlement pursuant to clause 2.5(a)(i)(B) above
after all allocations pursuant to clause 2.5(a)(i)(B) above; and
(C) the required Principal Payment for such Mortgage Pool, pro
rata based on their remaining entitlement pursuant to clause
2.5(a)(i)(C) above after all allocations pursuant to clause
2.5(a)(i)(C) above;
(iii) all remaining amounts after the allocations set forth in
clauses 2.5(a)(i) through 2.5(a)(ii) above from all Mortgage Pools in the
aggregate shall be applied to pay all other accrued and unpaid sums due to
the Bank hereunder, and
(iv) all remaining amounts after the allocations set forth in
clauses 2.5(a)(i) through 2.5(a)(iii) above from all Mortgage Pools in
the aggregate shall be paid as determined by the Bank in its
reasonable discretion exercised in good faith and then,
Second, all amounts distributed to each Mortgage Pool pursuant to clauses
2.5(a)(i) through 2.5(a)(ii) above shall then be applied to the Company
Subsidiary Loans related to such Mortgage Pool in the following order to
pay:
(i) any accrued and unpaid interest and Success Fees due on each
Company Subsidiary Loan related to such Mortgage Pool pro rata based
on their entitlement thereto; and
(ii) to each Company Subsidiary Loan, the greater of the related
Required Amortization Payment and the Subsidiary
Undercollateralization Amount, pro rata, based on their respective
entitlement thereto.
"Pool Percentage Interest" means the related Mortgage Pool Value over the
aggregate Mortgage Pool Value of all Mortgage Pools.
"Principal Payment" for the related month and any Mortgage Pool means
an amount equal to the greater of (i) the Required Amortization
Payment on all Company Subsidiary Loans related to such Mortgage Pool
and (ii) the Pool Undercollateralization Amount.
"Company Subsidiary Loan Value" means, as of any date of
determination, the aggregate Mortgage Loan Principal Balance of all
Pledged Mortgage Loans owned by the related Company Subsidiary less an
amount equal to all Reserves in respect of such Company Subsidiary.
"Mortgage Pool" means the pool of Mortgage Loans comprised of the
Pledged Mortgage Loans owned by the Company Subsidiaries set forth on
Exhibit G.
"Mortgage Pool Value" means, as of any date of determination, the
aggregate Mortgage Loan Principal Balance of all Pledged Mortgage
Loans in the related Mortgage Pool less an amount equal to all
Reserves in respect of the Pledged Mortgage Loans comprising such
Mortgage Pool.
"Mortgage Pool Loan Amount" means the outstanding principal balance of
all Company Subsidiary Loans made by Company Subsidiaries that own
Pledged Mortgaged Loans in such Mortgage Pool.
"Pool LTV" means, as of any date of determination, the ratio of the
applicable Mortgage Pool Value to the outstanding principal balance of
all Notes that were funded in respect of Advances for such Mortgage
Pool.
"Pool Undercollateralization Amount" for each Mortgage Pool shall mean
the amount, if any, by which the (i) Mortgage Pool Loan Amount
immediately prior to making distributions on any payment date as
described above, exceeds (ii) the product of the applicable Required
Pool LTV multiplied by the Mortgage Pool Value, taking into account
all payments made and applied on the underlying Pledged Mortgage Loans
on or prior to such payment date.
"Required Amortization Payment" means a payment of principal on the
related Company Subsidiary Loan as specified in the Note.
"Required Pool LTV" for each Mortgage Pool shall be as specified on
Exhibit G. On the 5th day of each calendar quarter (i.e., April 5,
July 5, October 5 and January 5) or if such day is not a Business Day,
the next succeeding Business Day, the Required Pool LTV for each
Mortgage Pool shall be reset (and Exhibit G automatically amended in
accordance herewith) as the weighted average of the Required Pool LTV
as of the last day of the preceding calendar month and the Required
Subsidiary LTV for each Company Subsidiary that was joined to Exhibit
G since the last reset of the Required Pool LTV's, weighted based on
the Mortgage Pool Value of the related Mortgage Pool as of the last
day of the preceding calendar month and the Company Subsidiary Loan
Value as of the date the related Advance was made, in each case
subject to the approval of the Bank with respect to such calculations.
"Required Subsidiary LTV" for each Company Subsidiary Loan shall be as
specified on Exhibit G. In the event any Company Subsidiary not a
party hereto on the date hereof becomes a party hereto, the Company
Subsidiary Loan Request in the form attached hereto as Exhibit B,
shall set forth the Required Subsidiary LTV as a percentage equal to
(A) (1) the amount of the Advance less (2) all accrued and unpaid
interest on such Mortgage Loans included in the purchase price of such
Mortgage Loan upon acquisition by the Company Subsidiary (or, in the
case of Mortgage Loans assigned to the Company Subsidiary by the
Company, by the Company) divided by (B) (1) the outstanding principal
balance of the Mortgage Loans in respect of which an Advance will be
made less (2) all Reserves for such Mortgage Loans in the aggregate
minus (C) if the Company Subsidiary Loan is to become part of the
Mortgage Pool designated as "A" or "B", 2%, (2) if the Company
Subsidiary Loan is to become part of the Mortgage Pool designated as
"C", 3% and (3) if the Company Subsidiary Loan is to become part of
any other Mortgage Pool, a percentage to be determined by the Bank and
the Company. Upon the making of the Advance with respect to any such
new Company Subsidiary, Exhibit G shall be automatically amended to
include such Company Subsidiary, the designation of the Mortgage Pool
(as set forth on the Company Subsidiary Loan Request) and the Required
Subsidiary LTV, as set forth on the Company Subsidiary Loan Request
and as calculated above, in each case subject to the approval of the
Bank with respect to such calculations.
"Reserves" means all reserve amounts in respect of a Pledged Mortgage
Loan as determined monthly.
"Subsidiary Undercollateralization Amount" for each Company Subsidiary
shall mean the amount, if any, by which the (i) outstanding principal
balance of the applicable Company Subsidiary Loan immediately prior to
making distributions on any payment date as described above, exceeds
(ii) the product of the applicable Required Subsidiary LTV multiplied
by the outstanding principal balance of the applicable Company
Subsidiary Loan Value, taking into account all payments made and
applied on the underlying Pledged Mortgage Loans on or prior to such
payment date.
Notwithstanding the foregoing, the outstanding principal amount of
each Company Subsidiary Loan shall be payable: (i) in part, upon~the
occurrence of any event described in Section~2.5(c) hereof with
respect to such Company Subsidiary Loan; or (ii)~in full, upon an
uncured Event of Default. Furthermore, if an Event of Default has
occurred and is then continuing, the provisions of Section 8.3 shall
apply.
Notwithstanding the foregoing, for purposes of determining Defaults in
the payment of amounts due under this Agreement, (i) it shall not be a
Default in payment of principal so long as the amount of principal
paid to the Company Subsidiary Loans in the aggregate in any calendar
month is at least equal to the Required Amortization Payments due in
the aggregate on the Company Subsidiary Loans for such month and (ii)
it shall not be a payment Default under this Agreement unless all
amounts paid pursuant to the foregoing waterfalls in the aggregate for
all payment dates for such month are not at least equal to the
Administrative Servicing Fees due for such month, interest due on the
Company Subsidiary Loans for such month and the Required Amortization
Payments due for such month.
(b) Notwithstanding the general order of payments set forth in Section
2.5 above, and so long as the provisions of Sections 2.5(c) or 8.3 do
not apply, the Company or a Company Subsidiary may prepay a Company
Subsidiary Loan, in whole or in part at any time and from time to
time, without premium or penalty (but subject to the Success Fee),
provided, however, the Bank may, at its reasonable discretion,
determine in which order of priority that the then outstanding Company
Subsidiary Loans are prepaid so as not to have a detrimental impact on
any remaining Company Subsidiary Loans.
(c) The Company and the Company Subsidiary shall be obligated to pay
to the Bank, and the Company and the Company Subsidiary hereby
authorize the Bank to charge its account for, the amount of the
Advance for the purchase of such Mortgage Loan if the Company or the
Company Subsidiary (i) fails, to deliver the Collateral Documents
relating to the Mortgage Loan against which such Advance was made
within sixty (60) days after written notice by the Bank, or (ii)
fails, within sixty (60) days after the delivery of any Collateral
Documents to the Company Subsidiary for correction or completion,
without being returned to the Bank corrected or completed as
instructed by the Bank, or from the date a Collateral Document,
following examination by the Bank, is found not to be in compliance
with the requirements of this Agreement.
Section~2.6. Expiration and/or Termination of Commitment. (a)~ Unless
terminated earlier as permitted hereunder, the Commitment shall expire
of its own term, and without the necessity of action by the Bank, two
(2) years following the date of execution of this Agreement. No such
expiration, however, shall in and of itself operate to accelerate the
due date of any outstanding Company Subsidiary Loan, or otherwise
terminate the obligations, terms and covenants herein with respect to
any then outstanding Company Subsidiary Loans.
(b) Either party shall have the right, without cause, at any time to
terminate this Commitment on not less than six (6) months' prior
written notice to the other party. No such termination, however, shall
in and of itself operate to accelerate the due date of any outstanding
Company Subsidiary Loan, or otherwise terminate the obligations, terms
and covenants herein with respect to any then outstanding Company
Subsidiary Loans.
(c) The Bank shall, furthermore, have the right to terminate the
Commitment upon or following the occurrence of a Event of Default as
specified in Section 8. No such termination, however, shall in and of
itself operate to accelerate the due date of any outstanding Company
Subsidiary Loan, or otherwise terminate the obligations, terms and
covenants herein with respect to any then outstanding Company
Subsidiary Loans.
(d) The Bank shall have the right from time to time and in its sole
discretion, to extend the term of this Agreement with prior written
agreement with the Company and each Company Subsidiary. The length of
any such extension shall also be determined in the Bank's sole
discretion. Such extension may be made subject to the renegotiation of
the terms hereunder and to any other such conditions as the Bank may
deem necessary. Under no circumstances shall such an extension by the
Bank be interpreted or construed as the Bank's waiver, release or
forfeiture of any of its rights, entitlements or interests created
hereunder. The Company and each Company Subsidiary acknowledges and
understands that the Bank is under no obligation whatsoever to extend
the term of this Agreement beyond its expiration date as originally
stated in this Agreement.
Section~2.7. Method of Making Payments. Except as otherwise
specifically provided herein, all payments under a Note shall be
received by the Bank on the date when due and shall be made in lawful
money of the United States of America in immediately available funds
at the office of the Bank, or such other place as the Bank from time
to time shall designate; provided that in any event such payments are
received no later than 12:00 p.m. New York City time. Whenever any
payment to be made under a Note shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to
the next succeeding Business Day, and, with respect to payments of
principal, the interest thereon shall be payable at the applicable
rate during such extension. Funds received by the Bank after 4:00 p.m.
New York City time on a Business Day shall be deemed to have been paid
on the next succeeding Business Day.
Section~2.8. Net Payments. All payments with respect to any Company
Subsidiary Loan shall be made without offset or counterclaim and free
from any present or future taxes, levies, imports, duties or other
similar charges of whatsoever nature imposed by any government or any
political subdivision or taxing authority hereof, other than any taxes
on or measured by the net income of the Bank.
Section~2.9. Direct Payments. Any and all payments received by the
Company or a Company Subsidiary on Pledged Mortgage Loans with respect
to which a Company Subsidiary Loan is made shall be deemed to have
been delivered in trust for the benefit of Bank and shall be promptly
delivered to the Bank for application to the Company Subsidiary Loans
and such other specified purposes in accordance with and as set forth
in Section 2.5.
Section~2.10. Success Fees. The Company or the Company Subsidiary
shall pay to Bank a "Success Fee" amounting to the lesser of (i) one
half of one percent (0.50%) of the original principal balance of the
Company Subsidiary Loan (provided further, however, that Company
Subsidiary acknowledges and agrees that the Success Fee for a Company
Subsidiary Loan listed on Schedule I attached hereto, shall be one
percent (1.0%) of the original principal balance of such Company
Subsidiary Loan), or (ii) fifty percent (50%) of the remaining
cashflows of the Pledged Mortgage Loans related to such Company
Subsidiary Loan received after the payoff of such Company Subsidiary
Loan.
Article ~ III
Collateral
Section~3.1. Assignments and Grants of Security Interest by Company
and Company Subsidiary. In consideration of the Commitment and as
security for (i) the payment of the Note made by it and the
performance of all of such Company Subsidiary's obligations under this
Agreement, (ii) the obligations of such Company Subsidiary under this
Agreement, (iii) the obligations of any other Company Subsidiary,
under that other Company Subsidiary's Note and under this Agreement,
whether such other Company Subsidiary is now existing or is hereafter
created, and whether such other Company Subsidiary's Loan was made
prior to or after the Company Subsidiary Loan to the Company
Subsidiary granting this security interest,~ the Company does hereby,
each Company Subsidiary which contemporaneously herewith becomes a
party to this Agreement does hereby, and each Company Subsidiary which
hereafter becomes a party to this Agreement shall, by executing a
counterpart signature page to this Agreement thereby, grant and convey
to the Bank a security interest in all rights, titles and interest of
the Company and the Company Subsidiary, respectively, in and to the
following described property (collectively, the "Collateral"), and
each Company Subsidiary which becomes a party hereto contemporaneously
herewith does hereby confirm and reaffirm its prior grant and
conveyance to the Bank of a security interest in all of its right,
title, and interest in the following described Collateral:
(a) All Mortgage Loans, including all Mortgage Notes and Mortgages
evidencing or securing such Mortgage Loans and all other related
Mortgage Loan Documents which from time to time are delivered, or
caused to be delivered, or which heretofore have been delivered to the
Bank (including delivery to a third party on behalf of the Bank)
pursuant hereto or in respect of which an Advance under a Company
Subsidiary Loan has been made by the Bank or which is hereafter made
by the Bank hereunder (the "Pledged Mortgage Loans"); each Company
Subsidiary hereafter obtaining a Company Subsidiary Loan shall deliver
a schedule, in form and detail acceptable to Bank, of the Mortgage
Loans being purchased from the proceeds of such Company Subsidiary
Loan and pledged hereunder, which schedule shall attached to the
Company Subsidiary's counterpart signature page to this Agreement and
shall be deemed to be a part of this Agreement.
(b) All rights, but not any obligations or liabilities under all
purchase agreements relating to the acquisition of Pledged Mortgage
Loans under which the Company or the Company Subsidiary is the
purchaser, and all rights, but not any obligations or liabilities
under all assignments to the Company Subsidiary by the Company of the
Company's rights under such agreements where the Company is the
purchaser.
