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EXHIBIT 10.32(a)
MASTER REPURCHASE AGREEMENT
This MASTER REPURCHASE AGREEMENT (this "Agreement") is dated as of April
8, 1999 by and between NATIONSBANK, N.A., a national banking association, as
buyer ("Buyer," which term shall include any "Principal" as defined in Paragraph
26 below) or as agent for any Principal (in such capacity, "Agent"), and AAMES
CAPITAL CORPORATION, a California corporation ("Seller").
1. Applicability. From time to time the parties hereto may enter into
transactions in which Seller agrees to transfer to Buyer Eligible Repo Assets
against the transfer of funds by Buyer, with a simultaneous agreement by Buyer
to transfer to Seller such Eligible Repo Assets at a date certain or on demand,
against the transfer of funds by Seller. Each such transaction shall be referred
to herein as a "Transaction" and, unless otherwise agreed in writing, shall be
governed by this Agreement.
2. Definitions. For purposes of this Agreement, the terms set forth
below shall have the following meanings:
"Act of Insolvency" shall mean, with respect to any party, (i)
the commencement by such party as debtor of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution,
delinquency or similar law, or such party seeking the appointment or election of
a receiver, conservator, trustee, custodian or similar official for such party
or any substantial part of its property, or the convening of any meeting of
creditors for purposes of commencing any such case or proceeding or seeking such
an appointment or election, (ii) the commencement of any such case or proceeding
against such party, or another seeking such an appointment or election, or the
filing against a party of an application for a protective decree under the
provisions of the Securities Investor Protection Act of 1970, which (A) is
consented to or not timely contested by such party, (B) results in the entry of
an order for relief, such an appointment or election, the issuance of such a
protective decree or the entry of an order having a similar effect, or (C) is
not dismissed within 15 days, (iii) the making by such party of a general
assignment for the benefit of creditors, or (iv) the admission in writing by
such party of such party's inability to pay such party's debts as they become
due.
"Additional Repo Assets" shall mean Eligible Repo Assets provided
by Seller to Buyer pursuant to Paragraph 4(a) hereof.
"Additional Required Documents" shall mean those documents
described on Exhibit A attached hereto.
"Affiliate" shall mean, as to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with, such Person. "Control" as used herein means the power to
direct the management and policies of such Person.
"Agent" shall mean NationsBank, N.A. or any successor thereto, in
its capacity as agent for any Principal pursuant to Paragraph 26 below.
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"Aggregate Purchase Price Limit" shall mean on any date an amount
equal to: (a) $200,000,000, minus (b) the aggregate amount of Buyer's commitment
to extend credit to Seller under all other credit facilities at such date, and
minus (c) the Buyer's commitment to extend credit to Aames Funding Corp. in the
aggregate amount of $1,000,000.00.
"Approved Investor" shall mean any financial institution
pre-approved in writing by Buyer to purchase Mortgage Loans while they are
subject to any Transaction under this Agreement. The Approved Investors as of
the date hereof are set forth in Exhibit B attached hereto.
"Authorized Representative" shall mean, with respect to Seller,
the officers of Seller as set forth in Exhibit C attached hereto or as otherwise
notified by Seller to Buyer from time to time.
"Business Day" shall mean any day excluding Saturday, Sunday and
any day on which banks located in the States of New York, Texas or California
are authorized or permitted to close for business.
"Buyer" shall refer to NationsBank, N.A.
"Buyer's Margin Amount" shall mean, with respect to any Purchased
Repo Asset as of any date, the amount obtained by application of the Buyer's
Margin Percentage to the Purchase Price of such Purchased Repo Asset as of such
date.
"Buyer's Margin Percentage" shall mean, with respect to any
Purchased Repo Asset as of any date, the percentage obtained by dividing the
Market Value of such Purchased Repo Asset as of its Purchase Date by the
Purchase Price of such Purchased Repo Asset as of its Purchase Date.
"Cap Z Agreement" shall mean that certain Preferred Stock
Purchase Agreement dated as of December 23, 1998 by and between Guarantor and
Capital Z Financial Services Fund II, L.P., as amended on February 10, 1999.
"Capitalized Lease Obligations" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes hereof, the amount of such obligations at any time shall
be the capitalized amount thereof at such time determined in accordance with
GAAP.
"Cash Equivalents" shall mean (a) securities with maturities of
90 days or less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b) certificates
of deposit and eurodollar time deposits with maturities of 90 days or less from
the date of acquisition and overnight bank deposits of any commercial bank
having capital and surplus in excess of $500,000,000, (c) repurchase obligations
of any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than seven days with respect to securities
issued or fully guaranteed or insured by the United States Government, (d)
commercial paper of a domestic issuer rated at
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least A-1 or the equivalent thereof by Standard and Poor's Ratings Group ("S&P")
or P-1 or the equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc. ("Moody's")
and in either case maturing within 90 days after the day of acquisition, (e)
securities with maturities of 90 days or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody's, (f) securities with maturities of 90 days or less from the date of
acquisition backed by standby letters of credit issued by any commercial bank
satisfying the requirements of clause (b) of this definition or (g) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.
"Commonly Controlled Entity" of a Person shall mean a Person,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(c) of the Internal Revenue Code.
"Confirmation" shall have the meaning specified in Paragraph 3
hereof and shall be substantially in the form attached hereto as Exhibit D.
"Contractual Obligation" as to any Person shall mean any
provision of any security issued by such Person or of any agreement, instrument
or undertaking to which such Person is a party or by which it or any of its
property is bound.
"Custodian" shall refer to the custodian named in the Custody
Agreement.
"Custody Agreement" shall refer to the Custody Agreement, dated
as of April 8, 1999, by and among Buyer, Seller and the Custodian named therein,
as the same may be modified and amended from time to time.
"Custody Receipt" shall be in the form attached as an exhibit to
the Custody Agreement.
"Eligible Repo Asset" shall mean a Repo Asset with respect to
which each of the following statements shall be accurate and complete (and
Seller by including said Repo Asset in any Transaction hereunder and delivering
the Required Documents for the related Repo Asset to the Custodian in accordance
with the Custody Agreement shall be deemed to so represent and warrant to Buyer
at and as of each date prior to the related Repurchase Date):
(a) The related Mortgage Loan is a binding and valid
obligation of the obligor thereon, in full force and effect and enforceable in
accordance with its terms.
(b) Said Mortgage Loan is genuine in all respects as
appearing on its face and as represented in the books and records of Seller, and
all information set forth therein is true and correct.