(c) All mortgage insurance and all commitments issued by Insurers to
insure or guarantee any Pledged Mortgage Loans; and all personal
property, contract rights, servicing and servicing fees and income,
accounts and general intangibles of whatsoever kind relating to the
Pledged Mortgage Loans, said Insurer commitments and the Purchase
Commitments, and all other documents or instruments delivered to the
Bank in respect of the Pledged Mortgage Loans, including, without
limitation, the right to receive all insurance proceeds and
condemnation awards which may be payable in respect of the premises
encumbered by any Pledged Mortgage Loan;
(d) All right, title and interest of the Company and/or the Company
Subsidiary in and to all files, surveys, certificates, correspondence,
appraisals, computer programs, tapes, discs, cards, accounting
records, information and data of the Company and/or the Company
Subsidiary relating to the Pledged Mortgage Loans;
(e) All property of the Company and/or the Company Subsidiary, in any
form or capacity now or at any time hereafter in the possession or
direct or indirect control of the Bank relating to the Pledged
Mortgage Loans (including possession by a parent company, affiliate or
subsidiary of the Bank);
(f) The Company and the Company Subsidiary's rights (but not any
obligations or liabilities of the Company or the Company Subsidiary)
under all Purchase Commitments now held or hereafter acquired by the
Company and/or the Company Subsidiary covering Pledged Mortgage Loans
and all proceeds resulting from the sale of Pledged Mortgage Loans to
Investors pursuant thereto;
(g) All rights (but not any obligations or liabilities) of the Company
and of the Company Subsidiary under the Administrative Services
Agreements and under the Custodial Agreements; and
(h) All replacements, products and proceeds of any and all of the
foregoing.
Without limiting the foregoing, it is the express intention of
the Company, and of each Company Subsidiary that now or hereafter
becomes a party to this Agreement, that the security interest granted
above is and shall be a continuing security interest covering all now
present (or then present), and all future obligations of the Company
to Bank hereunder or arising hereunder; and all now present (or then
present), and all future obligations of each and every Company
Subsidiary to Bank hereunder or arising hereunder, and that the
security interests granted herein by the Company and each Company
Subsidiary shall remain in effect until all indebtedness secured
hereby has been paid in full and the Commitment has expired or has
been otherwise terminated.
Upon the request of the Bank, the Company and the Company
Subsidiaries shall execute any further document or instrument
reasonably requested by the Bank to further evidence or effectuate the
assignments and security interests set forth in this Section.
Furthermore, the Company and the Company Subsidiaries (a) hereby
authorize Bank to sign (if required) and file financing statements at
any time with respect to any of the Collateral, without such financing
statements being executed by, or on behalf of, the Company or the
Company Subsidiaries, (b) shall, at any time on request of Bank,
execute or cause to be executed financing statements in respect of any
Collateral and (c) shall reasonably cooperate to provide any
information reasonably required by the Bank in connection with the
filing of financing statements with respect to the Collateral. The
Company and the Company Subsidiaries agree to pay all filing fees,
including fees for filing continuation statements in connection with
such financing statements, and to reimburse Bank for all costs
incurred in connection therewith.
Section 3.2 Mandatory Prepayment. In the event that the Bank
shall in good faith determine at any time that any Pledged Mortgage
Loan materially and adversely breaches the representations and
warranties contained in this Agreement, and the Company or the Company
Subsidiary fails to cure such breach of compliance upon thirty (30)
Business Days prior written notice from the Bank, the Company or the
Company Subsidiary shall partially prepay the Company Subsidiary Loan
Advance by paying the Bank the Redemption Amount with respect to such
Pledged Mortgage Loan and the Bank shall release such Pledged Mortgage
Loan from the Pledge of this Agreement.
Section~3.3. Right of Redemption from Pledge. Provided no Default
or Event of Default has occurred and is continuing, a Company and/or
Company Subsidiary may redeem a Pledged Mortgage Loan from pledge, by
either (i)~paying, or causing an Investor to pay, to the Bank, for
application to prepayment of the principal balance of the Note, an
amount (the "Redemption Amount") equal to the price at which such
Mortgage Loan could readily be sold as determined by the Bank, or
(ii)delivering substitute Collateral which, in addition to being
acceptable to the Bank in its sole discretion, will when included with
the Collateral, result in an LTV for the applicable Mortgage Pool
which is equal to or less than the LTV of such Mortgage Pool at the
time of the redemption request.
Section~3.4. Collection and Servicing Rights. (a) The Company
Subsidiary and the Bank agree that the "Lock Box Terms" set forth on
Exhibit F shall be utilized by Company Subsidiary for the receiving,
collecting, and processing of all sums payable to the Company
Subsidiary in respect of the Collateral (the "Lock-box Agreement").
Under that Lock-box Agreement, the Bank shall be entitled to receive
all sums payable to the Company Subsidiary in respect of the
Collateral. All amounts payable to the Company Subsidiary for the
purchase by any Investor under a Purchase Commitment of any Pledged
Mortgage Loans shall also be paid directly to the Bank. The Company
Subsidiary shall instruct each Pledged Mortgage Loan obligor to direct
all payments due under the Pledged Mortgage Loans, and shall direct
each Investor to pay the amounts payable for the purchase of such
Pledged Mortgage Loans, directly to the Lockbox address at the Bank.
(b) In the event of any conflict between the terms of the
Lock-box Agreement and the terms of the Administrative Services
Agreement, the Lock-box Agreement terms shall prevail. The Bank shall
have the right on not less than thirty (30) days prior notice to the
Company and each Company Subsidiary to reasonably modify the Lock-box
Agreement to conform to then current Bank practices and/or banking
regulations.
Section~3.5. Return of Collateral. If no Company Subsidiary
Loans, interest or other amounts evidenced by a Note or due under a
Company Subsidiary Loan or under this Agreement shall be outstanding
and unpaid, the Bank shall promptly deliver or release all Collateral
in its possession to the Company or to the Company Subsidiaries, as
appropriate. The Bank shall also execute and deliver such assignments
and other instruments and documents reasonably requested by the
Company or by the Company Subsidiaries to vest title in the Collateral
to the Company or the Company Subsidiaries, as appropriate. The
receipt of the Company or of Company Subsidiaries, as appropriate, for
any Collateral released or delivered pursuant to any provision of this
Agreement shall be a complete and full acquittance for the Collateral
so returned, and the Bank shall hereafter be discharged from any
liability or responsibility therefor.
Article IV
Conditions Precedent
Section~4.1. Relating to a Company Subsidiary Advance. The
obligation of the Bank to fund an approved Company Subsidiary Loan is
subject to (i) the receipt by the Bank by the date of an Advance
thereunder of the following documents, all of which must be
satisfactory in form and content to the Bank in its reasonable
discretion, and (ii) the satisfaction of the following conditions
precedent:
a) Requests for a Company Subsidiary Loan shall be initiated by
the Company or by a Company Subsidiary by delivering to the Bank a
completed and signed a Company Subsidiary Loan Request. The Bank shall
review such Company Subsidiary Loan Request and if the Bank does not
approve such designation of a Mortgage Pool, the Company or Company
Subsidiary shall revise such request and deliver a new completed and
signed Company Subsidiary Loan Request with a revised designation of a
Mortgage Pool for the Bank's approval.
b) The Company and/or the Company Subsidiary shall have delivered
the Collateral Documents to the Custodian within three (3) Business
Days after the date of the closing of the Company Subsidiary Loan;
c) The Bank shall have received the Tax Identification number of
each Company Subsidiary, as the case may be, and, when specifically
requested for a particular Company Subsidiary Loan, file-stamped
copies of the Company Subsidiary's articles of incorporation (dated no
less recently than one (1) month prior to the date of the Advance),
and operating agreement or by-laws;
d) When specifically requested for a particular Company
Subsidiary Loan, the Bank shall have received an original resolution
of the members/manager, or directors, of the Company and each Company
Subsidiary, as the case may be, certified by its manager or chief
executive officer authorizing the execution, delivery and performance
of this Agreement, the Note, and all other instruments or documents to
be delivered by the Company Subsidiary pursuant to this Agreement;
e) When specifically requested for a particular Company
Subsidiary Loan, the Bank shall have received a certificate of the
Company's and each Company Subsidiary's manager or chief executive
officer as to the incumbency and authenticity of the signatures of the
officers of the Company and the Company Subsidiary executing this
Agreement, the Note, the Company Subsidiary Loan Request, and all
other instruments or documents to be delivered pursuant hereto (the
Bank being entitled to rely thereon until a new such certificate has
been furnished to the Bank);
f) The Bank shall have received an original independently audited
financial statements of the Company for the most recent fiscal
year-end for which reports on Form 10-K have been filed with the
Securities and Exchange Commission (the "Statement Date") containing a
balance sheet and related statements of income and retained earnings
and changes in financial position for the period ended on the
Statement Date, all prepared in accordance with GAAP applied on a
basis consistent with prior periods and reasonably acceptable to the
Bank;
g) [Reserved];
h) [Reserved];
i) The Bank shall have satisfied itself, in its discretion and
following due diligence, that the Underwriting Standards have been
satisfied. The Bank shall have received each of the following, which
must be satisfactory in form and content to the Bank in its reasonable
discretion: (i) The purchase agreement relating to the acquisition of
the Mortgage Loans, and the assignment to the Company Subsidiary by
the Company of the Company's rights under such purchase agreement when
the Company is the purchaser; (ii) a schedule, in form and detail
acceptable to Bank of the Mortgage Loans being purchased, (iii) the
Note, substantially in the form of Exhibit A hereto, duly executed by
the Company Subsidiary; (iv) counterpart signature page for this
Agreement, substantially in the form of Exhibit E hereto, duly
executed by the Company Subsidiary; and (v) if the Company, not the
Company Subsidiary, is the party to the purchase agreement covering
the Mortgage Loans and Mortgage Loan Documents to be acquired by the
Company Subsidiary and pledged to the Bank to secure the Advance, a
duly executed assignment by the Company to the Company Subsidiary of
all of the Company's rights in the purchase agreement and in the
Mortgage Loans and Mortgage Loan Documents covered by that agreement;
j) [Reserved];
k) The representations and warranties of the Company contained in
Article V hereof shall be true and correct in all material respects as
if made on and as of the date of each Advance unless the same relates
to an earlier date;
l) The representations and warranties of the Company Subsidiary
contained in Article V hereof shall be true and correct in all
material respects as if made on and as of the date of the Advance
unless the same relates to an earlier date;
m) The Company Subsidiary shall have performed all obligations to
be performed by it hereunder, and after giving effect to the requested
Advance, there shall exist no Default or Event of Default hereunder;
n) The Company Subsidiary shall have become a party to this
Agreement, shall have performed all obligations to be performed by it
under this Agreement, and under the Note, and, after giving effect to
the requested Advance, there shall exist no Default or Event of
Default under this Agreement or under any Note;
o) The Company shall not have experienced any other material
adverse change in its business or operations as reasonably determined
by the Bank in its reasonable discretion exercised in good faith; and
p) The Company Subsidiary, as reasonably determined by the Bank
in its reasonable discretion exercised in good faith, shall not have
(i) incurred any material liabilities, direct or contingent, other
than in the ordinary course of its business and other than under this
Agreement, or (ii) experienced any other material adverse change in
its business or operations as reasonably determined by the Bank in its
reasonable discretion exercised in good faith.
Section 4.2. Acceptance of Proceeds. Acceptance of the proceeds
of the requested Advance by the Company Subsidiary shall be deemed a
representation by the Company and the Company Subsidiary that all
conditions set forth in this Article IV shall have been satisfied as
of the date of such Advance.
Article ~ V
Representations and Warranties
Section 5.1. By the Company. In order to induce the Bank to enter
into this Agreement and make each Company Subsidiary Loan, the Company
hereby represents and warrants to the Bank, as of the date of this
Agreement and as of the date of each Company Subsidiary Loan Request
and of each Company Subsidiary Loan, that:
(a) Organization; Good Standing. The Company is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Delaware and is duly registered to do business and is
in good standing under the laws of the State of New York, has the full
legal power and authority to own its property and to carry on its
business as currently conducted, and is duly qualified as a foreign
corporation to do business in and is in good standing in each
jurisdiction in which the transaction of its business makes such
qualification necessary, except in jurisdictions, if any, where a
failure to be in good standing has no material adverse effect on the
business, operations, assets or financial condition of the Company.
(b) Authorization and Enforceability. The Company has the power
and authority to execute, deliver and perform this Agreement and all
other documents contemplated hereby or thereby. The execution,
delivery and performance by the Company of this Agreement and all
other documents contemplated hereby or thereby, have been duly and
validly authorized by all necessary corporate action on the part of
the Company (none of which actions have been modified or rescinded,
and all of which actions are in full force and effect) and do not and
will not conflict with or violate any provision of law or of the
articles of organization or bylaws of the Company, conflict with or
result in a breach of or constitute a default or require any consent
under, or result in the creation of any Lien upon any property or
assets of the Company (other than pursuant to this Agreement), or
result in or require the acceleration of any indebtedness of the
Company pursuant to any agreement, instrument or indenture to which
the Company is a party or by which the Company or its property may be
bound or affected. This Agreement and all other documents contemplated
hereby or thereby constitute legal, valid, and binding obligations of
the Company enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights and by general
principles of equity.
(c)Approvals. The execution and delivery of this Agreement and
all other documents contemplated hereby or thereby and the performance
of the Company's obligations hereunder and thereunder do not require
any license, consent, approval or other action of any state or federal
agency or governmental or regulatory authority.
(d)Financial Condition. The balance sheet of the Company as at
the Statement Date, and the related statements of income and cash
flows for the fiscal year ended on the Statement Date, heretofore
furnished to the Bank, fairly present the financial condition of the
Company as at the Statement Date and the results of its operations for
the fiscal period ended on the Statement Date. The Company had, on the
Statement Date, no known liabilities, direct or indirect, fixed or
contingent, matured or unmatured, or liabilities for taxes, long-term
leases or unusual forward or long-term commitments not disclosed by,
or reserved against in, said balance sheet and related statements,
except as heretofore disclosed to the Bank in writing, and except for
the Bank's extension(s) of credit to the Company and its Subsidiaries.
Except for financial statements prepared for interim periods between
the fiscal year-end, all financial statements were prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved. Since the Statement Date, there has been no material
adverse change in the business, operations, assets or financial
condition of the Company, nor is the Company aware of any state of
facts which (with or without notice or lapse of time or both) could
reasonably be expected to result in any such material adverse change.
(e) Litigation. There are no actions, claims, suits or
proceedings pending, or to the knowledge of the Company, threatened
against or affecting the Company in any court or before any arbitrator
or before any government commission, board, bureau or other
administrative agency which, if adversely determined, may reasonably
be expected to result in any material and adverse change in the
business, operations, assets, licenses, qualifications or financial
condition of the Company.
(f) Compliance with Laws. The Company is not in violation of any
provision of any law, or of any judgment, award, rule, regulation,
order, decree, writ or injunction of any court or public regulatory
body or authority which could reasonably be expected to have a
material adverse effect on the business, operations, assets or
financial condition, assets, licenses, qualifications or financial
condition of the Company.
(g) Regulation~U. No part of the proceeds of any Advances made
hereunder will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any
Margin Stock.
(h) Investment Company Act. The Company is not an "investment
company," or a company controlled by an "investment company," within
the meaning of the Investment Company Act of 1940, as amended.
(i) Payment of Taxes. The Company has filed or caused to be filed
all federal, state, and local income, excise, property and other tax
returns with respect to the operations of the Company, which are
required to be filed, all such returns are true and correct in all
material respects, and the Company has paid or caused to be paid all
taxes as shown on such returns or on any assessment to the extent that
such taxes have become due, except in cases where the Company has
disputed in good faith the amount of said taxes.
(j) Agreements. The Company is not a party to any agreement,
instrument or indenture or subject to any restriction materially and
adversely affecting its business, operations, assets or financial
condition, except as disclosed in the financial statements described
in Section~5.1(d) hereof. The Company is not in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement, instrument, or
indenture which default could reasonably be expected to have a
material adverse effect on the business, operations, properties or
financial condition of the Company. No holder of any indebtedness of
the Company has given notice of any asserted default thereunder, and
no liquidation or dissolution of the Company and no receivership,
insolvency, bankruptcy, reorganization or other similar proceedings
relative to the Company or any of its properties is pending, or to the
knowledge of the Company, threatened.
(k) Title to Properties. The Company or the applicable Company
Subsidiary has good, valid, insurable (in the case of real property)
and marketable title to all material portions of its properties and
assets (whether real or personal, tangible or intangible) reflected on
the financial statements described in Section~5.1(d) hereof, except
for such properties and assets as have been disposed of since the date
of such financial statements as no longer used or useful in the
conduct of its business or as have been disposed of in the ordinary
course of business, and all such properties and assets are free and
clear of all Liens except as disclosed in such financial statements.
(l) ERISA. All plans ("Plans") of a type described in
Section~3(3) of ERISA in respect of which the Company is an
"Employer," as defined in Section~3(8) of ERISA, are in substantial
compliance with ERISA, and none of such Plans is insolvent or in
reorganization, has an accumulated or waived funding deficiency within
the meaning of Section~412 of the Internal Revenue Code, and the
Company has not incurred any material liability (including any
material contingent liability) to or on account of any such Plan
pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA; and no
proceedings have been instituted to terminate any such plan, and no
condition exists which presents a material risk to the Company of
incurring a material liability to or on account of any such Plan
pursuant to any of the foregoing Sections of ERISA. No Plan or trust
forming a part thereof has been terminated since September 1, 1974.
(m) Eligibility. The Company has all state and local permits,
licenses, approvals, registrations and qualifications which it is
required to have, in order to purchase, sell or service the Pledged
Mortgage Loans.
Section 5.2. By the Company Subsidiary. In order to induce the
Bank to make a Company Subsidiary Loan, each Company Subsidiary does
represent and warrant to the Bank, as of the date of each Company
Subsidiary Loan Request and each Company Subsidiary Loan, that:
(a) Organization; Good Standing; Subsidiaries. Such Company
Subsidiary is a duly organized, validly existing and in good standing
under the laws of the state of its jurisdiction of incorporation, and
is duly registered to do business in and is in good standing under the
laws of the state of its jurisdiction of incorporation, and has the
full legal power and authority to own its property and to carry on its
business as currently conducted, and is duly qualified as a foreign
corporation Company Subsidiary to do business in and is in good
standing in each jurisdiction in which the transaction of its business
makes such qualification necessary, except in jurisdictions, if any,
where a failure to be in good standing has no material adverse effect
on the business, operations, assets or financial condition of the
Company Subsidiary. Such Company Subsidiary has no Subsidiaries.
(b)Authorization and Enforceability. Such Company Subsidiary has
the power and authority to execute, deliver and perform this
Agreement, and all other documents contemplated thereby. The
execution, delivery and performance by such Company Subsidiary of the
Note, this Agreement and all other documents contemplated thereby and
the making of the borrowing thereunder, have been duly and validly
authorized by all necessary corporate action on the part of such
Company Subsidiary (none of which actions have been modified or
rescinded, and all of which actions are in full force and effect) and
do not and will not conflict with or violate any provision of law or
of the articles of organization, bylaws or operating agreement of such
Company Subsidiary, conflict with or result in a breach of or
constitute a default or require any consent under, or result in the
creation of any Lien upon any property or assets of such Company
Subsidiary (other than pursuant to this Agreement), or result in or
require the acceleration of any indebtedness of such Company
Subsidiary pursuant to any agreement, instrument or indenture to which
such Company Subsidiary is a party or by which such Company Subsidiary
or its property may be bound or affected. This Agreement, and all
other documents contemplated hereby constitute legal, valid, and
binding obligations of such Company Subsidiary enforceable in
accordance with their respective terms, except as limited by
bankruptcy, insolvency or other similar laws affecting the enforcement
of creditors' rights and by general principles of equity.
(c) Approvals. The execution and delivery of the Note, this
Agreement, and all other documents contemplated thereby and the
performance of such Company Subsidiary's obligations thereunder do not
require any license, consent, approval or other action of any state or
federal agency or governmental or regulatory authority.
(d) Financial Condition. Any balance sheet of such Company
Subsidiary as at the Statement Date, and the related statements of
income and cash flows for the fiscal year ended on the Statement Date,
theretofore furnished to the Bank, fairly present the financial
condition of such Company Subsidiary as at the Statement Date and the
results of its operations for the fiscal period ended on the Statement
Date. Such Company Subsidiary had, on the Statement Date, no known
liabilities, direct or indirect, fixed or contingent, matured or
unmatured, or liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against
in, said balance sheet and related statements except as theretofore
disclosed to the Bank in writing, and except for the Bank's
extension(s) of credit to such Company Subsidiary. Except for
financial statements prepared for interim periods between the fiscal
year end, all financial statements were prepared in accordance with
GAAP applied on a consistent basis throughout the periods involved.
Since the Statement Date, there has been no material adverse change in
the business, operations, assets or financial condition of such
Company Subsidiary, nor is such Company Subsidiary aware of any state
of facts which (with or without notice or lapse of time or both) would
or could result in any such material adverse change.
(e) Litigation. There are no actions, claims, suits or
proceedings pending, or to the knowledge of such Company Subsidiary,
threatened against or affecting such Company Subsidiary in any court
or before any arbitrator or before any government commission, board,
bureau or other administrative agency which, if adversely determined,
may reasonably be expected to result in any material and adverse
change in the business, operations, assets, licenses, qualifications
or financial condition of such Company Subsidiary.
(f) Compliance with Laws. Such Company Subsidiary is not in
violation of any provision of any law, or of any judgment, award,
rule, regulation, order, decree, writ or injunction of any court or
public regulatory body or authority which might have a material
adverse effect on the business, operations, assets or financial
condition, assets, licenses, qualifications or financial condition of
such Company Subsidiary.
(g) Regulation~U. No part of the proceeds of any Advance will be
used to purchase or carry any Margin Stock or to extend credit to
others for the purpose of purchasing or carrying any Margin Stock.
(h) Investment Company Act. Such Company Subsidiary is not an
"investment company," or a company controlled by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended.
(i) Payment of Taxes. Such Company Subsidiary has filed or caused
to be filed all federal, state, and local income, excise, property and
other tax returns with respect to the operations of such Company
Subsidiary, which are required to be filed, all such returns are true
and correct in all material respects, and such Company Subsidiary has
paid or caused to be paid all taxes as shown on such returns or on any
assessment to the extent that such taxes have become due, except in
cases where such Company Subsidiary has disputed in good faith the
amount of said taxes.
(j) Agreements. Such Company Subsidiary is not a party to any
agreement, instrument or indenture or subject to any restriction
materially and adversely affecting its business, operations, assets or
financial condition, except as disclosed in the financial statements
described in Section~5.2(d). Such Company Subsidiary is not in default
in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement,
instrument, or indenture which default could reasonably be expected to
have a material adverse effect on the business, operations, properties
or financial condition of such Company Subsidiary. No holder of any
indebtedness of such Company Subsidiary has given notice of any
asserted default thereunder, and no liquidation or dissolution of such
Company Subsidiary and no receivership, insolvency, bankruptcy,
reorganization or other similar proceedings relative to such Company
Subsidiary or any of its properties is pending, or to the knowledge of
such Company Subsidiary, threatened.
(k) Title to Properties. Such Company Subsidiary has good, valid,
insurable (in the case of real property) and marketable title to all
material portions of its properties and assets (whether real or
personal, tangible or intangible) reflected on the financial
statements described in Section~5.2(d), except for such properties and
assets as have been disposed of since the date of such financial
statements as no longer used or useful in the conduct of its business
or as have been disposed of in the ordinary course of business, and
all such properties and assets are free and clear of all Liens except
as disclosed in such financial statements.
(l) Eligibility. Such Company Subsidiary has all state and local
permits, licenses, approvals, registrations and qualifications which
it is required to have, in order to purchase or sell Pledged Mortgage
Loans.
(m) Security Interest. No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or
regulatory body is required (and has not been obtained, delivered or
filed, as applicable) either (i)~for the grant by such Company
Subsidiary of the security interest granted under this Agreement or
for the execution, delivery or performance of this Agreement by such
Company Subsidiary or (ii)~for the perfection of or the exercise by
the Bank of its rights and remedies under this Agreement, other than
the filing of a financing statement.
Section 5.3 Special Representations Concerning Collateral. The
Company and each Company Subsidiary shall represent and warrant to the
Bank as of the date of this Agreement and as of the date of the
Advance Request and of the Advance, that:
(i) The Company Subsidiary owns the Collateral free and clear of
any Lien, except for the security interest created by this Agreement.
No financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of Bank relating to this
Agreement. The Company Subsidiary has no trade names.
(ii) Except as is disclosed to Bank in writing, to the best of
Company and Company Subsidiary's knowledge based upon due diligence
conducted by the Company and/or Company Subsidiary, each Mortgage Loan
conforms in all material respects to the requirements and the
specifications set forth in the attached Exhibit~C constituting the
Underwriting Standards.
(iii) The Mortgage Loan Documents have been duly executed by the
mortgagor and create valid and legally binding obligations of the
mortgagor, enforceable in accordance with their terms, except as may
be limited by bankruptcy or other similar laws affecting the
enforcement of creditors' rights generally, and general principles of
equity, and to the knowledge of the Company Subsidiary there are no
rights of rescission, set-offs, counterclaims or other defenses with
respect thereto. To the best knowledge of the Company and Company
Subsidiaries, other than home equity line of credit loans, the full
original principal amount of each Mortgage Loan (net of any discounts)
has been fully advanced or disbursed to the mortgagor named therein.
To the best knowledge of the Company and the Company Subsidiaries,
other than home equity line of credit loans, there is no requirement
for future advances and except for Mortgage Loans insured under
Section~203(k) of the National Housing Act, any and all requirements
as to completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefore have been satisfied.
(iv) Except as is disclosed to Bank in writing, to the best of
the Company and Company Subsidiary's knowledge based upon due
diligence conducted by the Company and/or the Company Subsidiary, each
of the Mortgage Loans has been originated, made and serviced in
material compliance with all industry standards, applicable Investor
and Insurer requirements and all applicable federal, state and local
statutes, regulations and rules, including, without limitation, the
Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z
thereunder, the Federal Fair Credit Reporting Act, the Federal Equal
Credit Opportunity Act, the Federal Real Estate Settlement Procedures
Act of 1974, as amended, and Regulation~X thereunder, the Home
Ownership and Equity Protection Act of 1994, as amended, and all
applicable usury, licensing, real property, consumer protection and
other laws.
(v) Except as is disclosed to Bank in writing, to the best of the
Company and Company Subsidiary's knowledge based upon due diligence
conducted by the Company and/or the Company Subsidiary, no Mortgage
Loan is a "high cost mortgage" as defined in Section 152(a) of the
Home Ownership and Equity Protection Act of 1994. Further, no Mortgage
Loan is "high cost home loan" or other such corresponding term within
the meaning of corresponding state laws, including but not limited to,
the Georgia Fair Lending Act, the New York State Anti-Predatory
Lending Law, and the New Jersey Homeownership Security Act.
(vi) Reserved
(vii) Reserved
(viii) A title opinion or a valid and enforceable title policy
currently in full force and effect has been issued for each Mortgage
Loan which is a first mortgage lien, and in the case of title
insurance, in an amount not less than the original principal amount of
such Mortgage Loan, and which title opinion opines or which title
policy insures that the Mortgage relating thereto is either (i)~a
valid first lien on the property therein described and that the
mortgaged property is free and clear of all encumbrances and liens
having priority over the first lien of the Mortgage except for taxes
not yet due and payable and minor title irregularities that do not
have a material adverse effect on the use or marketability of the
mortgaged property, and otherwise in compliance with the requirements
of the applicable Investor; or (ii)~if the Mortgage Loan is insured
under Title I of the National Housing Act, a valid second lien on the
property therein described and that the mortgaged property is free and
clear of all encumbrances and liens (other than the first lien) having
priority over the second lien of the Mortgage except for taxes not yet
due and payable and minor title irregularities that do not have a
material adverse effect on the use or marketability of the mortgaged
property, and otherwise in compliance with the requirements of the
applicable Investor.
(ix) All escrow/custodial accounts have been established in
accordance with the requirements of FHA, VA and the applicable
Investor and Insurer and all other applicable laws and by the terms of
the related Mortgages.
(x)To the best of the Company and/or Company Subsidiary's
knowledge, the Company, Company Subsidiary, all prior servicers and,
if different, the originating mortgagee, have performed all
obligations required of them to be performed under or pursuant to each
of the servicing contracts and related requirements of the applicable
Investor and Insurer and each other document or agreement relating to
the Mortgage Loans by which the Company and/or Company Subsidiary is
bound, and no event has occurred and is continuing which, under the
provisions of any such servicing contracts and related requirements of
the applicable Investor or other document or agreement, but for the
passage of time or in, giving of notice, or both, would constitute an
event of default thereunder.
(xi) Any and all payments made with respect to the individual
Mortgage Loans have been and will be applied to such Mortgage Loan in
accordance with the terms of the Mortgage Note and Mortgage evidencing
and securing that Mortgage Loan. The books, records, accounts and
reports of the Company and the Company Subsidiary with respect to the
Mortgage Loans and servicing contracts have been and will be prepared
and maintained in accordance with all applicable Investor and Insurer
requirements, if any.
Article VI
Affirmative Covenants
Section 6.1. Of the Company. The Company agrees that so long as
the Commitment is outstanding or there remains any obligation of the
Company or any Company Subsidiary to be paid or performed hereunder or
under any Note, the Company shall:
(a) Payment of Note. Punctually cause to be paid by the Company
Subsidiary the principal and interest on and all other amounts due and
payable hereunder and under the Note in accordance with the terms
hereof and thereof.
(b) Financial Statements and Other Reports. Deliver or cause to
be delivered or make available to the Bank:
(i) Upon reasonable request by the Bank, as soon as available and
in any event within thirty (30) days after each calendar quarter,
statements of income and cash flows of the Company for the immediately
preceding quarter, and related balance sheet as of the end of the
immediately preceding quarter, all in reasonable detail and certified
by the chief financial officer or other appropriate officer of the
Company, subject, however, to year-end audit adjustments.