(c) Said Mortgage Loan is free of any default of any party
thereto (including Seller), (other than as permitted under subparagraph (d)
below), counterclaims, offsets
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and defenses and from any rescission, cancellation or avoidance, and all right
thereof, whether by operation of law or otherwise.
(d) No payment under said Mortgage Loan is more than sixty
(60) days past due the payment due date set forth in the underlying promissory
note and deed of trust (or mortgage); provided, however that if any payment
under said Mortgage Loan is more than thirty (30) days past due, the Purchase
Price for said Mortgage Loan, when added to the aggregate Purchase Price of all
other Mortgage Loans with any payment more than thirty (30) days past due, does
not exceed: (i) at any time prior to May 7, 1999, seven and one-half percent
(7.5%) of the Aggregate Purchase Price Limit, and (ii) at any time on and after
May 7, 1999, five percent (5%) of the Aggregate Purchase Price Limit.
(e) Said Mortgage Loan contains the entire agreement of
the parties thereto with respect to the subject matter thereof, has not been
modified or amended in any respect not expressed in writing therein and is free
of concessions or understandings with the obligor thereon of any kind not
expressed in writing therein.
(f) Said Mortgage Loan is in all respects as required by
and in accordance with all applicable laws and regulations governing the same,
including, without limitation, the federal Consumer Credit Protection Act and
the regulations promulgated thereunder and all applicable usury laws and
restrictions, and all notices, disclosures and other statements or information
required by law or regulation to be given, and any other act required by law or
regulation to be performed, in connection with said Mortgage Loan have been
given and performed as required.
(g) All advance payments and other deposits on said
Mortgage Loan have been paid in cash, and, other than as disclosed to Buyer in
writing, there have been no prepayments on said Mortgage Loan.
(h) At all times said Mortgage Loan will be free and clear
of all Liens, except the security interest in favor of Buyer pursuant to this
Agreement.
(i) The Property covered by said Mortgage Loan is insured
against loss or damage by fire and all other hazards normally included within
standard extended coverage in accordance with the provisions of said Mortgage
Loan with Seller named as a loss payee thereon.
(j) The Property covered by said Mortgage Loan is free and
clear of all Liens except in favor of Seller subject only to (i) the Lien of
current real property taxes and assessments not yet due and payable; (ii)
covenants, conditions and restrictions, rights of way, easements and other
matters of the public record, as of the date of recording, as are acceptable to
mortgage lending institutions generally and specifically referred to in a
lender's title insurance policy delivered to the originator of said Mortgage
Loan and referred to or otherwise considered in the appraisal made for the
originator of said Mortgage Loan or which do not materially adversely affect the
appraised value of such Property as set forth in such appraisal; (iii) other
matters to which like properties are commonly subject which do not materially
interfere with the benefits of the security intended to be provided by said
Mortgage Loan or the use, enjoyment,
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value or marketability of the related Property; (iv) any subsequent Liens, and
(v) a prior first priority Lien to the extent permitted pursuant to subparagraph
(s) below.
(k) If said Mortgage Loan has been withdrawn from the
possession of the Custodian on terms and subject to conditions set forth in the
Custody Agreement:
(i) If said Mortgage Loan was withdrawn by Seller for
purposes of correcting clerical or other non-substantive documentation
problems, the promissory note and other documents relating to said
Mortgage Loan were or will be returned to the Custodian within ten (10)
Business Days from the date of withdrawal, and the Purchase Price for
said Mortgage Loan when added to the aggregate Purchase Price of all
other Mortgage Loans which have been similarly withdrawn, does not
exceed $2,000,000; and
(ii) If said Mortgage Loan was shipped by the
Custodian pursuant to Section 6 of the Custody Agreement, the full
amount required to be paid on account thereof (as set forth on the
schedule attached to the related bailee letter) has been received into
the Settlement Account (or said Mortgage Loan has been returned to the
Custodian) within the required number of days (as set forth in the
related bailee letter) from the date of shipment by the Custodian.
(l) The date of the underlying promissory note is no
earlier than ninety (90) days prior to the related Purchase Date; provided,
however, that with respect to any Mortgage Loan purchased at any time prior to
April 16, 1999, the date of the underlying promissory note is no earlier than
one hundred eighty (180) days prior to the related Purchase Date, and if the
date of the underlying promissory note is earlier than ninety (90) days prior to
the related Purchase Date, the Purchase Price for said Mortgage Loan, when added
to the aggregate Purchase Price of all other Mortgage Loans where the date of
the underlying promissory note is earlier than ninety (90) days prior to the
related Purchase Date, does not exceed five percent (5%) of the Aggregate
Purchase Price Limit.
(m) The improvements on the related Property consist of a
completed one-to-four family residence (and as to which there are no commercial
operations, other than in the nature of an in-home office or otherwise permitted
under the Underwriting Guidelines, conducted on such Property) or a unit in a
condominium or planned unit development.
(n) The Required Documents for said Mortgage Loan have
been delivered to the Custodian on or prior to the time required pursuant to the
Custody Agreement (or, if such items have not been delivered to the Custodian,
the Custodian has received a Mortgage Loan Confirmation Agreement, including a
complete Mortgage Loan Schedule, relating to said Mortgage Loan on or prior to
such time, and the Required Documents are received by the Custodian within seven
(7) Business Days after the related Purchase Date, and the Purchase Price for
said Mortgage Loan when added to the Purchase Price of all other Mortgage Loans
for which the Custodian has not received the Required Documents does not exceed
forty percent (40%) of the Aggregate Purchase Price Limit).
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(o) If so requested by Buyer, the Additional Required
Documents for said Mortgage Loan have been delivered to the Custodian within
five (5) Business Days of such request.
(p) Said Mortgage Loan is not subject to any servicing
arrangement with any Person other than (i) Seller or a subservicer servicing
said Mortgage Loan on behalf of Seller and (ii) the Buyer as permitted under
Paragraph 11(n) below, nor are any servicing rights relating to said Mortgage
Loan subject to any Lien or negative pledge in favor of any Person.
(q) Said Mortgage Loan does not have a Loan-to-Value Ratio
greater than ninety-seven percent (97%); provided, however, that if said
Mortgage Loan has a Loan-to-Value Ratio greater than ninety percent (90%), the
amount of said Mortgage Loan in excess of the 90% Loan-to-Value Ratio is covered
by private mortgage insurance, and the Purchase Price for said Mortgage Loan,
when added to the aggregate Purchase Price of all other Mortgage Loans with a
Loan-to-Value Ratio greater than ninety percent (90%), does not exceed two
percent (2%) of the Aggregate Purchase Price Limit.