(ii) As soon as available and in any event within one hundred
twenty~(120) days after the close of each fiscal year: original
independently audited financial statements of the Company for the most
recent fiscal year-end (the "Statement Date") containing a balance
sheet and related statements of income and retained earnings and
changes in financial position for the period ended on the Statement
Date, all prepared in accordance with GAAP applied on a basis
consistent with prior periods and reasonably acceptable to the Bank
and accompanied by an opinion of an accounting firm reasonably
satisfactory to the Bank, or other independent public accountants of
recognized standing selected by the Company and acceptable to the
Bank, as to said financial statements and a certificate signed by the
chief financial officer or other appropriate officer of the Company
stating that said financial statements fairly present the financial
condition and results of operations of the Company as at the end of,
and for, such year.
(iii) Together with each delivery of financial statements
pursuant to Sections~6.1(b) (i) and (ii) hereof, an officer's
certificate stating that the signatory or signatories thereto have
reviewed the terms of this Agreement and have made, or caused to be
made under their supervision, a review in reasonable detail of the
transactions and conditions of the Company during the accounting
period covered by such financial statements and that such review has
not disclosed the existence during or at the end of such accounting
period, and that the signatory or signatories thereto do not have
knowledge of the existence as of the date of the Officer's
Certificate, of any Default or if any Default existed or exists,
specifying the nature and period of the existence thereof and what
action the Company has taken, is taking and proposes to take with
respect thereto.
(iv) Such other reports in respect of the Mortgage Loans pledged
as collateral, in such detail and at such times as the Bank in its
reasonable discretion may request at any time or from time to time.
(v) Copies of all regular or periodic financial and other
reports, if any, which the Company shall file with the Securities and
Exchange Commission or any governmental agency successor thereto.
(vi) Upon request by the Bank, copies of audits, examinations and
reports concerning the operations of the Company from any Investor,
Insurer or licensing authority to the extent not subject to
restrictions on disclosure.
(vii) From time to time, with reasonable promptness, such further
information regarding the business, operations, properties or
financial condition of the Company or of any one or more of Company
Subsidiaries as the Bank may reasonably request.
Except for financial statements and reports prepared for interim
periods between the fiscal year end, all financial statements and
reports furnished to the Bank hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent with that applied
in preparing the financial statements as at, and for the period ended,
the Statement Date (except to the extent otherwise required to conform
to good accounting practice).
(c)Maintenance of Existence; Conduct of Business. Preserve and
maintain its corporate existence in good standing and all of its
rights, privileges, licenses, qualifications and franchises necessary
or desirable in the normal conduct of its business, including, without
limitation, as described under Section~5.1(n) hereof; and make no
material change in the nature or character of its business or engage
in any business in which it was not engaged on the date of this
Agreement.
(d) Compliance with Applicable Laws. Comply with the requirements
of all applicable laws, rules, regulations and orders of any
governmental authority and customary industry standards, a breach of
which could reasonably be expected to materially adversely affect its
business, operations, assets, or financial condition or which could
reasonably be expected to materially adversely impair the ability of
Company to perform its obligation hereunder, except where contested in
good faith and by appropriate proceedings.
(e) Inspection of Books, Records, Systems, Properties, Advances,
Mortgage Loans, and Collateral. Permit authorized representatives of
the Bank, its parent company or affiliates, upon prior notice to the
Company, (i) to discuss the business, operations, assets and financial
condition of the Company and its Subsidiaries with their officers and
employees, (ii) to examine their books, records, information and
service systems and properties, and make copies or extracts thereof
subject to applicable laws with respect to confidentiality of customer
records, including without limitation access to Company Subsidiaries'
and the custodian's books, records, systems, properties, and
documents, (iii) to examine and audit the Company Subsidiaries' Loan
accounts, individual Mortgage Loans, and related documentation and
Collateral, and (iv) for those purposes, to visit the Company's and
all Company Subsidiaries' offices, all at such reasonable times as the
Bank may request. The Company shall provide its internal and
independent accountants with a copy of this Agreement promptly after
the execution hereof and shall instruct them to answer candidly and
fully any and all questions that the officers of the Bank or any
authorized representatives of the Bank may address to them in
reference to the financial condition or affairs of the Company and the
Company Subsidiaries. In addition to the foregoing, the Company shall
provide, or cause to be provided, live, "real time" access to the data
system(s) for all records maintained by the Company and/or each
Company Subsidiary related to the Mortgage Loans. The purposes or uses
for which the Bank may use the right of access to such data system
records, and the rights of inspection, examination, and audit set
forth in this Section shall include, without limitation, the
following: (i) to ensure that the Company Subsidiary Loans, their
administration, and their payment processing remain in compliance with
the terms of this Agreement; (ii) to enable the Bank (w) to
periodically sample or test the flow of payments received from its
Mortgage Loan obligors to ensure that monies are being received from
its Mortgage Loan obligors and not from other sources, (x) to see if
there is any rise in defaults and bankruptcy filings among its
Mortgage Loan obligors, (y) to confirm that payments on particular
Mortgage Loans are being properly credited to the related Company
Subsidiary Loan, and (z) to determine the extent to which individual
Company Subsidiary Mortgage Loan "pools" are being supported by
payments from other Company Subsidiary Mortgage Loan pools, and to the
extent to which such payments are correspondingly supporting other
outstanding Company Subsidiary Loans issued under this Agreement; and
(iii) to enable the Bank to periodically determine the value of the
Bank's Collateral from time to time and to ensure that the Collateral
continues to meet the Bank's underwriting standards throughout the
life of those Mortgage Loans.
(f) Notice. Give prompt written notice to the Bank of (i)~any
action, suit or proceeding instituted against the Company in any
federal or state court or before any commission or other regulatory
body (federal, state or local, domestic or foreign) seeking specified
damages of One Hundred Thousand Dollars ($100,000) or more in a
writing containing the details thereof, (ii)~the filing, recording or
assessment of any federal, state or local tax lien against it, or any
of its assets, which has a material adverse affect on the Company
(iii)~the occurrence of any Default or Event of Default hereunder,
(iv)~[Reserved], (v)~the suspension, revocation or termination of any
existing credit or Investor relationship made to the Company to
facilitate the sale and/or origination of residential mortgages which
has a material adverse affect on the Company, (vi)~the transfer or
loss of any servicing contract to which the Company is a party, or
which is held for the benefit of the Company, and the reason for such
transfer or loss, if known to the Company, which has a material
adverse affect on the Company (vii)~any demand by any Investor or
Insurer for either the repurchase of a Mortgage Loan or
indemnification which has a material adverse affect on the Company,
and (viii)~any other action, event or condition of any nature which
has a material adverse effect upon the business, operations, assets,
or financial condition of the Company or which, with or without notice
or lapse of time or both, would constitute a default under any other
material agreement, instrument or indenture to which the Company is a
party or to which the Company, its properties or assets may be
subject.
(g) Payment of Debt, Taxes, etc. Pay and perform all obligations
of the Company promptly and in accordance with the terms thereof and
pay and discharge or cause to be paid and discharged promptly all
taxes, assessments and governmental charges or levies imposed upon the
Company or upon its income, receipts or properties before the same
shall become past due, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might become a
Lien or charge upon such properties or any part thereof; provided,
however, that the Company shall not be required to pay taxes,
assessments or governmental charges or levies or claims for labor,
materials or supplies for which the Company shall have obtained an
adequate bond or adequate insurance or which are being contested in
good faith and by proper proceedings which are being reasonably and
diligently pursued.
(h) Insurance. Maintain (i)~errors and omissions insurance or
mortgage impairment insurance and blanket bond coverage, with such
companies and in such amounts as satisfy prevailing FNMA, GNMA or
FHLMC requirements applicable to a qualified mortgage originating
institution, and (ii)~liability insurance and fire and other hazard
insurance on its properties, with responsible insurance companies, in
such amounts and against such risks as is customarily carried by
similar businesses operating in the same vicinity, and (iii)~within
thirty (30) days after notice from the Bank, will obtain such
additional insurance as the Bank shall reasonably require, all at the
sole expense of the Company. Copies of all such policies shall be
furnished to the Bank without charge upon the reasonable request of
the Bank.
(i) Purchased Loans. Indemnify and hold the Bank harmless from
and against any loss, including reasonable attorneys' fees and costs,
attributable to the failure of any seller of the Mortgage Loans to the
Company or the Company Subsidiary, or any escrow agent, to comply with
the disbursement or instruction letter or letters of the Company, the
Company Subsidiary or of the Bank relating to Mortgage Loans purchased
by the Company or the Company Subsidiary with an Advance under a
Company Subsidiary Loan.
(j) Other Loan Obligations. Perform in all material respects all
obligations under the terms of each loan agreement, note, mortgage,
security agreement or debt instrument by which the Company Subsidiary
is bound or to which any of its property is subject, and will promptly
notify the Bank in writing of the cancellation or reduction of any of
its other mortgage warehousing lines of credit or agreements with any
other lender.
(k) Use of Proceeds of Advances. Cause the proceeds of each
Company Subsidiary Loan to be used solely for the purpose of financing
the purchase or origination of Mortgage Loans or to refinance Company
Subsidiary Loans.
(l) Due Diligence by Bank. Assist the Bank in the performance of
the Bank's due diligence in response to Company Subsidiary Loan
Requests in order for the Bank to gain assurance that the terms and
conditions of this Agreement will be met, and that the product
standards set forth in Exhibit C will be satisfied, with respect to
the requested Company Subsidiary Loan, and also shall cause its
Company Subsidiaries to provide such assistance.
(m) Due Diligence by Company. Perform reasonable due diligence
when agreeing to purchase Mortgage Loans to be assigned to Company
Subsidiaries and to be financed by Advances from the Bank in order to
ensure that those Mortgage Loans comply with the terms and conditions
of this Agreement and with the product standards set forth in Exhibit
C.
(n) Loan Purchase Agreement. Use its best commercially reasonable
efforts, reasonably and in good faith, to include covenants,
representations, and warranties covering the following items in its
Mortgage Loan purchase agreements with its sellers, and cause Company
Subsidiaries to use the same efforts in their purchase agreements with
their sellers: (i) standard representations and warranties as to the
due organization of the seller and the seller's authorization to sell
the loans; (ii) representations and warranties regarding the mortgage
loans being purchased, and the documentation for the same consistent
with general commercial standards, but in any event, having
representations and warranties consistent with the requirements for
Mortgage Loans set forth in this Agreement; (iii) standard remedies
for breach of contract; (iv) covenant that the seller will buy back
from the Company Subsidiary (or any assignee, including the Company
Subsidiary) any mortgage loan which does not comply with
representations and warranties regarding it; and (vi) covenant that
the seller will indemnify and hold the Company Subsidiary, and any
assignee, including the Company Subsidiary, harmless against any and
all damages which the indemnified party may suffer on account of any
mortgage loan which does not meet representations and warranties.
(o) Minimum Net Worth. The Company and its Subsidiaries shall
together maintain a minimum Net Worth of not less than $10,000,000.
(p) Administrative Services Agreement. Within a reasonable period
of time following the execution of the Agreement, the Company shall
enter into and maintain in effect an Administrative Services Agreement
with each Company Subsidiary, reasonably acceptable to the Bank, under
which the Company provides the Company Subsidiary with any and all
administrative, document, and payment processing services which the
Company Subsidiary may need in connection with its business, and under
which the Company Subsidiary compensates the Company for the provision
of those services.
(q) Custodial Agreement. Maintain in effect the Custodial
Agreement, or another custodial agreement with another custodian with
substantially the same terms as the Custodial Agreement. The Company
shall cause each Company Subsidiary to become a party to the Custodial
Agreement or other custodial agreement.
(r) Company Subsidiary Compliance. The Company shall cause each
Company Subsidiary to full comply with the terms of this Agreement,
its Note, and all related agreements or instruments executed and
delivered to Bank in connection herewith or in connection with a
Company Subsidiary Loan.
Section 6.2. Of the Company Subsidiary. Each Company Subsidiary
that becomes a party to this Agreement agrees that so long as the
Commitment or its Company Subsidiary Loan is outstanding or there
remains any obligations of the Company Subsidiary to be paid or
performed under its Note, or any of its Pledged Mortgage Loans remain
subject to this Agreement, the Company Subsidiary shall:
(a) Payment of Note. Punctually pay the principal and interest on
and all other amounts due and payable under this Agreement or the Note
in accordance with the terms thereof.
(b) Reports. Make available, deliver or cause to be delivered to
the Bank such reports as set forth below:
(i) Such other reports in respect of the Pledged Mortgage Loans,
in such detail and at such times as the Bank in its reasonable
discretion may request at any time or from time to time.
(iii) Upon request, make available to the Bank copies of audits,
examinations and reports concerning the operations of the Company
Subsidiary from any Investor, Insurer or licensing authority to the
extent not subject to restrictions on disclosure.
(iv) Make available to the Bank from time to time, with
reasonable promptness, such further information regarding the
business, operations, properties or financial condition of the Company
Subsidiary as the Bank may reasonably request.
All financial statements and reports furnished to the Bank hereunder
shall be prepared in accordance with GAAP, applied on a basis
consistent with that applied in preparing the financial statements as
at, and for the period ended, the statement date (except to the extent
otherwise required to conform to good accounting practice).
(c) Maintenance of Existence; Conduct of Business. Preserve and
maintain its Company Subsidiary existence in good standing and all of
its rights, privileges, licenses, qualifications and franchises
necessary or desirable in the normal conduct of its business,
including, without limitation, its eligibility as an approved lender
and issuer as described under Section~5.2(l) hereof; and make no
material change in the nature or character of its business or engage
in any business in which it was not engaged on the date of this
Agreement.
(d) Compliance with Applicable Laws. Comply with the requirements
of all applicable laws, rules, regulations and orders of any
governmental authority and customary industry standards, a breach of
which could reasonably be expected to materially adversely affect its
business, operations, assets, or financial condition or which could
reasonably be expected to materially adversely impair the ability of
Company Subsidiary to perform its obligations under this Agreement and
the Note, except where contested in good faith and by appropriate
proceedings.
(e) Inspection of Books, Records, Systems, and Properties. Permit
authorized representatives of the Bank, its parent Company Subsidiary
or affiliates, upon prior notice to the Company Subsidiary, (i) to
discuss the business, operations, assets and financial condition of
the Company Subsidiary with the officers and employees, (ii) to
examine its books, records, information and service systems, and
properties, and make copies or extracts thereof subject to applicable
laws with respect to confidentiality of customer records, including
without limitation access to the Custodian's books, records, systems,
properties, and documents, (iii) to examine and audit its Company
Subsidiary Loan Advances, individual Pledged Mortgage Loans, and
related documentation and Collateral, and (iv) for those purposes, to
visit the Company Subsidiary's offices, all at such reasonable times
as the Bank may request. The Company Subsidiary shall provide its
internal and independent accountants with a copy of this Agreement
promptly after the execution thereof and shall instruct them to answer
candidly and fully any and all questions that the officers of the Bank
or any authorized representatives of the Bank may address to them in
reference to the financial condition or affairs of the Company
Subsidiary. The purposes or uses for which the Bank may use the right
of inspection, examination, and audit set forth in this Section shall
include, without limitation, the following: (i) to ensure that the
Company Subsidiary's Loan, its administration, and its payment
processing remain in compliance with the terms of this Agreement
generally; (ii) to enable the Bank (w) to periodically sample or test
the flow of payments received from its Pledged Mortgage Loan obligors
and not from other sources, (x) to see if there is any rise in
bankruptcy filings among its Pledged Mortgage Loan obligors, (y) to
see if payments on particular Pledged Mortgage Loans are being
credited to that Company Subsidiary's Loan properly, and (z) to
determine the extent to which such payments are supporting other
outstanding Company Subsidiary Loans issued under this Agreement; and
(iii) to enable the Bank to periodically apply its collateral
eligibility standards to the Company Subsidiary's Pledged Mortgage
Loans in order to determine the value of the Bank's Collateral and to
ensure that the Collateral continues to meet the Bank's underwriting
standards throughout the life of those Pledged Mortgage Loans.
(f) Notice. Give prompt written notice to the Bank of (i)~any
action, suit or proceeding instituted against the Company Subsidiary
in any federal or state court or before any commission or other
regulatory body (federal, state or local, domestic or foreign) seeking
specified damages of One Hundred Thousand Dollars ($100,000) or more
in a writing containing the details thereof, (ii)~the filing,
recording or assessment of any federal, state or local tax lien
against it, or any of its assets, which has a material adverse affect
on the Company Subsidiary (iii)~the occurrence of any Default or Event
of Default hereunder, (iv)~the actual or threatened suspension,
revocation or termination of the Company Subsidiary's eligibility, in
any respect, as an approved lender, and issuer as described under
Section~5.1(m) hereof which has a material adverse affect on the
Company Subsidiary, (v)~the suspension, revocation or termination of
any existing credit or Investor relationship made to the Company
Subsidiary to facilitate the sale and/or origination of residential
mortgages which has a material adverse affect on the Company
Subsidiary, (vi)~the transfer or loss of any servicing contract to
which the Company Subsidiary is a party, or which is held for the
benefit of the Company Subsidiary, and the reason for such transfer or
loss, if known to the Company Subsidiary, which has a material adverse
affect on the Company Subsidiary (vii)~any demand by any Investor or
Insurer for either the repurchase of a Pledged Mortgage Loan or
indemnification which has a material adverse affect on the Company
Subsidiary, and (viii)~any other action, event or condition of any
nature which has a material adverse effect upon the business,
operations, assets, or financial condition of the Company Subsidiary
or which, with or without notice or lapse of time or both, would
constitute a default under any other material agreement, instrument or
indenture to which the Company Subsidiary is a party or to which the
Company Subsidiary, its properties or assets may be subject.
(g) Payment of Debt, Taxes, etc. Pay and perform all obligations
of the Company Subsidiary promptly and in accordance with the terms
thereof and pay and discharge or cause to be paid and discharged
promptly all taxes, assessments and governmental charges or levies
imposed upon the Company Subsidiary or upon its income, receipts or
properties before the same shall become past due, as well as all
lawful claims for labor, materials and supplies or otherwise which, if
unpaid, might become a Lien or charge upon such properties or any part
thereof; provided, however, that the Company Subsidiary shall not be
required to pay taxes, assessments or governmental charges or levies
or claims for labor, materials or supplies for which the Company
Subsidiary shall have obtained an adequate bond or adequate insurance
or which are being contested in good faith and by proper proceedings
which are being reasonably and diligently pursued.
(h) Insurance. Maintain~or cause to be maintained liability
insurance and fire and other hazard insurance on its properties, with
responsible insurance companies, in such amounts and against such
risks as is customarily carried by similar businesses operating in the
same vicinity, and (iii)~within thirty (30) days after notice from the
Bank, will obtain such additional insurance as the Bank shall
reasonably require, all at the sole expense of the Company Subsidiary.
Copies of all such policies shall be furnished to the Bank without
charge upon request of the Bank.
(j) Purchased Loans. Indemnify and hold the Bank harmless from
and against any loss, including reasonable attorneys' fees and costs,
attributable to the failure of any seller of the Pledged Mortgage
Loans to the Company or the Company Subsidiary, or any escrow agent,
Company Subsidiary to comply with the disbursement or instruction
letter or letters of the Company, the Company Subsidiary or of the
Bank relating to Mortgage Loans purchased by the Company or the
Company Subsidiary with the Company Subsidiary Loan under this
Agreement.
(k) Other Loan Obligations. Perform in all material respects all
obligations under the terms of each loan agreement, note, mortgage,
security agreement or debt instrument by which the Company Subsidiary
is bound or to which any of its property is subject, and will promptly
notify the Bank in writing of the cancellation or reduction of any of
its other mortgage warehousing lines of credit or agreements with any
other lender.
(l) Use of Proceeds of Advances. Use the proceeds of the Company
Subsidiary Loan solely for the purpose of financing the purchase or
origination of Pledged Mortgage Loans.
(m) Administrative Services Agreement. Within a reasonable period
of time following the execution of the Agreement, the Company
Subsidiary shall enter into and maintain in effect an Administrative
Services Agreement with the Company, reasonably acceptable to the
Bank, under which the Company provides the Company Subsidiary with any
and all administrative, document, and payment processing services
which the Company Subsidiary may need in connection its business and
under which the Company compensates the Company Subsidiary for the
provision of those services.
(o) [Reserved]
(p) Due Diligence by Bank. Assist the Bank in the performance of
the Bank's due diligence in response to the Company Subsidiary Loan
Request by the Company Subsidiary in order for the Bank to gain
assurance that the terms and conditions of this Agreement will be met,
and that the product standards set forth in Exhibit C will be
satisfied, with respect to the requested Advance.
6.3 Special Affirmative Covenants Concerning Collateral.
(i) The Company and/or the Company Subsidiary warrants and will
defend the right, title and interest of the Bank in and to the Pledged
Mortgage Loans against the claims and demands of all persons
whomsoever.
(ii) The Company and/or the Company Subsidiary shall service or
cause to be serviced in all material respects all Pledged Mortgage
Loans in accordance with the standard requirements of the issuers of
the respective Purchase Commitments covering the same and all
applicable governmental requirements, including without limitation
taking all actions necessary to enforce the obligations of the
obligors under such Pledged Mortgage Loans. The Company Subsidiary
shall hold all escrow funds collected in respect of Pledged Mortgage
Loans in trust, without commingling the same with non-custodial funds,
and apply the same for the purposes for which such funds were
collected.
(iii) The Company and/or the Company Subsidiary shall also
execute and deliver to the Bank such instruments of sale, pledge or
assignment or transfer, and such powers of attorney, as reasonably
required by the Bank, and shall do and perform all matters and things
necessary or desirable to be done or observed, for the purpose of
effectively creating, maintaining and preserving the security and
benefits intended to be afforded the Bank under this Agreement. The
Bank shall have all the rights and remedies of a secured party under
the Uniform Commercial Code of the State of New York, or any other
applicable law, in addition to all rights provided for herein.
(iv) The Company and/or the Company Subsidiary will promptly
comply in all material respects with the terms and conditions of all
Purchase Commitments, and all extensions, renewals and modifications
or substitutions thereof or thereto. The Company and/or the Company
Subsidiary will cause to be delivered to the Investor the Pledged
Mortgage Loans to be sold under each Purchase Commitment not later
than the earlier of three (3) Business Days prior to the expiration
thereof or three (3) Business Days prior to the deadline for
acquisition of the Pledged Mortgage Loan by the Investor thereunder.
(v) The Company and/or the Company Subsidiary shall maintain, at
its principal office, or in the office of the custodian under the
Custodial Agreement, or in the office of a computer service bureau
engaged by the Company and/or the Company Subsidiary or by the
custodian and approved by the Bank, and, upon request, shall make
available to the Bank the originals, or copies in any case where the
original has been delivered to the Bank, or to an Investor, of its
Mortgage Notes and Mortgages included in Pledged Mortgage Loans,
Purchase Commitments, and all related Pledged Mortgage Loan documents
and instruments, and all files, surveys, certificates, correspondence,
appraisals, computer programs, tapes, discs, cards, accounting records
and other information and data relating to the Collateral.
(vi) Any and all payments made with respect to the individual
Pledged Mortgage Loans have been will be applied to such Pledged
Mortgage Loan in accordance with the terms of the Mortgage Note and
Mortgage evidencing and securing that Pledged Mortgage Loan, and the
books, records, accounts and reports of the Company and/or the Company
Subsidiary with respect to the Pledged Mortgage Loans and servicing
contracts have will be prepared and maintained in accordance with all
applicable Investor and Insurer requirements.
Article~VII
Negative Covenants
Section 7.1. Of the Company. The Company agrees that so long as the
Commitment is outstanding or there remains any obligation of the
Company or any Company Subsidiary to be paid or performed hereunder or
under any Note, the Company shall not, either directly or indirectly,
without the prior written consent of the Bank, which shall not be
unreasonably withheld:
(a) Merger; Sale of Assets; Acquisitions; Change in Control.
Except for the sale or purchase of loans in the ordinary course of the
business, liquidate, dissolve, consolidate or merge or sell, transfer
or otherwise dispose of, any substantial part of its assets, or
acquire substantially all of the assets of another, or
permit~ownership beneficially or of record of the voting stock of
Company which results in ▇▇▇▇▇▇ ▇. ▇▇▇▇ having a non-controlling
ownership interest of the voting stock of the Company. For purposes of
this section, "control" shall have the meaning set forth in Rule 12b-2
under the Exchange Act.
(b) Distributions or Payments of Company. Without the consent of
Bank, cause to be paid any dividends which exceed in the aggregate the
amount permitted in Section 2.5(a).
(c) Distributions or Payments From Company Subsidiary. Cause to
be paid to itself, or receive, or accept any payments, distributions,
or dividends from any of its Company Subsidiaries which exceed in the
aggregate the amount permitted in Section 2.5(a); provided that if a
Default has occurred and is continuing, the Bank may withhold its
consent in its reasonable discretion exercised in good faith.
(d) Special Negative Covenants Concerning Collateral. Except for
actions taken in the ordinary course of servicing Pledged Mortgage
Loans, the Company shall not do, and shall not cause or permit any
Company Subsidiary to grant any option with respect to, or pledge or
otherwise encumber (except pursuant to this Agreement or sales to
Investors for fair value) any of the Collateral or any interest
therein.
Section 7.2. Covenants Of the Company Subsidiary. Each Company
Subsidiary that becomes a party to this Agreement agrees that so long
as the Commitment or its Company Subsidiary Loan is outstanding or
there remains any obligations of the Company Subsidiary to be paid or
performed under its Note, or any of its Pledged Mortgage Loans remain
subject to this Agreement, the Company Subsidiary shall not take the
following actions which could reasonably be expected to materially and
adversely impact the Company or Company Subsidiary's ability to
perform under this Agreement, either directly or indirectly, without
the prior written consent of the Bank:
(a) Contingent Liabilities. Assume, guarantee, endorse, or
otherwise become liable for the obligation of any Person except by
endorsement of negotiable instruments for deposit or collection in the
ordinary course of business.
(b) Merger; Sale of Assets; Acquisitions; Change in Control.
Except for the sale or purchase of loans in the ordinary course of the
business, liquidate, dissolve, consolidate or merge or sell, transfer
or otherwise dispose of, any substantial part of its assets, or
acquire substantially all of the assets of another, or permit
ownership beneficially or of record of the voting stock of Company
Subsidiary which results in the Company having an ownership interest
of less than one hundred percent (100%) of the voting stock of the
Company Subsidiary.
(c) Additional Indebtedness. Create, incur, assume or suffer to
exist any indebtedness other than indebtedness permitted under the
this Agreement.
(d) Related Party Transactions. Enter into, or be a party to any
transaction with any affiliate of the Company, except for (a)~the
transactions contemplated by the this Agreement, including without
limitation, the transactions contemplated by the Administrative
Services Agreement and the servicing agreement with the Company and
(b)~to the extent not otherwise prohibited under this Agreement, other
transactions in the nature of employment contracts and directors'
fees, upon fair and reasonable terms materially no less favorable to
it than would be obtained in a comparable arm's-length transaction
with a person not an affiliate.
(e) Collateral and Agreements. Except in the ordinary course of
business, cancel or terminate any of the Collateral Documents or
Purchase Agreements to which it is party (in any capacity), or consent
to or accept any cancellation or termination of any of such
agreements, or materially amend or otherwise modify any term or
condition of any of the Collateral Documents or Purchase Agreements to
which it is party (in any capacity) or give any consent, waiver or
approval under any such agreement, or waive any default under or
breach of any of the Collateral Documents or Purchase Agreements to
which it is party (in any capacity) or take any other action under any
such agreement not required by the terms thereof, unless (in each
case) the Bank shall have consented thereto (which consent shall not
unreasonably be withheld to the extent set forth in such Collateral
Documents or Purchase Agreements); provided that no such consent shall
be required to the extent that any such action is in the ordinary
course of business of servicing the Pledged Mortgage Loans in
accordance with reasonable and customary servicing practices in the
industry for the same type of mortgage loans as the Pledged Mortgage
Loan.
(f) Investments & Subsidiaries. form, or cause to be formed, any
subsidiaries; or make or suffer to exist any loans or advances to, or
extend any credit to, or make any investments (by way of transfer of
property, contributions to capital, purchase of stock or securities or
evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any affiliate or any other person.
(g) Distributions or Payments of Company Subsidiary. Without the
consent of Bank, cause to be paid to itself, or receive, or accept any
payments or distributions from the Pledged Mortgage Loans which exceed
in the aggregate the amount permitted in Section 2.5(a).
(h) Special Negative Covenants Concerning Collateral. Except for
actions taken in the ordinary course of servicing Pledged Mortgage
Loans, grant any option with respect to, or pledge or otherwise
encumber (except pursuant to this Agreement or sales to Investors for
fair value) any of the Collateral or any interest therein.