(r) The original principal balance of said Mortgage Loan
did not exceed $500,000; provided, however, that if the original principal
balance of said Mortgage Loan exceeded $250,000, the Purchase Price for said
Mortgage Loan when added to the aggregate Purchase Price of all other Mortgage
Loans as to which the original principal balance exceeded $250,000, does not
exceed ten percent (10%) of the Aggregate Purchase Price Limit.
(s) The promissory note evidencing said Mortgage Loan is
secured by a first or second priority Lien on the related Property; provided,
however, that if said Mortgage Loan is secured by a second priority Lien on the
related Property:
(i) And the Loan-to-Value Ratio is greater than seventy
percent (70%), either the related first lien does not provide for a
balloon payment or the maturity date of each Mortgage Loan with respect
to which a first lien on the related Property provides for a balloon
payment is prior to the maturity date of the Mortgage Loan relating to
such first lien;
(ii) Either the related first Lien on the related
Property does not provide for negative amortization, or if it does
provide for negative amortization, the total amount of negative
amortization allowed is not more than twenty-five percent (25%) of the
original principal balance of the related first Lien and the
Loan-to-Value Ratio is calculated on the maximum allowable amount of the
negative amortization;
(iii) Either no consent for said Mortgage Loan is
required by the holder of the related first lien or such consent has
been obtained and is contained in the mortgage file provided to the
Custodian; and
(iv) The Purchase Price for said Mortgage Loan, when
added to the aggregate Purchase Price of all other Mortgage Loans which
are secured by a second priority Lien on the related Property, does not
exceed five percent (5%) of the Aggregate Purchase Price Limit.
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(t) The proceeds of said Mortgage Loan have been fully
disbursed and the obligor thereon has no additional right to further borrowings
thereunder. Any and all requirements as to completion of any improvements and as
to disbursements of any escrow funds therefor either have been complied with or
are not yet required to be complied with but will be complied with as and when
required. All costs, fees and expenses incurred in making or closing or
recording said Mortgage Loan were paid.
(u) Said Mortgage Loan is covered by a lender's title
insurance policy issued in standard form by a title insurance company authorized
to transact business in the state where the related Property is located, in an
amount at least equal to the original principal balance of the promissory note
evidencing said Mortgage Loan insuring the mortgagee's interest under said
Mortgage Loan as the holder of a first or second Lien of record on the related
Property, as appropriate (subject only to such exceptions as are generally
acceptable to home equity mortgage lending institutions, and such other
exceptions to which similar properties are commonly subject and which do not
individually, or in the aggregate, materially and adversely affect the benefits
of the security intended to be provided by said Mortgage Loan).
(v) The Property relating to said Mortgage Loan is
undamaged by waste, fire, earthquake or earth movement, windstorm, flood,
tornado or other casualty so as to affect adversely the value of such Property
as security for said Mortgage Loan or the use for which the premises were
intended, such Property is in good repair and no condemnation proceeding has
been commenced against such Property.
(w) The obligor on said Mortgage Loan has not notified
Seller, and Seller has no knowledge, of any relief requested or allowed to such
obligor under the Soldiers' and Sailors' Civil Relief Act of 1940.
(x) Said Mortgage Loan was underwritten in compliance with
the requirements of the Underwriting Guidelines; provided, however, that (i) if
said Mortgage Loan has a "C" rating according to the Underwriting Guidelines,
the Purchase Price for said Mortgage Loan, when added to the aggregate Purchase
Price of all other Mortgage Loans with a "C" rating, does not exceed (A) at any
time prior to June 30, 1999, twelve and one-half percent (12.5%) of the
Aggregate Purchase Price Limit, and (B) at any other time, ten percent (10%) of
the Aggregate Purchase Price Limit; and (ii) if said Mortgage Loan has a "D"
rating according to the Underwriting Guidelines, the Purchase Price for said
Mortgage Loan, when added to the aggregate Purchase Price of all other Mortgage
Loans with a "D" rating, does not exceed (A) at any time prior to June 30, 1999,
ten percent (10%) of the Aggregate Purchase Price Limit, and (B) at any other
time, seven and one-half percent (7.5%) of the Aggregate Purchase Price Limit.
(y) Said Mortgage Loan has not been purchased and owned by
Buyer for more than one hundred eighty (180) days; provided, however, that if
said Mortgage Loan has been purchased and owned by Buyer for more than one
hundred twenty (120) days, the Purchase Price for said Mortgage Loan, when added
to the aggregate Purchase Price of all other Mortgage Loans which has been
purchased and owned by Buyer for more than one hundred twenty (120) days, does
not exceed twenty percent (20%) of the Aggregate Purchase Price Limit.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may from time to time be supplemented or amended.
"Facility Fee Percentage" shall mean three-tenths of one percent
(0.30%) per annum.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Guarantor" shall mean Aames Financial Corporation, a Delaware
corporation.
"Guaranty" shall mean a guaranty in the form of Exhibit E
attached hereto.
"Income" shall mean, with respect to any Purchased Repo Asset at
any time, any principal thereof and all interest, dividends or other
distributions thereon.
"Indebtedness" of any Person shall mean all items of indebtedness
which, in accordance with GAAP and practices, would be included in determining
liabilities as shown on the liability side of a statement of condition of such
Person as of the date as of which indebtedness is to be determined, including,
without limitation, all obligations for money borrowed and Capitalized Lease
Obligations, and shall also include all indebtedness and liabilities of others
assumed or guaranteed by such Person or in respect of which such Person is
secondarily or contingently liable (other than by endorsement of instruments in
the course of collection) whether by reason of any agreement to acquire such
indebtedness or to supply or advance sums or otherwise.
"Lender Release" shall be in the form attached as an exhibit to
the Custody Agreement.
"Leverage Ratio" of any Person shall mean, on a consolidated
basis, the ratio of such Person's (a) total liabilities, as determined in
accordance with GAAP, minus Subordinated Debt, to (b) Tangible Net Worth plus
Subordinated Debt.
"Lien" shall mean any security interest, mortgage, pledge, lien,
claim on property, charge or encumbrance (including any conditional sale or
other title retention agreement), any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction.
"Loan-to-Value Ratio" shall mean, with respect to any Mortgage
Loan, the ratio of the principal amount of such Mortgage Loan outstanding at the
origination thereof (plus, in the case of a Mortgage Loan secured by a second
priority deed of trust (or mortgage), the principal amount outstanding under the
first Mortgage Loan affecting the related Property) divided by the lesser of (a)
the most recent selling price of the related Property in the case of a purchase
money loan, and (b) the appraised value of the related Property.