Article VIII
Defaults; Remedies
Section~8.1. Events of Default by the Company. The occurrence of any
of the following conditions or events shall be an event of default
("Event of Default") under this Agreement:
(a) Failure of any Company Subsidiary to pay any installment of
principal and/or interest when due or required under its Note or this
Agreement, and whether at stated maturity, by acceleration, or
otherwise; or failure of the Company or any Company Subsidiary to
otherwise pay any other sum when due by the Company or such Company
Subsidiary under this Agreement or under any other agreement related
hereto, and such default shall have continued unremedied for fifteen
days; or
(b) Failure of the Company or any Company Subsidiary to pay, or
any default in the payment of any principal or interest on, any
indebtedness or in the payment of any contingent obligation which are
in the aggregate amount of One Hundred Thousand Dollars ($100,000.00)
or more; or breach or default with respect to any other material term
of any indebtedness or of any loan agreement, note, mortgage, security
agreement, indenture or other agreement relating thereto, if the
effect of such failure, default or breach is to cause, or to permit
the holder or holders thereof (or a trustee on behalf of such holder
or holders) to cause, indebtedness of the Company, the Company
Subsidiary or any other Subsidiaries of the Company in the aggregate
amount of more than One Hundred Thousand Dollars ($100,000.00) or more
to become or be declared due prior to its stated maturity; or
(c) (i) Failure of the Company to perform or comply with any term
or condition applicable to it contained in Sections 7.1 of this
Agreement, or failure of the Company Subsidiary to perform or comply
with any term or condition applicable to it contained in Sections 7.2
of this Agreement, or with any like provision contained in the Note;
or (ii) failure of the Company to perform or comply with any term or
condition applicable to it contained in Section 6.1 of this Agreement,
or failure of the Company Subsidiary to perform or comply with any
term or condition applicable to it contained in Section 6.2 of this
Agreement, or with any like provision contained in the Note after
receipt of notice of such Default from the Bank.
(d) Any of the Company's or the Company Subsidiaries'
representations or warranties made herein or in any statement or
certificate at any time given by the Company or any Company Subsidiary
in writing pursuant hereto or in connection herewith shall be false in
any material respect on the date as of which made; or
(e) The Company or any Company Subsidiary shall default in the
performance of or compliance with any term contained in this Agreement
other than those referred to above in Sections 8.1 (a), (b) or (c) and
such default shall not have been remedied or waived within thirty (30)
days after receipt of notice from the Bank of such default; or
(f) (i)~A court having jurisdiction shall enter a decree or order
for relief in respect of the Company or any Company Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not
stayed; or (ii)~any other similar relief shall be granted under any
applicable federal or state law; or a decree or order of a court
having jurisdiction for the appointment of a receiver, liquidator,
sequestrator, trustee, custodian or other officer having similar
powers over the Company or any Company Subsidiary, or over all or a
substantial part of their respective properties, shall have been
entered; or the involuntary appointment of an interim receiver,
trustee or other custodian of the Company or any Company Subsidiary
for all or a substantial part of its respective property; or the
issuance of a warrant of attachment, execution or similar process
against any substantial part of the property of the Company or of any
Company Subsidiary, and the continuance of any such events in this
clause~(ii) for sixty (60) days unless dismissed, bonded off or
discharged; or
(g) The Company or any Company Subsidiary shall have an order for
relief entered with respect to it or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion to an involuntary
case, under any such law, or shall consent to the appointment of or
taking possession by a receiver, trustee or other custodian for all or
a substantial part of its property; the making by the Company or any
Company Subsidiary of any assignment for the benefit of creditors; or
the inability or failure of the Company or any Company Subsidiary, or
the admission by the Company or any Company Subsidiary in writing of
its inability, to pay its debts as such debts become due; or
(h) Any money judgment, writ or warrant of attachment, or similar
process involving in any case an amount in excess of One Hundred
Thousand Dollars ($100,000.00) shall be entered or filed against the
Company or any Company Subsidiary or any of their respective assets
and shall remain undischarged, unvacated, unbonded or unstayed for a
period of sixty (60) days or in any event later than five (5) days
prior to the date of any proposed sale thereunder; or
(i) Any order, judgment or decree shall be entered against the
Company or any Company Subsidiary decreeing the dissolution,
liquidation or split up of the Company or any Company Subsidiary and
such order shall remain undischarged or unstayed for a period in
excess of thirty (30) days; or
(j) Any Plan maintained by the Company shall be terminated within
the meaning of Title IV of ERISA or a trustee shall be appointed by an
appropriate United States district court to administer any Plan, or
the Pension Benefit Guaranty Corporation (or any successor thereto)
shall institute proceedings to terminate any Plan or to appoint a
trustee to administer any Plan if as of the date thereof the Company's
liability (after giving effect to the tax consequences thereof) to the
Pension Benefit Guaranty Corporation (or any successor thereto) for
unfunded guaranteed vested benefits under the Plan exceeds the then
current value of assets accumulated in such Plan by more than One
Hundred and Fifty Thousand Dollars ($150,000.00) (or in the case of a
termination involving the Company as a "substantial employer" (as
defined in Section~4001(a)(2) of ERISA) the withdrawing employer's
proportionate share of such excess shall exceed such amount); or
(k) The Company as employer under a Multiemployer Plan shall have
made a complete or partial withdrawal from such Multiemployer Plan and
the plan sponsor of such Multiemployer Plan shall have notified such
withdrawing employer that such employer has incurred a withdrawal
liability in an annual amount exceeding One Hundred and Fifty Thousand
Dollars ($150,000.00); or
(l) The Company or any Company Subsidiary shall purport to
disavow its obligations hereunder or shall contest the validity or
enforceability hereof; or the Bank's security interest in any portion
of the Collateral shall become unenforceable or otherwise impaired; or
(m) An event of default shall occur under the terms of any note,
instrument or agreement evidencing, securing or related to any other
indebtedness, whether now existing or hereafter arising, of any other
Subsidiary, whether now existing or hereafter created, to Bank,
including, without limitation, any now existing or hereafter arising
indebtedness of Tribeca Lending Corporation to Bank if the effect of
such default is to cause, or to permit the Bank to cause, indebtedness
of such other Subsidiary to become or be declared due prior to its
stated maturity; provided that Bank shall have give the Company notice
of such default and such default shall have continued unremedied for
at least 5 Business Days.
Section~8.2. Remedies Relating to Events of Default. (a)~Upon the
occurrence of any Event of Default described in Sections~8.1(f) or (g)
the unpaid principal amount of and accrued interest on any obligation
owed by the Company hereunder to the Bank, and the unpaid principal
amount of and accrued interest on any and all outstanding Notes from
each Company Subsidiary and any other sums otherwise due from the
Company Subsidiaries hereunder shall automatically become due and
payable, without presentment, demand or other requirements of any
kind, all of which are hereby expressly waived by the Company and each
Company Subsidiary, and the obligation of the Bank to make Company
Subsidiary Loans or Advances there-under shall thereupon terminate.
(b) Upon the occurrence of any Event of Default other than those
described in Sections~8.1(f) or (g), the Bank may, by written notice
to the Company declare all or any portion of any obligation owed by
the Company to the Bank, and all or any portion of the unpaid
principal amount of and accrued interest on any one or more or all
outstanding Notes from any one or more of the Company Subsidiaries and
any other sums otherwise due from the Company Subsidiaries hereunder
to be due and payable whereupon the same shall forthwith become due
and payable, together with all accrued interest thereon, and the
obligation of the Bank to make Company Subsidiary Loans or advances
there-under shall thereupon terminate.
(c) Upon the occurrence of any Event of Default, the Bank may
also do any one or more or all of the following with respect to any
Collateral, whether individual items of Collateral relate directly to
a particular Company Subsidiary Loan to a Company Subsidiary, or to a
now existing or hereafter granted Company Subsidiary Loan, or
otherwise:
i) Foreclose upon or otherwise enforce its security interest in
and Lien on all of the Collateral or on any portion thereof to secure
all payments and performance of obligations owed by the Company or by
any Company Subsidiary under this Agreement or by any Company
Subsidiary under any Note.
(ii) Notify all obligors of Collateral, or on any portion
thereof, that the Collateral has been assigned to the Bank and that
all payments thereon are to be made directly to the Bank, or to such
other party as may be designated by the Bank; settle, compromise, or
release, in whole or in part, any amounts owing on the Collateral by
any such obligor or Investor, or any portion of the Collateral, on
terms acceptable to the Bank; enforce payment and prosecute any action
or proceeding with respect to any and all Collateral; and where any
such Collateral is in default, foreclose on and enforce security
interests in, such Collateral by any available judicial procedure or,
if permitted by applicable law, without judicial process and sell
property acquired as a result of any such foreclosure.
(iii) Act, or contract with a third party to act, as servicer of
all or any item of Collateral requiring servicing and perform all
obligations required in connection with Purchase Commitments, such
third party's fees to be paid by the Company.
(iv) Exercise all rights and remedies of a secured creditor under
the Uniform Commercial Code of the State of New York or the state in
which the Collateral is located, including but not limited to selling
the collateral at public or private sale. The Bank shall give the
Company not less than sixty (60) days' notice of any such public sale
or of the date after which private sale may be held. The Company
agrees that sixty (60) days' notice shall be reasonable notice. At any
such sale the Collateral may be sold as an entirety or in separate
parts, as the Bank may determine. The Bank may, without notice or
publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Bank until the selling price
is paid by the purchaser thereof, but the Bank shall not incur any
liability in case of the failure of such purchaser to take up and pay
for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. The Bank may, however,
instead of exercising the power of sale herein conferred upon it,
proceed by a suit or suits at law or in equity to collect all amounts
due upon all or any portion of the Collateral or to foreclose the
pledge and sell all or any portion of the Collateral under a judgment
or decree of a court or courts of competent jurisdiction, or both.
(v) Proceed against the Company on any obligation owed by the
Company to the Bank or proceed against any one or more Company
Subsidiary under the Notes.
(vi) Pursue any rights and/or remedies available at law or in
equity against the Company and/or the Company Subsidiaries.
(d) Notwithstanding anything herein to the contrary, upon any
sale or other disposition of the Collateral, all proceeds of such sale
or disposition will be applied among each Mortgage Pool and the
related Company Subsidiary Loans in accordance with Section 2.5(a).
(e) [Reserved]
(f) The Bank may, but shall not be obligated to, advance any sums
or do any act or thing necessary to uphold and enforce the Lien and
priority of, or the security intended to be afforded by, any Pledged
Mortgage Loan, including, without limitation, payment of delinquent
taxes or assessments and insurance premiums. All advances, charges,
costs and expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Bank in exercising any right,
power or remedy conferred by this Agreement, or in the enforcement
hereof, shall be paid by the Company or the Company Subsidiary, shall
be secured by the Collateral, and until paid, shall bear interest from
the date of expenditure at the rate of interest specified by the
obligation due to the Bank.
(g) No failure on the part of the Bank to exercise, and no delay
in exercising, any right, power or remedy provided hereunder, at law
or in equity shall operate as a waiver thereof; nor shall any single
or partial exercise by the Bank of any right, power or remedy provided
hereunder, at law or in equity preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The
remedies herein provided are cumulative and are not exclusive of any
remedies provided at law or in equity.
(h) Notice to the Company for purposes of this Section 8.2 shall
be deemed to be notice to each and every Company Subsidiary that
becomes, now or hereafter, a party to this Agreement.
Section~8.3. Application of Proceeds. Unless otherwise required
by applicable law, the proceeds of any sale or other enforcement of
the Bank's security interest in all or any part of the Collateral
shall be applied by the Bank in such order of priority as the Bank may
determine at its sole discretion, including, without limitation, the
following:
(a) To the payment of the costs and expenses of such sale or
enforcement, including reasonable compensation to the Bank's agents
and counsel, and all expenses, liabilities and advances made or
incurred by or on behalf of the Bank in connection therewith;
(b) To the payment of any other amounts due under any one or more
of the Notes (whether for principal or interest or otherwise), in such
order and manner as the Bank elects;
(c) To the payment of any other amounts due by the Company or by
any one or more of the Company Subsidiaries under this Agreement, in
such order and manner as the Bank elects;
If the Proceeds of any such sale are insufficient to cover the costs
and expenses of such sale, as aforesaid, and the payment in full of
the Note(s), of all amounts due under this Agreement, and all other
amounts due thereunder or hereunder, the Company Subsidiary(ies)
and/or the Company, as appropriate, shall remain liable for any
deficiency.
Notwithstanding anything herein to the contrary, upon any sale or
other disposition of the Collateral, all proceeds of such sale or
disposition will be applied among each Mortgage Pool and the related
Company Subsidiary Loans in accordance with Section 2.5(a).
Section~8.4. Bank Appointed Attorney-in-Fact. The Bank is hereby
appointed the attorney-in-fact of the Company, and of each Company
Subsidiary which becomes a party to this Agreement, after the
occurrence and during the continuance of an Event of Default
hereunder, with full power of substitution, for the purpose of
carrying out the provisions hereof, and of the Company Subsidiary
Loans and Notes of parties hereto, and taking any action and executing
any instruments which the Bank may deem necessary or advisable to
accomplish the purposes hereof or thereof, after the occurrence and
during the continuance of an Event of Default hereunder, which
appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, the Bank
shall have the right and power to give notices of its security
interest in the Collateral to any Person, either in the name of the
Company, in the name of the Company Subsidiary, or in its own name,
after the occurrence and during the continuance of an Event of Default
hereunder to endorse all Pledged Mortgage Loans payable to the order
of the Company or the Company Subsidiary, or, after the occurrence and
during the continuance of an Event of Default hereunder, to receive,
endorse and collect all checks made payable to the order of the
Company or the Company Subsidiary, representing any payment on account
of the principal of or interest on, or the proceeds of sale of, any of
the Pledged Mortgage Loans and to give full discharge for the same and
execute any and all instruments in writing whatever kind and nature,
if they be necessary, and be necessary and deemed proper by Bank to
effectively assure its appropriate lien position in the Collateral and
in the Pledged Mortgage Loans.
Section~8.5. Right of Set-off. If the Company Subsidiary or the
Company shall default in the payment of the Note or this Agreement,
any interest accrued thereon, or any other sums which may become
payable hereunder or thereunder when due, or in the performance of any
of its or their other obligations or liabilities thereunder or
hereunder, the Bank shall have the right, at any time and from time to
time, without notice, to set-off and to appropriate or apply any and
all deposits of money or property or any other indebtedness at any
time held or owing by the Bank or a parent company, affiliate, or
subsidiary to or for the credit of the account of the Company or the
Company Subsidiary against and on account of the obligations and
liabilities of the Company or the Company Subsidiary under this
Agreement, or under the Note or this Agreement, irrespective of
whether or not the Bank shall have made any demand thereunder or
hereunder and whether or not said obligations and liabilities shall
have matured, provided, however, that the aforesaid right of set-off
shall not apply to any deposits of escrow monies or other funds being
held on behalf of the mortgagors under Mortgage Loans or other third
parties.
Section~8.6. Reasonable Assurances. If, at any time during the term of
the Agreement, the Bank has reasonably and in good faith believe that
the Company or the Company Subsidiary is not conducting its business
in accordance with, or otherwise is not satisfying in all material
respects: (a)~all applicable statutes, regulations, rules, and notices
of federal, state, or local governmental agencies or
instrumentalities, or (b)~all applicable requirements of Bank, as set
forth in this Agreement, the or the Note, then, Bank shall have the
right to demand, pursuant to written notice from Bank to the Company
or to the Company Subsidiary as appropriate, specifying with
particularity, the alleged act, error or omission in question,
reasonable assurances from Company or the Company Subsidiary that such
a belief is in fact unfounded.
Article ~ IX
Reimbursement of Expenses; Indemnity
The Company or the Company Subsidiary, as appropriate, shall:
Section~9.1. Cost of Enforcement. Pay all costs and expenses of
the Bank, including reasonable attorney's fees, in connection with the
enforcement of this Agreement, the Note, the and other documents and
instruments related hereto and thereto.
Section~9.2. Payments of Taxes. Pay, and hold the Bank and any
holder of the Note harmless from and against, any, and all, present
and future stamp, documentary and other similar taxes with respect to
the foregoing matters and save the Bank and the holder or holders of
the Note harmless from and against any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes.
Section~9.3. Indemnification. Indemnify, pay and hold harmless
the Bank and any of its officers, directors, employees or agents and
any subsequent holder of the Note from and against any and all
liabilities, obligations, losses, damages, penalties, judgments,
suits, costs, expenses and disbursements of any kind whatsoever (the
"Indemnified Liabilities") (excluding any such Indemnified Liabilities
resulting from failure by the Bank to perform any of its obligations
under this Agreement, or any Note, or any other document referred to
herein or therein as established in a suit between the Company and/or
the Company Subsidiary and the Bank which may be the same suit in
which indemnification is being sought hereunder by the Bank and any
liabilities arising from the Bank's negligence, gross negligence, or
willful misconduct) which may be imposed upon, incurred by or asserted
against the Bank or such holder in any way relating to or arising out
of this Agreement, any Note, or any other document referred to herein
or therein or any of the transactions contemplated hereby or thereby
to the extent that any such Indemnified Liabilities result (directly
or indirectly) from (a)~the inaccuracy or incompleteness of any
representation or warranty made by the Company or by the Company
Subsidiary in this Agreement, or in any schedule, statement, exhibit
or certificate furnished by the Company pursuant to this Agreement, or
any Note, or (b)~the failure by the Company or by any Company
Subsidiary to observe or perform any term or provision of this
Agreement, or of any agreement executed in connection herewith, or any
Note, including without limitation any claims made, or any actions,
suits or proceedings commenced or threatened, by or on behalf of any
creditor (excluding the Bank and the holder or holders of the Note),
security holder, shareholder, mortgagor, customer (including, without
limitation, any person or entity having any dealings of any kind with
the Company or the Company Subsidiary), trustee, director, officer,
employee and/or agent of the Company or the Company Subsidiary acting
in such capacity, the Company, the Company Subsidiary, or any
governmental regulatory body or authority.
Article ~ X
Administrative Services; Payment Processing; Servicing
Section 10.1. Administrative Services Agreement. (a) Within a
reasonable period of time following the execution of the Agreement,
the Company and the Company Subsidiary shall enter into, and shall
maintain in effect, an administrative services agreement (the
"Administrative Services Agreement") reasonably acceptable to the
Bank, which covers the provision by the Company of any and all
administrative services necessary or helpful for the Company
Subsidiary to operate its business and for the payment by the Company
Subsidiary to the Company of reasonable compensation for those
services. Those services shall include, without limitation, the
handling of such matters as: closing of purchases of Mortgage Loans;
safe-keeping and administration of Mortgage Loan Documents; processing
of and record-keeping for Mortgage Loan payments; insurance;
government reporting; Mortgage Loan administration and collection; and
compliance with this Agreement.
(b) In the event that the terms of the Administrative Security
Agreement should conflict with the terms of this Agreement or with the
terms of the Lock-box Agreement, the terms of this Agreement or of the
Lock-box Agreement shall prevail.
(c) The Company is the servicer of the Pledged Mortgage Loans
pursuant to a servicing agreement between the Company and each Company
Subsidiary. Upon an Event of Default, (i) Bank shall have the right to
terminate the servicing agreement and transfer servicing to its
designee, (ii) the Company will servicer the Pledged Mortgage Loans
for the benefit of the Bank as if the Bank was the owner of the
Pledged Mortgage Loans until such time as the Bank terminates the
servicing agreement, (ii) the Company will cooperate with the Bank to
effect a transfer of the servicing of the Pledged Mortgage Loans in
connection with the Bank's termination of the servicing agreement.
(d) The Company covenants to maintain or cause the servicing of
the Pledged Mortgage Loans to be maintained in conformity with
reasonable and customary servicing practices in the industry for the
same type of mortgage loans as the Pledged Mortgage Loans and in a
manner at least equal in quality to the servicing the Company 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 Event of Default or (ii) the date on which
this Agreement terminates.
Article XI
Miscellaneous
Section~11.1. Relationships of Parties. The relationship between
the Bank each Company Subsidiary which becomes a party to this
Agreement is limited to that of creditor/secured party, on the one
hand, and borrower, on the other hand. The relationship between the
Bank and the Company is limited to that of creditor/secured party, on
the one hand, and contract obligor and parent of Company Subsidiaries,
on the other hand. The provisions herein for compliance with financial
covenants and delivery of financial statements are intended solely for
the benefit of the Bank to protect its interests as lender in assuring
performance of the obligations hereunder and thereunder, and nothing
contained herein or therein shall be construed as permitting or
obligating Bank to act as a financial or business advisor or
consultant to the Company or a Company Subsidiary, as permitting or
obligating the Bank to control the Company or a Company Subsidiary, or
to conduct the Company's or to a Company Subsidiary's operations, as
creating any joint venture, agency, fiduciary, trustee, or other
relationship among the parties other than as explicitly and
specifically stated herein. The Company and the Company Subsidiary
acknowledge that they have had the opportunity to obtain the advice of
experienced counsel of their own choosing in connection with the
negotiation and execution of this Agreement and to obtain the advice
of such counsel with respect to all matters contained herein. The
Company and the Company Subsidiary further acknowledge that they are
experienced with respect to financial and credit matters and has made
their own independent decisions to execute and deliver this Agreement.
Section~11.2. Recourse. The Company and each Company Subsidiary
each acknowledge and agree that they are each fully liable for
repayment of all Advances made to them, and/or all sums due by them
hereunder, or under the Note and for performance of all obligations
contained in this Agreement and in the Note. Furthermore, the Company
and each Company Subsidiary jointly and severally acknowledge and
agree that the Advances hereunder are made, were made and will be made
by the Bank, in addition to other requirements set forth herein, based
upon the condition precedent, and in consideration of (in addition to
any other consideration), the granting of the security interest in the
Collateral by the Company and each Company Subsidiary to jointly and
severally secure the repayment of all Advances, now existing or
hereafter granted by Bank, to all Company Subsidiaries. Each Company
Subsidiary and the Company unconditionally and irrevocably waives
until the payment in full of the Advances and all other sums due
hereunder or under any Note the following:
(i) Any defense, counterclaim, claim or right to bring any third
party actions in any proceedings or action brought by Bank to enforce
its rights under this Agreement against any one or more of the Company
or Company Subsidiary based on joinder of any other Company Subsidiary
and/or the Company, contribution, subrogation, reimbursement or any
other legal or equitable claims involving the liability of any Company
Subsidiary or the Company to another;
(ii) Any claim based on marshalling of assets; and
(iii) Any benefits or rights under Section 105 or any other
provisions of the U.S. Bankruptcy Code to invoke the automatic stay
resulting from the bankruptcy of any other Company Subsidiary or the
Company.
Section~11.3. Notices. All notices, demands, consents, requests
and other communications required or, permitted to be given or made
hereunder (collectively, "Notices") shall, except as otherwise
expressly provided hereunder, be in writing and shall be delivered in
person or telegraphed or mailed, first class, return receipt
requested, postage prepaid, or by overnight delivery service or by
telecopy or other telecommunications device addressed to the
respective parties hereto at their respective addresses hereinafter
set forth or, as to any such party, at such other address as may be
designated by it in a Notice to the other. All Notices shall be
conclusively deemed to have been properly given or made when duly
delivered, in person or by overnight delivery service or by telecopy
or other telecommunications device, or if mailed on the third Business
Day after being deposited in the mails or when delivered to the
telegraph company, addressed as follows:
If to the Company or to any Company Subsidiary:
Franklin Credit Management Corporation
Six ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
General Counsel
Facsimile No.: 212.925.1971
If to the Bank:
Sky Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Facsimile No.: 330.679.0028
With a Copy To:
Sky Bank
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Jr., General Counsel
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Section~11.4. Terms Binding Upon Successors; Survival. The terms
and provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
permitted assigns. All representations, warranties, covenants and
agreements herein contained on the part of the Company or of any
Company Subsidiary that becomes a party to this Agreement shall
survive the making of any Company Subsidiary Loan and the execution of
any Note, and shall be effective so long as the Commitment is
outstanding or there remains any obligation of the Company hereunder,
or any obligation of a Company Subsidiary under the Note to be paid or
under this Agreement to be performed. All representations, warranties,
covenants, and agreements contained in the Note and in this Agreement
on the part of a Company Subsidiary shall survive the making of an
Advance under the Company Subsidiary Loan and the execution of the
Note and this Agreement, and shall be effective so long as the Company
Subsidiary Loan is outstanding or there remains any obligations of the
Company Subsidiary under the Note to be paid or under this Agreement
to be performed.
Section~11.5. Assignment. This Agreement may not be assigned by
the Company or by the Company Subsidiary. This Agreement, the Note,
along with the Bank's security interest in any or all of the
Collateral, may be transferred or assigned, in whole or in part, by
the Bank in its sole discretion and any such transferee or assignee
thereof may enforce this Agreement, the Note, and such security
interest.
Section~11.6. Amendments. This Agreement may not be modified or
amended or waived unless such modification, waiver or amendment is in
writing signed by the Bank and the Company. All such written
amendments, modifications and extensions to this Agreement, the
Custodial Agreement, and any other agreements related hereto executed
by the Company shall be binding upon each Company Subsidiary that now
or hereafter becomes a party to this Agreement to the same extent as
if such amendment, modification or extension had been executed by each
such Company Subsidiary, and each such Company Subsidiary shall
thereafter be bound by any such amendments, modifications and
extensions.
Section~11.7. No Waiver; Remedies Cumulative. No failure or delay
on the part of the Company, the Company Subsidiary, or the Bank or any
holder of the Note in exercising any right, power or privilege
hereunder, or under the Note, and no course of dealing between or
among the Company, the Company Subsidiary, and the Bank or the holder
of the Note, shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, power or privilege hereunder or
there-under preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or
there-under. The rights and remedies herein and therein expressly
provided are cumulative and not exclusive of any rights or remedies
which the Company, the Company Subsidiary, or the Bank or the holder
of the Note would otherwise have. No notice to or demand on the
Company or the Company Subsidiary in any case shall entitle the
Company or the Company Subsidiary to any other or further notice or
demand in similar or other circumstances or constitute a waiver of the
rights of the Bank or the holder of the Note to any other or further
action in any circumstances without notice or demand.
Section~11.8. Invalidity. In case any one or more of the
provisions contained in this Agreement, the Note, or in any other
agreement or instrument related hereto shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions
hereof or thereof, and this Agreement, the Note, and such other
instruments or agreements shall be construed as if such invalid,
illegal or unenforceable provision had not been included.
Section~11.9. Participations. The Bank may from time to time sell
or otherwise grant participations in the Note, and the holder of any
such participation, if the participation agreement so provides,
(a)~shall, with respect to its participation, be entitled to all of
the rights of the Bank, and (b)~may exercise any and all rights of
setoff or banker's lien with respect thereto, in each case as fully as
though the Company or the Company Subsidiary were directly indebted to
the holder of such participation in the amount of such participation;
provided, however, that the Company or the Company Subsidiary shall
not be required to send or deliver to any of the participants other
than the Bank any of the materials or notices required to be sent or
delivered by it under the terms of this Agreement, nor shall it have
to act except in compliance with the instructions of the Bank.
Section~11.10. Integration. This Agreement, together with the
Note and other documents executed pursuant to the terms hereof and
thereof, constitute the entire agreement between or among the parties
hereto, with respect to the subject matter hereof and thereof.
Section~11.11. Additional Instruments, etc. The Company and the
Company Subsidiary shall execute and deliver such further instruments,
and shall do and perform all matters and things necessary or expedient
to be done or observed, for the purpose of effectively creating,
maintaining and preserving the security and benefits intended to be
afforded by this Agreement.
Section~11.12. Governing Law. This Agreement and the rights and
obligations of the parties hereunder, under the Note and under other
documents executed pursuant to the terms hereof and thereof shall be
construed in accordance with and governed by the laws of the State of
Ohio.
Section~11.13. Company and Company Subsidiary Information. The
Company and the Company Subsidiary hereby authorize the Bank to
provide any Affiliate of the Bank with information regarding them,
including copies of documents, financial statements, corporate records
and reports, obtained by the Bank from them or any other entity during
the course of the negotiation or administration of this Agreement.
Section~11.14. Counterparts; Execution by Company Subsidiaries.
(a) This Agreement may initially be executed in one or one
counterparts by the Bank, the Company, and the Company Subsidiaries in
existence as of the date hereof on separate counterpart signature
pages, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument.
(b) Each Company Subsidiary which receives a Company Subsidiary
Loan under this Agreement after the date hereof shall become a party
to this Agreement and shall execute a counterpart signature page
substantially in the form Exhibit E hereto. Each such Company
Subsidiary shall be deemed to become a party hereto no later than the
receipt of its first Advance regardless of when or if it signs a
counterpart signature page hereto. The Company shall cause each such
Company Subsidiary to become a party to this Agreement by executing a
counterpart signature page as required by this Section.
(c) Each Subsidiary of the Company, except for Tribeca Lending
Corporation, which has received an Advance from the Bank for the
purpose of funding or financing the purchase of Mortgage Loans, any
part of the principal of which is still outstanding, or any collateral
for which is still in effect as of the date of this Agreement, shall
be treated as a Company Subsidiary hereunder, shall become a party
hereto, and shall execute a counterpart signature page substantially
in the form of Exhibit E. Each such Company Subsidiary shall be deemed
to become a party hereto as of the date hereof regardless of when or
if it signs a counterpart signature page hereto. The Company shall
cause each such Company Subsidiary to become a party to this Agreement
by executing a counterpart signature page as required by this Section.
In the event that the terms of this Agreement shall conflict with the
terms of the loan documentation for such loan to such a Subsidiary of
the Company, the terms of this Agreement shall prevail, except for
interest rate terms which shall not be affected by the terms of this
Agreement, and except that any default under any such loan, which has
not been cured or waived, shall remain in effect.
[ Signatures are located on the following page.]
17
In Witness Whereof, the parties have caused this Agreement to be duly
executed as of the date first above written.
Company:
Franklin Credit Management Corporation
By___________________________________
Printed Name:
Title:
Bank:
Sky Bank
By____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Exhibit~A
PROMISSORY NOTE
$________________ New York, New York
___________, 20_____
FOR VALUE RECEIVED, ____________________________ (the "Borrower"),
hereby unconditionally promises to pay to the order of Sky Bank (the
"Bank"), at ▇.▇. ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, the sum of ______________________________________ AND ____/100
DOLLARS ($_____________), together with an initial interest rate of
__________% per annum. The interest rate will be adjusted monthly on
the first day of each month, based upon the following Index: Federal
Home Loan Bank of Cincinnati 30 day advance rate, plus __________
basis points.