"Margin Deficit" shall have the meaning specified in Paragraph
4(a) hereof.
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"Market Value" shall mean, with respect to any Eligible Repo
Asset as of any date, the market price on such date for such Eligible Repo Asset
as determined by Seller in its sole discretion.
"Material Adverse Effect" shall mean the existence of any
circumstance or event which, individually or collectively, is reasonably
expected to result in any (a) material adverse impairment of Seller's ability to
perform its obligations under this Agreement, (b) material impairment on the
ability of the Buyer to enforce any of such obligations or any of its rights,
remedies, powers, privileges and benefits under this Agreement, (c) material
adverse effect on Seller's financial condition as represented to Buyer in the
most recently furnished financial statements, or (d) Event of Default.
"Mortgage-Backed Security" shall mean any security (including,
without limitation, a participation certificate) that represents an interest in
a pool of mortgages, deeds of trust or other instruments creating a Lien on
Property which is improved by a completed single family dwelling (one-to-four
family units) or a unit in a condominium or planned unit development.
"Mortgage Loan" shall mean a residential real estate secured loan
(including 1-4 family unit, condominium and planned unit development),
including, without limitation: (a) a promissory note and related deed of trust
(or mortgage) and/or security agreement; (b) all guaranties and insurance
policies, including, without limitation, all mortgage and title insurance
policies and all fire and extended coverage insurance policies and rights of
Seller to return premiums or payments with respect thereto; and (c) all right,
title and interest of Seller in the Property covered by said deed of trust (or
mortgage).
"Mortgage Loan Confirmation Agreement" shall be substantially in
the form of Exhibit F attached hereto.
"Mortgage Loan Schedule" shall mean a schedule in the form of
Exhibit G attached hereto.
"NationsBank Agreement" shall mean that certain Residuals
Financing Agreement dated as of September 4, 1998 among Seller, Buyer and
Guarantor, as amended, restated, extended and replaced from time to time.
"Non-Warehouse Debt Ratio" shall mean, with respect to Guarantor
and its Subsidiaries on a consolidated basis, on any date the ratio of (a)
consolidated funded Indebtedness (including Subordinated Debt), minus the sum
of- (i) unrestricted cash or cash equivalents exceeding $5,000,000.00, plus (ii)
one hundred percent (100%) of the value, according to Guarantor's balance sheet
at such date, of all Mortgage Loans held for sale, plus (iii) eighty percent
(80%) of the dollar amount of all accounts receivable shown on Guarantor's
balance sheet at such date (but excluding all accounts receivable as to which
any affiliate or any Subsidiary of Guarantor is the account party), to (b)
Tangible Net Worth.
"Permitted Secured Debt" shall mean the Indebtedness set forth on
Exhibit H hereto.
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"Person" shall mean any corporation, natural person, firm, joint
venture, partnership, limited liability company, trust, unincorporated
organization or governmental entity.
"Plan" shall mean, as to any Person, any pension plan that is
covered by Title IV of ERISA and in respect of which such Person or a Commonly
Controlled Entity of such Person is an "employer" as defined in Section 3(5) of
ERISA.
"Potential Default" shall mean an event which but for the lapse
of time or the giving of notice, or both, would constitute an Event of Default.
"Price Differential" shall mean, with respect to any Transaction
as of any date, the aggregate amount obtained by daily application of the
Pricing Rate for such Transaction to the Purchase Price for such Transaction on
a 360-day-per-year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction and ending
on (but excluding) the date of determination (reduced by any amount of such
Price Differential previously paid by Seller to Buyer with respect to such
Transaction).
"Pricing Rate" shall mean on any day, the per annum percentage
rate equal to the sum of (a) the thirty (30)-day rate set forth at Telerate Page
3750 (generally known to be the 30-day LIBOR rate) at approximately 11:00 a.m.
London time for such day, plus (b) (i) with respect to the aggregate amount of
Purchase Price of Eligible Repo Assets delivered under a Mortgage Loan
Confirmation Agreement and the Required Documents for which have not been
delivered to the Custodian, one and one-half of one percent (1.50%), and (ii)
with respect to the aggregate amount of Purchase Price of Eligible Repo Assets
the Required Documents for which have been delivered to the Custodian, one and
one-quarter of one percent (1.25%); provided, however, that if such information
is not available on Telerate, the "Pricing Rate" shall be determined from
information supplied to the Buyer by a nationally recognized reporting service
for similar information acceptable to the Buyer.
"Prime Rate" shall mean the prime rate of U.S. commercial banks
as published in The Wall Street Journal (or, if more than one such rate is
published, the average of such rates).
"Principal" shall have the meaning given such term in Paragraph
26 below.
"Property" shall mean the real property, including the
improvements thereon, and the personal property (tangible or intangible) which
are encumbered pursuant to a Mortgage Loan.
"Purchase Date" shall mean the date on which Purchased Repo
Assets are to be transferred by Seller to Buyer.
"Purchase Price" shall mean, as calculated on each date pursuant
to information certified by Seller on all Purchased Repo Assets subject to a
Transaction on such date, with respect to each Purchased Repo Asset, an amount
equal to the least of (a) one hundred percent (100%) of the unpaid principal
balance thereof, (b) ninety-eight (98%) of the Market Value (as determined by
Buyer in its sole discretion) thereof as of such date, and (c) one hundred
percent (100%) of the acquisition cost thereof if said Purchased Repo Asset was
acquired by Seller from a third party; provided, however, that (i) if any
payment under the Mortgage Loan related to such
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Purchased Repo Asset is more than thirty (30) days past due, the Purchase Price
for such Purchased Repo Asset shall be eighty-five percent (85%) of the amount
calculated pursuant to the above formula, (ii) at any time prior to June 30,
1999, if the Mortgage Loan related to such Purchased Repo Asset has a "C" rating
according to the Underwriting Guidelines and the aggregate Purchase Price for
all Purchased Repo Assets the related Mortgage Loan of which has a "C" rating
according to the Underwriting Guidelines exceeds ten percent (10%) of the
Aggregate Purchase Price Limit, the Purchase Price for such Purchased Repo Asset
and each other Purchased Repo Asset which exceeds such ten-percent limit shall
be ninety percent (90%) of the amount calculated pursuant to the above formula,
(iii) at any time prior to June 30, 1999, if the Mortgage Loan related to such
Purchased Repo Asset has a "D" rating according to the Underwriting Guidelines
and the aggregate Purchase Price for all Purchased Repo Assets the related
Mortgage Loan of which has a "D" rating according to the Underwriting Guidelines
exceeds seven and one-half percent (7.5%) of the Aggregate Purchase Price Limit,
the Purchase Price for such Purchased Repo Asset and each other Purchased Repo
Asset which exceeds such seven-and-one-half-percent limit shall be ninety
percent (90%) of the amount calculated pursuant to the above formula, and (iv)
if the date of the promissory note underlying the Mortgage Loan related to such
Purchased Repo Asset is earlier than ninety (90) days prior to the related
Purchase Date, the Purchase Price for such Purchased Repo Asset shall be ninety
percent (90%) of the amount calculated pursuant to the above formula.
"Purchased Repo Assets" shall mean the Eligible Repo Assets
transferred by Seller to Buyer in a Transaction hereunder, and any Eligible Repo
Assets substituted therefor in accordance with Paragraph 9 hereof. The term
"Purchased Repo Assets" with respect to any Transaction at any time also shall
include Additional Repo Assets delivered pursuant to Paragraph 4(a) hereof.
"Repo Asset" shall mean all now existing and hereafter arising
right, title and interest of Seller in, under and to each of the following:
(a) A Mortgage Loan, now owned and hereafter acquired by
Seller the Required Documents for which are delivered to the Custodian or which
Mortgage Loan is otherwise identified for inclusion under the Custody Agreement
(including, without limitation, on a Mortgage Loan Confirmation Agreement),
including, without limitation, the promissory notes or other instruments or
agreements evidencing the indebtedness of obligors thereon, all mortgages, deeds
to secure debt, trust deeds and security agreements related thereto, all rights
to payment thereunder, all rights in the properties securing payment of the
indebtedness of the obligors thereon, all rights under documents related
thereto, such as guaranties and insurance policies (issued by governmental
agencies or otherwise), including, without limitation, mortgage and title
insurance policies, fire and extended coverage insurance policies (including the
right to any return premiums) and FHA insurance and VA guaranties, and all
rights in cash deposits consisting of impounds, insurance premiums or other
funds held on account thereof;
(b) All rights of Seller (but not its obligations) under
all Take-Out Commitments and hedge contracts, now existing and hereafter
arising, covering any part of the foregoing Repo Asset, and all rights to
deliver Mortgage Loans included as Repo Asset hereunder to permanent investors
and other purchasers, and all proceeds resulting from the disposition of such
Repo Asset;
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(c) All now existing and hereafter established hedge
contracts and other futures and futures options transactions involving Mortgage
Loans included as Repo Asset hereunder;
(d) All now existing and hereafter arising rights to
service, administer and/or collect Mortgage Loans included as Repo Asset
hereunder;
(e) All rights of Seller, now existing and hereafter
arising, to the payment of monies on account of advances made by Seller, on
account of principal and interest payments and otherwise, under all servicing
contracts pursuant to which Seller is servicing Mortgage Loans, and on account
of fees payable to Seller under such servicing contracts;
(f) All now existing and hereafter arising accounts,
contract rights and general intangibles constituting or relating to any of the
foregoing Repo Asset;
(g) All now existing and hereafter acquired files,
documents, instruments, surveys, certificates, correspondence, appraisals,
computer programs, tapes, discs, cards, accounting records and other books,
records, information and data of Seller relating to the foregoing Repo Asset
(including all information, records, data, programs, tapes, discs, and cards
necessary or helpful in the administration or servicing of the foregoing Repo
Asset);
(h) The Settlement Account and any and all funds at any
time held therein; and
(i) All products and proceeds of the foregoing Repo Asset.
"Reportable Event" shall mean a reportable event as defined in
Title IV of ERISA, except actions of general applicability by the Secretary of
Labor under Section 110 of ERISA.
"Repurchase Date" shall mean, with respect to any Purchased Repo
Asset, the earliest of: (a) the date all Transactions hereunder are terminated
pursuant to ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, (▇) the date such Purchased Repo Asset is no
longer an Eligible Repo Asset, (c) the date of occurrence of any Event of
Default, and (d) the date Seller otherwise requests to repurchase such Purchased
Repo Asset pursuant to Paragraph 3(c) below.
"Repurchase Price" shall mean the price at which Purchased Repo
Assets are to be transferred from Buyer to Seller on the Repurchase Date, which
will be determined in each case as the sum of the Purchase Price and the Price
Differential as of the date of such determination.
"Repurchase Request" shall have the meaning set forth in
Paragraph 3(c) below.
"Required Documents" shall mean those documents described in
Exhibit I attached hereto.
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"Required Servicing Data" shall mean, with respect to any Repo
Asset, all information, records, data, programs, tapes, discs, cards and other
materials necessary to enable Buyer or its designee or assignee to administer or
service such Repo Asset.
"Requirements of Law" shall mean, as to any Person, the Articles
or Certificate of Incorporation and ByLaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitrator or a determination of a court or
other governmental authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Responsible Financial Officer" shall mean as to any Person the
chief financial officer, senior vice president-finance, vice president-finance
or assistant vice president-finance of such Person, with any Person executing
and delivering any certificate hereunder on behalf of Seller or Guarantor which
is required to be executed and delivered by a "Responsible Financial Officer"
being acknowledged by Seller and Guarantor as being a Person actively involved
with and knowledgeable with respect to all financial matters affecting Seller
and Guarantor, as applicable.
"Secured Obligations" shall mean any and all debts, obligations
and liabilities of Seller to the Buyer (whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with others,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later increased,
created or incurred), arising out of or related to: (a) this Agreement, the
Custody Agreement, and all documents, instruments and agreements executed in
connection herewith, and (b) any and all other credit extensions and other
contractual relationships between Buyer and/or any of its Affiliates and Seller
and/or Guarantor, excluding, however, credit extensions in the nature of
syndicated credit facilities under which Seller and/or Guarantor is liable to
Buyer and/or its Affiliates and other credit extenders which are not Affiliates
of Buyer and/or its Affiliates.
"Seller" shall refer to Aames Capital Corporation, a California
corporation.
"Settlement Account" shall mean no-access account #▇▇-▇▇▇-▇▇▇
maintained with the Custodian (ABA # 021-001-033).
"Subordinated Debt" shall mean Indebtedness of the Seller
subordinated to the Secured Obligations in the manner and to the extent required
by the Buyer pursuant to written subordination agreements satisfactory in form
and substance to the Buyer.