This Note shall be for a term of Thirty Six (36) months, amortized
over a term of Two Hundred Forty (240) months. Beginning
__________________, 20______, there shall be monthly principal
payments of ___________________________________________________AND
_____/100 DOLLARS ($________________), plus interest as billed monthly
until maturity.
The interest rate charged herein shall be adjusted monthly as changes
in the above-referenced index occur. The Federal Home Loan Bank of
Cincinnati 30 day advance rate shall mean the highest rate of interest
as published daily by Bloomberg under the symbol FHL5LBR1.
Amounts payable on this Note are payable in lawful money of the United
States of America in good and immediately available funds at the
offices of the Bank, or at such other address as the holder of the
Note may designate in writing.
If this Note or any installment hereof becomes due and payable on a
Saturday, Sunday or public holiday under the laws of the State of
Ohio, the due date thereof shall be extended to the next succeeding
full Business Day.
This Note is a Note referred to in and is subject to the term,
conditions and covenants of, and is secured by certain collateral as
more fully described and provided in, a certain Master Credit and
Security Agreement, dated as of October 13, 2004, among the Bank,
Franklin Credit Management Corporation, and other subsidiaries of
Franklin Credit Management Corporation, and to which Borrower has
become a party to on or about even date herewith, (the "Loan
Agreement"), including, without limitation, being subject to mandatory
payment in whole or in part as provided in the Loan Agreement, and
Borrower acknowledges receiving a copy of and becoming a party to said
Loan Agreement), provided, however, reference to the Loan Agreement
and to the collateral does not affect or impair the absolute and
unconditional obligation of the Borrower to pay the principal of and
interest on this Note when due.
Upon the occurrence of any one or more of the Events of Default
specified in the Loan Agreement, all amounts then remaining unpaid on
this Note may be declared to be immediately due and payable as
provided in the Loan Agreement.
Promissory Note
Page 2
_________________, 20______
Prepayment of this Loan is subject to the terms as more fully outlined
in the Loan Agreement referred to above.
This Note shall be construed in accordance with and governed by the
laws of the State of Ohio without giving effect to the principles
thereof relating to the conflict of laws. For any dispute arising
under this Note or in connection herewith, the Borrower hereby
irrevocably submits to, consents to, and waives any objection to, the
jurisdiction of the courts of the State of Ohio or the United States
Courts for the Northern District of Ohio. Trial by jury is waived by
the Borrower for collection hereof.
In the event that any one or more of the provisions of this Note shall
for any reason be held to be invalid, illegal or unenforceable, in
whole or in part, or in any respect, or in the event that any one or
more of the provisions of this Note shall operate, or would
prospectively operate, to invalidate this Note, then, and in any such
event, such provision or provisions only shall be deemed to be null
and void and of no force or effect and shall not affect any other
provision of this Note, and the remaining provisions of this Note
shall remain operative and in full force and effect and shall in no
way be affected, prejudiced or disturbed thereby.
It is the intention of the parties hereto to comply strictly with the
usury laws of the State of Ohio and applicable Federal law; therefore,
it is agreed that notwithstanding any provision to the contrary in
this Note, no such provision shall require the payment or permit the
collection of interest in excess of the maximum amount permitted by
law.
_______________________________
By:
Its: _________________________
SCHEDULE I
Schedule of All Existing Company Subsidiary Loans and Success Fee Due
{ Exhibit B
Company Subsidiary Loan Request Form
[Date]
Sky Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President
Ladies/Gentlemen:
This letter is a request for you to make an Advance to us in respect
of the Mortgage Loans listed in Appendix I hereto, pursuant to the
Master Credit And Security Agreement (the "Agreement") is entered into
as of October 13, 2004, between Franklin Credit Management Corporation
(the "Company") and Sky Bank (the "Bank")and each Company subsidiary
that is a party thereto as follows:
Company Subsidiary:
Requested funding date:
Mortgage Loans requested to be funded in respect of such Advance:
See Appendix I hereto.
[Appendix I to Transaction Request Letter will list Mortgage Loans]
Requested Advance Amount:
Requested Mortgage Pool:
Requested Required Subsidiary LTV:
Anticipated, adjusted Required Pool LTV:
All capitalized terms used herein shall have the meaning assigned
thereto in the Agreement.
[COMPANY SUBSIDIARY]
By: _____________________________
Name:
Title:
Exhibit C
Product Standards For Mortgage Loans
23
Exhibit D
Collateral Documents
With respect to each Pledged Mortgage Loan, the Collateral
Documents shall include each of the following items, which shall be
available for inspection by the Bank and which shall be delivered to
the Custodian pursuant to Section~4.1(a) of the Master Credit and
Security Agreement to which this Exhibit~is attached (the
"Agreement"):
(a)______the original Mortgage Note bearing all intervening
endorsements evidencing a complete chain of assignment from the
originator to the last endorsee, endorsed "Pay to the order of
_________, without recourse" and signed in the name of the last
endorsee by an authorized officer. To the extent that there is no room
on the face of the Mortgage Notes for endorsements, the endorsement
may be contained on an allonge, if state law so allows and the
Custodian is so advised by the Company Subsidiary that state law so
allows;
(b)______the original of any guarantee executed in connection
with the Mortgage Note;
(c)______the original Mortgage with evidence of recording
thereon. If in connection with any Mortgage Loan, the Company
Subsidiary cannot deliver or cause to be delivered the original
Mortgage with evidence of recording thereon on or prior to the Closing
Date because of a delay caused by the public recording office where
such Mortgage has been delivered for recordation or because such
Mortgage has been lost or because such public recording office retains
the original recorded Mortgage, the Company Subsidiary shall deliver
or cause to be delivered to the Custodian, a photocopy of such
Mortgage, together with (i) in the case of a delay caused by the
public recording office, an officer's certificate of the Company
Subsidiary stating that such Mortgage has been dispatched to the
appropriate public recording office for recordation and that the
original recorded Mortgage or a copy of such Mortgage certified by
such public recording office to be a true and complete copy of the
original recorded Mortgage will be promptly delivered to the Custodian
upon receipt thereof by the Company Subsidiary; or (ii) in the case of
a Mortgage where a public recording office retains the original
recorded Mortgage or in the case where a Mortgage is lost after
recordation in a public recording office, a copy of such Mortgage
certified by such public recording office to be a true and complete
copy of the original recorded Mortgage;
(d)______the originals of all assumption, modification,
consolidation or extension agreements, if any, with evidence of
recording thereon;
(e)______the original assignment of Mortgage for each Mortgage
Loan, in form and substance acceptable for recording. The assignment
of Mortgage shall be delivered in blank;
(f)______the originals of all intervening assignments of
mortgage, evidencing a complete chain of assignment from the
originator to the last endorsee, with evidence of recording thereon,
or if any such intervening assignment has not been returned from the
applicable recording office or has been lost or if such public
recording office retains the original recorded assignments of
mortgage, the Company Subsidiary shall deliver or cause to be
delivered to the Custodian, a photocopy of such intervening
assignment, together with (i) in the case of a delay caused by the
public recording office, an officers certificate of the Company
Subsidiary stating that such intervening assignment of mortgage has
been dispatched to the appropriate public recording office for
recordation and that such original recorded intervening assignment of
mortgage or a copy of such intervening assignment of mortgage
certified by the appropriate public recording office to be a true and
complete copy of the original recorded intervening assignment of
mortgage will be promptly delivered to the Custodian upon receipt
thereof by the Company Subsidiary; or (ii) in the case of an
intervening assignment where a public recording office retains the
original recorded intervening assignment or in the case where an
intervening assignment is lost after recordation in a public recording
office, a copy of such intervening assignment certified by such public
recording office to be a true and complete copy of the original
recorded intervening assignment;
(g)______the original mortgagee policy of title insurance or, in
the event such original title policy is unavailable, a certified true
copy of the related policy binder or commitment for title certified to
be true and complete by the title insurance company; and
(h)______security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage, if any.
From time to time, the Company subsidiary shall cause to be
forwarded to the Custodian additional original documents, additional
documents evidencing an assumption, modification, consolidation or
extension of a Mortgage Loan. All such mortgage documents held by the
Custodian as to each Mortgage Loan shall constitute the "Collateral
Documents"
{
Exhibit E
Counterpart Signature Page Form
Counterpart Signature Page
for
Master Credit and Security Agreement
between
Sky Bank and Franklin Credit Management Corporation and its Subsidiaries
The undersigned subsidiary of Franklin Credit Management
Corporation hereby agrees to be bound by the terms, conditions,
covenants and provisions of the above-referenced Agreement to which
this Counterpart Signature Page will be attached, including, without
limitation, the granting of the security interest in Article III of
the Agreement and the rights and remedies with respect thereto set
forth in Article VIII. By signing below, the undersigned hereby
executes and becomes a "Company Subsidiary" (as defined therein) party
to the Agreement and grants such security interest. Such security
interest covers, among the items of "Collateral" listed in Article
III, the "Mortgage Loans" set forth on the Schedule attached to this
Counterpart Signature Page.
[name of Company Subsidiary here]
Date: __________________________ By:____________________________
Printed Name:
Title:
SCHEDULE E-1
List Of Mortgage Loans Pledged to Bank By:
____________________________
(Name of Company Subsidiary)
26
EXHIBIT F
LOCK BOX TERMS
A. Lockbox Service. The lockbox service (the "Service") will
operate through a U.S. Postal Service box in the Company Subsidiary's
name (the "Lockbox") and Company Subsidiary demand deposit accounts at
Bank (the "Accounts") which are designated herein below, and which
Accounts are subject to Bank's standard deposit account agreements.
Company Subsidiary authorizes Bank and its employees, representatives
or authorized agents to (i) pick up and transport from the Post Office
mail addressed to the Lockbox, and (ii) open such mail and process its
contents according to the Lockbox processing procedures which will be
agreed to by Bank and the Company Subsidiary.
B. Company Subsidiary's Obligations. Company Subsidiary agrees to
provide Bank, its employees, representatives or authorized agents with
unrestricted and exclusive access to the Lockbox. Company Subsidiary
agrees to follow the recommendations and specifications outlined in
the Processing Procedures relating, without limitation, to document
specifications for the remittance documents to be submitted to the
Lockbox. Insofar as the performance of Services under this Agreement
by Bank requires data, documents, information or materials of any
nature to be furnished by Company Subsidiary, or for personnel,
Company Subsidiary hereby agrees to furnish all data, documents,
information, and materials and to perform all such acts and to make
appropriate personnel, records and facilities available to Bank,
within such time and in such form or manner as may reasonably be
necessary in order to enable Bank to perform the required Services
promptly and in a workmanlike manner.
C. Deposits. Bank will deposit all items which comply with the
processing procedures agreed to by Bank and Customer for credit to
Company Subsidiary's Account with Bank. Company Subsidiary authorizes
Bank to endorse checks and other payment instruments received (the
"Remittances") and to deposit such instruments in the Accounts. If any
payee is a legal entity other than Company Subsidiary, Company
Subsidiary represents and warrants to Bank that Company Subsidiary has
the proper authorization from such payee to have such check endorsed
for deposit, and deposited into the Account, and Company Subsidiary
agrees to indemnify Bank against any losses, liabilities, damages,
claims, demands, obligations, actions, suits, judgments, penalties,
costs or expenses, including, but not limited to, attorneys' fees
(collectively "Losses and Liabilities"), suffered or incurred by Bank
as a result of, or in connection with, Company Subsidiary's failure to
have such authorization. Further, the Bank may accept checks and other
instruments for deposit to the Account without endorsement. Company
Subsidiary represents and warrants to Bank that the endorsements of
all items received through this Service are proper and valid and that
Company Subsidiary has a right to receive such items for deposit to
the Account. Company Subsidiary agrees to notify Bank no later than
ten (10) calendar days after Company Subsidiary receives an advice of
deposit, if there is any error in such advice, and no later than
thirty (30) calendar days after Company Subsidiary receives a bank
statement on the Account, if such statement contains an error or fails
to show a deposit that should have been made during the time period
covered by such statement.
C. Account Documentation. Company Subsidiary understands that
this Agreement covers Lockbox Services as described herein and does
not cover the handling of the Accounts and the processing of checks
drawn on the Account or the availability of the deposits made to the
Accounts. The Accounts will be subject to, and Bank's operation of the
Accounts will be in accordance with, the terms and provisions of
Bank's deposit account agreements and the account rules and
regulations governing the Accounts (collectively the "Account
Agreements"), copies of which Company Subsidiary acknowledges having
received, and shall be subject to the Master Credit Agreement to which
this Lock Box Terms agreement is attached.
D Reasonable Care. As to property of Company Subsidiary in Bank's
possession Bank shall be liable only for the exercise of reasonable
care in safekeeping the same and restricting access to authorized
persons of information relating to Company Subsidiary's business or
the business of any of Company Subsidiary's customers which may be
received in the course of rendering the Service hereunder.
E. Mail Collection. Bank shall collect the mail from the Lockbox
in accordance with Bank's post office schedule, as such schedule may
change from time to time.
F. Limitation of Liability, Indemnity. The Bank will only be
liable for damages arising from the Bank's intentional misconduct or
gross negligence in the performance of this Service. The Bank will not
be responsible for any loss, delay, costs or liability which arise,
directly or indirectly, in whole or part, from, Company Subsidiary's
actions or omissions, negligence or breach of any agreement with Bank;
any ambiguity, inaccuracy or omission in any instruction or
information provided to Bank; accidents, strikes, labor disputes,
civil unrest, fire, flood, water damage (e.g., from fire suppression
systems), or acts of God; or the actions of others or causes that are
beyond Bank's reasonable control. The Bank will not be responsible
under any circumstances for special, indirect, or consequential
damages, which the Company Subsidiary incurs as a result of the Bank's
actions or omissions, even if the Bank is aware of the possibility for
such damage. Any claim, action or proceeding by the Company Subsidiary
to enforce the terms of this Agreement or to recover for any
Service-related loss or for any losses or liabilities, must be
commenced within one year from the date that the event giving rise to
the claim, action, or proceeding first occurs. The Company Subsidiary
agrees to cooperate with the Bank in any loss recovery effort the Bank
undertakes to reduce any loss or liability that arises in connection
with the Bank's Services. Company Subsidiary agrees to indemnify,
defend, hold Bank harmless from and against any claim, damage, loss,
liability and cost (including, without limitation, attorneys' fees) of
any kind whatsoever which results directly or indirectly, in whole or
in part from: (a) Bank's actions or omissions, if they are in
accordance with the Company Subsidiary's instructions or the terms of
this Agreement; or (b) the actions or omissions of the Company
Subsidiary, its agents or employees. This clause shall survive the
termination of this Agreement.
Account Information:
Depository Account Number:
Other:
Any correspondence between the Company Subsidiary and the Bank
concerning normal operations of the Payments Processing and Control
service shall be addressed as follows:
Account Name:
Address:
Primary Contact: Telephone:
Fax:
Special Instructions or Comments:
Exhibit G
Required Subsidiary LTV and Required Pool LTV