"Subsidiary" shall mean, with respect to any Person, any
corporation more than fifty percent (50%) of the stock of which having by the
terms thereof ordinary voting power to elect the board of directors, managers or
trustees of such corporation shall, at the time as of which any determination is
being made, be owned by such Person, either directly or through Subsidiaries of
such Person (irrespective of whether or not at such time stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency); provided, however, that in no event
shall the term "Subsidiary" as it relates to Seller include any special purpose
entity formed solely for the purpose of issuing
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Mortgage-Backed Securities supported by Mortgage Loans originated or acquired by
Seller and transferred to such special purpose entity in support of such
Mortgage-Backed Securities.
"Take-Out Commitment" shall mean a bona fide current, unused and
unexpired whole loan commitment or forward sale Mortgage-Backed Security
commitment issued in favor of and held by Seller made by an Approved Investor,
under which said Approved Investor agrees, prior to the expiration thereof, upon
the satisfaction of certain terms and conditions therein, to purchase the
subject Mortgage Loan or related Mortgage-Backed Security at a specified price,
which commitment is not subject to any term or condition which is not customary
in commitments of like nature, and which can and will be fully complied with
prior to the expiration thereof.
"Tangible Net Worth" of any Person shall mean the consolidated
net worth of such Person, determined in accordance with GAAP, minus all
intangible assets under GAAP; provided that residual assets shall not be
classified as intangible assets.
"Transaction" shall, in addition to the definition set forth in
Paragraph 1 above, refer to substitutions pursuant to Paragraph 9 below.
"Underwriting Guidelines" shall mean Seller's guidelines for
underwriting the origination or acquisition of Mortgage Loans as of the date
hereof, a copy of which guidelines have been furnished to Buyer.
"Upfront Fees" shall mean such fees payable to the Buyer as are
set forth in that certain fee letter dated as of April 8, 1999.
3. Initiation; Confirmation; Purchase and Repurchase; Price
Differential; Transaction Amount; Non-Usage Fee.
(a) Subject to the terms and conditions set forth herein, Seller
may initiate a Transaction by delivering a written confirmation (a
"Confirmation") to Buyer on or before 9:00 a.m. (Los Angeles time) on the
proposed Purchase Date for the related Transaction.
(b) Each Confirmation shall be prepared and duly executed by an
Authorized Representative of Seller and shall describe the Purchased Repo
Assets, identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the
Purchase Price, and (iii) any additional terms or conditions of the Transaction
not inconsistent with this Agreement. In the event any Repo Asset subject to the
proposed Transaction is subject to any prior Lien to be released upon receipt of
funds in payment therefor and any portion of the Purchase Price shall be used to
pay any lienholder for the release of such Lien, Seller shall identify such Repo
Asset, the lienholder, the amount to be wired to such lienholder for the release
of such Lien, and the wire instructions for such lienholder and instruct and
authorize Buyer in the Confirmation to wire such portion of the Purchase Price
to such lienholder directly; provided, however, that on any Purchase Date, with
respect to any Repo Assets subject to the Lien of a flow correspondent mortgage
lender of Seller with an aggregate Purchase Price not exceeding $1,000,000,
Seller shall identify such Repo Assets and the related flow correspondent
mortgage lender in the Confirmation and attach thereto a copy of the related
bailee letter from such flow correspondent mortgage lender and Seller's
internally generated wire request, and provide to Buyer on the Business Day
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immediately following the Purchase Date confirmation satisfactory to Buyer that
Seller has wired the full amount necessary for the release of the Lien of such
flow correspondent mortgage lender. The Confirmation, together with this
Agreement, shall constitute conclusive evidence of the terms agreed between
Buyer and Seller with respect to the Transaction to which the Confirmation
relates, unless with respect to the Confirmation specific objection is made
promptly after receipt thereof. In the event of any conflict between the terms
of such Confirmation and this Agreement, this Agreement shall prevail. On the
Purchase Date for the Transaction, the Purchased Repo Assets shall be
transferred to Buyer against the transfer of the Purchase Price to the account
or accounts specified by Seller.
(c) The Purchased Repo Assets shall be repurchased by Seller on
the Repurchase Date. In the event Seller wishes to repurchase any Purchased Repo
Asset at any time prior to a Repurchase Date which would otherwise occur
pursuant to the terms hereof (including the repurchase and simultaneous sale of
any Purchased Repo Asset to an Approved Investor), Seller shall deliver a
written request in the form of Exhibit J hereto (the "Repurchase Request") to
each of the Buyer and the Custodian on or before 1:00 p.m. (Los Angeles time) on
the Business Day prior to the proposed Repurchase Date. Each Repurchase Request
shall be prepared and duly executed by an Authorized Representative of Seller
and shall describe the Purchased Repo Assets to be repurchased, identify Buyer
and Seller and set forth (i) the Repurchase Date, and (ii) the Repurchase Price.
The Repurchase Request, together with this Agreement, shall constitute
conclusive evidence of the terms agreed between Buyer and Seller with respect to
the repurchase to which the Repurchase Request relates, unless with respect to
the Repurchase Request specific objection is made promptly after receipt
thereof. In the event of any conflict between the terms of such Repurchase
Request and this Agreement, this Agreement shall prevail. On the Repurchase
Date, the Purchased Repo Assets shall be transferred to Seller against the
transfer of the Repurchase Price to an account specified by Buyer.
(d) Unless otherwise required by Buyer, the outstanding Price
Differential, if not previously paid, shall be payable monthly in arrears at the
end of each calendar month. Buyer shall prepare and deliver a billing to Seller
for any such monthly payment as well as the non-usage fee pursuant to Paragraph
3(f) below and Seller shall pay the full amount of such billing no later than
two (2) Business Days after receipt thereof. Payment of the Repurchase Price
(including any Price Differential) and the non-usage fee shall be made by wire
transfer in immediately available funds.
(e) The minimum aggregate Purchase Price for the Purchased Repo
Assets subject to each Transaction shall be $1,000,000. The aggregate
outstanding Purchase Price for all Purchased Repo Assets subject to this
Agreement as of any date of determination shall not exceed the Aggregate
Purchase Price Limit.
(f) Seller shall pay to Buyer a monthly non-usage fee, in
arrears, equal to the product of: (i) one-twelfth (1/12) of the Facility Fee
Percentage multiplied by (ii) the excess, if any, of the daily average Aggregate
Purchase Price Limit during the month for which such fee is calculated, over the
daily average dollar amount of Purchase Price paid by Buyer during such monthly
period, such monthly amount to be billed and to be payable in accordance with
the provisions of Paragraph 3(d) above.
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4. Margin Maintenance.
(a) Buyer shall determine the Market Value for the Purchased Repo
Assets in its sole discretion from time to time and at such time as it may elect
in its sole discretion. Buyer shall not take into account any Purchased Repo
Asset with respect to which there is a breach of representation, warranty or
covenant made by Seller in this Agreement or the Custody Agreement and which
breach has not been cured prior to the date on which Market Value is being
determined. If at any time the aggregate Market Value of all Purchased Repo
Assets is less than the aggregate Buyer's Margin Amount for all Purchased Repo
Assets (a "Margin Deficit"), then Buyer may by written notice to Seller require
Seller, at Seller's option, to transfer to Buyer cash or additional Eligible
Repo Assets reasonably acceptable to Buyer ("Additional Repo Assets"), so that
the cash and aggregate Market Value of the Purchased Repo Assets, including any
such Additional Repo Assets, will thereupon equal or exceed such aggregate
Buyer's Margin Amount.
(b) If any notice is given by Buyer under subparagraph (a) of
this Paragraph at or before the close of business on any Business Day, Seller
shall transfer cash or Additional Repo Assets as provided in such subparagraph
no later than the close of business on the next Business Day following such
notice.
(c) Notwithstanding any term to the contrary set forth herein or
in the Custody Agreement, so long as a Margin Deficit has occurred and is
continuing, Buyer shall not be required to sell or release any Purchased Repo
Asset to Seller.
5. Income Payments. All payments and distributions of Income, whether in
cash or in kind, made on or with respect to the Purchased Repo Assets shall
belong to Buyer; provided, however, that until otherwise notified by Buyer, such
notification to be given in Buyer's sole and absolute discretion at any time,
amounts payable by obligors on account of Mortgage Loans included in the
Purchased Repo Assets may be received and retained by Seller. Upon such
notification by Buyer, Seller shall cause all payments and distributions of
Income with respect to the Purchased Repo Assets to be made directly to Buyer.
Buyer shall in its sole discretion, on the date such Income is paid or
distributed, either (i) transfer to or credit to the account of Seller such
Income or (ii) with respect to Income paid in cash, apply the Income payment or
payments to reduce the outstanding Repurchase Price to be transferred to Buyer
by Seller upon termination of such Transaction. Buyer shall not be obligated to
take any action pursuant to the preceding sentence (A) to the extent that such
action would result in the creation of a Margin Deficit, unless prior thereto or
simultaneously therewith Seller transfers to Buyer cash or Additional Repo
Assets sufficient to eliminate such Margin Deficit, or (B) if an Event of
Default with respect to Seller has occurred and is then continuing at the time
such Income is paid or distributed.
6. Security Interest.
(a) Although the parties intend that all Transactions hereunder
be sales and purchases and not loans, in the event any such Transactions are
construed by any court or otherwise deemed to be secured loans rather than sales
and purchases, Seller shall be deemed to have pledged to Buyer as security for
the performance by Seller of its obligations under each such Transaction, and
shall be deemed to have granted to Buyer a perfected, first priority
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security interest in, all of the Purchased Repo Assets with respect to all
Transactions hereunder and all Income thereon and other proceeds thereof. Seller
hereby pledges, assigns and grants to Buyer a first priority, perfected security
interest in the Purchased Repo Assets at any time acquired by Buyer to secure
payment and performance of the Secured Obligations.
(b) Seller shall execute any financing statements required by
Buyer from time to time in order to perfect such security interest, and shall
pay all fees and expenses associated with perfecting such security interest.
(c) Upon Buyer's request, Seller shall give notice of its
assignment of all hedge contracts in connection with the Purchased Repo Assets
to the issuers under such hedge contracts and cause such issuers to acknowledge
in writing such assignments to the Buyer and the rights of the Buyer thereunder.
7. Payment and Transfer. All transfers of funds hereunder shall be in
immediately available funds. All Eligible Repo Assets transferred by Seller to
Buyer shall be in suitable form for transfer or shall be accompanied by duly
executed instruments of transfer or assignment in blank and such other
documentation as required hereunder and under the Custody Agreement. Except as
otherwise permitted under the definition of Eligible Repo Asset, Seller shall,
at such time as required pursuant to the Custody Agreement prior to the funding
of each Transaction, deliver to Buyer through the Custodian a fully executed
Custody Receipt (with a copy to the Buyer) and all Required Documents in
connection with each Eligible Repo Asset to be included in such Transaction. All
transfers of Purchased Repo Assets by Buyer to Seller shall occur upon Buyer's
receipt of the Repurchase Price therefor. Upon request by Seller, Buyer shall
promptly notify the Custodian to transfer custody of the applicable Purchased
Repo Assets to Seller pursuant to the Custody Agreement after Buyer has
confirmed its receipt of the Repurchase Price therefor.
8. Transfer of Purchased Repo Assets by Buyer. All of Seller's interest
in the Purchased Repo Assets shall pass to Buyer on the Purchase Date and
nothing in this Agreement shall preclude Buyer from engaging in repurchase
transactions with the Purchased Repo Assets or otherwise selling, transferring,
pledging or hypothecating the Purchased Repo Assets, but no such transaction
shall relieve Buyer of its obligations to transfer Purchased Repo Assets to
Seller pursuant to the terms hereof, or of Buyer's obligation to credit or pay
Income to, or apply Income to the obligations of, Seller pursuant to Paragraph 5
hereof.
9. Substitution. Seller may, subject to agreement with and acceptance by
Buyer, substitute other Eligible Repo Assets of the same type for any Purchased
Repo Assets. Such substitution shall be made by transfer to Buyer of such other
Eligible Repo Assets pursuant to the same procedure as that set forth in
Paragraph 7 above for any Transaction. After substitution, the substituted
Eligible Repo Assets shall be deemed to be Purchased Repo Assets.
10. Representations and Warranties. Seller hereby represents and
warrants, and shall on and as of the Purchase Date for any Transaction and on
and as of each date thereafter through and including the related Repurchase Date
be deemed to represent and warrant, that:
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(a) Financial Condition. The financial statements dated February
28, 1999, copies of which have heretofore been furnished to the Buyer, are
complete and correct in all material respects and present fairly in accordance
with GAAP the consolidated financial condition of the Guarantor and its
consolidated Subsidiaries at such dates and the consolidated and consolidating
results of its operations and changes in cash flows for the fiscal periods then
ended.
(b) No Change. Since February 28, 1999, there has been no
material adverse change in the business, operations, assets or financial or
other condition of Seller, Guarantor or the Guarantor and its consolidated
Subsidiaries taken as a whole.
(c) Corporate Existence; Compliance with Law. Each of Seller and
Guarantor: (1) is duly organized, validly existing and in good standing as a
corporation under the States of California and Delaware, respectively and is
qualified to do business in each jurisdiction where its ownership of property or
conduct of business requires such qualification and where failure to qualify
would have a material adverse effect on Seller, Guarantor or their respective
property and/or business or on the ability of Seller to pay or perform its
obligations under this Agreement or Guarantor to pay or perform the Guaranty,
(2) has the corporate power and authority and the legal right to own and operate
its property and to conduct business in the manner in which it does and proposes
so to do, and (3) is in compliance with all Requirements of Law and Contractual
Obligations, the failure to comply with which could have a material adverse
effect on the business, operations, assets or financial or other condition of
Seller, Guarantor or Guarantor and its consolidated Subsidiaries taken as a
whole or on the Purchased Repo Assets.
(d) Corporate Power; Authorization; Enforceable Obligations. Each
of Seller and Guarantor has the corporate power and authority and the legal
right to execute, deliver and perform this Agreement and the Guaranty,
respectively, and to enter into the transactions contemplated hereby and
thereby, and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the Transactions
hereunder, and the Guaranty and the transactions contemplated thereby,
respectively. This Agreement has been duly executed and delivered on behalf of
Seller and constitute legal, valid and binding obligations of Seller,
enforceable against Seller in accordance with its terms, subject to the effect
of applicable bankruptcy and other similar laws affecting the rights of
creditors generally and the effect of equitable principles whether applied in an
action at law or a suit in equity. The Guaranty has been duly executed and
delivered on behalf of Guarantor and constitute legal, valid and binding
obligations of Guarantor, enforceable against Guarantor in accordance with its
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally and the effect of equitable
principles whether applied in an action at law or a suit in equity.
(e) No Legal Bar. The execution, delivery and performance of this
Agreement, the Guaranty, the Transactions hereunder and the use of the proceeds
thereof, will not violate any Requirement of Law or any Contractual Obligation
of Seller and/or Guarantor or create or result in the creation of any Lien
(except the security interest purported to be created under this Agreement) on
any assets of Seller.
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(f) No Material Litigation. No litigation, investigation or
proceeding of or before any arbitrator, court or governmental authority is
pending (or, to the knowledge of Seller or Guarantor, threatened) by or against
Guarantor or any of its Subsidiaries or against any of such parties' properties
or revenues which is likely to be adversely determined and which, if adversely
determined, could have a material adverse effect on the business, operations,
property or financial or other condition of Guarantor or any of its Subsidiaries
or on the Purchased Repo Assets or is likely to have a material adverse effect
on the validity or enforceability of this Agreement or the Guaranty.
(g) Taxes. Guarantor and each of its Subsidiaries has filed or
caused to be filed all tax returns that are required to be filed and have paid
all taxes shown to be due and payable on said returns or on any assessments made
against them or any of their property other than taxes which are being contested
in good faith by appropriate proceedings and as to which Guarantor or the
applicable Subsidiary has established adequate reserves in conformity with GAAP.
(h) Investment Company Act. Neither the Company nor the Parent is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(i) Federal Reserve Board Regulations. Neither Guarantor nor any
of its Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
such terms under Regulation U. No part of the proceeds of any Transaction will
be used for "purchasing" or "carrying" "margin stock" as so defined or for any
purpose which violates, or which would be inconsistent with, the provisions of
the Regulations of the Board of Governors of the Federal Reserve System.
(j) ERISA. Guarantor and each of its Subsidiaries are in
compliance in all respects with the requirements of ERISA and no Reportable
Event has occurred under any Plan maintained by Guarantor or any of its
Subsidiaries which is likely to result in the termination of such Plan for
purposes of Title IV of ERISA.
(k) Assets. Guarantor and each of its Subsidiaries have good and
marketable title to all material property and assets reflected in the financial
statements referred to in Paragraph 10(a) above, except property and assets sold
or otherwise disposed of in the ordinary course of business or for fair market
value subsequent to the date thereof.
(l) Securities Acts. Neither Guarantor nor any of its
Subsidiaries has issued any unregistered securities in violation of the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the "Act"), or any other law, and is not violating any rule, regulation or
requirement under the Act or the Securities Exchange Act of 1934, as amended.
(m) Consents, etc. No consent, approval or authorization of, or
registration, declaration or filing with, any Person is required on the part of
Seller or Guarantor in connection with the execution and delivery of this
Agreement or the Transactions hereunder, and the Guaranty, respectively (other
than filings to perfect the security interest purported to be granted
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by Seller pursuant hereto) or the performance of or compliance with the terms,
provisions and conditions hereof.
(n) Repurchase Agreement. Each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar as the type of Repo Assets subject to
such Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
(o) Contractual Right to Liquidation. Buyer's right to liquidate
Repo Assets delivered to it in connection with Transactions under this Agreement
or to exercise any other remedies pursuant thereto (including, without
limitation, Paragraph 11 of this Agreement) is a contractual right to liquidate
such Transaction as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended, and is a right of setoff for settlement payments with
respect to such Transaction as described in subsections (b)(6) and (7) of
Section 362 of Title 11 of the United States Code, as amended.
(p) Information. All information provided by Seller to Buyer
concerning the Purchased Repo Assets is true and correct as of the date provided
in all material respects. All data and other information provided by or on
behalf of Seller to the Custodian, whether in writing, by electronic
transmission or on computer tape or diskette or otherwise, is true and correct
(or corrected as of the Purchase Date so as to be true and correct) as of the
date provided in all material respects.
(q) Servicing. Seller is servicing each Mortgage Loan in strict
conformity with the servicing standards described in Paragraph 11(n) below.
(r) Year 2000 Compliance. Seller has (i) initiated a review and
assessment of all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Seller or any of its subsidiaries (or its suppliers and
vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable, except to the extent that a failure to do so could not
reasonably be expected to have a Material Adverse Effect. Seller reasonably
believes that all computer applications (including those of its suppliers and
vendors) that are material to its or any of its subsidiaries' business and
operations will on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be "Year 2000
compliant"), except to the extent that a failure to do so could not reasonably
be expected to have a Material Adverse Effect.
11. Affirmative Covenants of the Seller. Seller hereby covenants and
agrees with Buyer that, as long as any Repurchase Price or any other obligations
of Seller under this Agreement remain unpaid (or longer as expressly provided in
Paragraphs 11(g) and 11(j) below) or this Agreement has not been terminated,
Seller shall:
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(a) Financial Statements. Furnish or cause to be furnished to
Buyer:
(1) Within: (i) ninety (90) days after the last day of
each fiscal year of Guarantor, consolidated statements of income and
statements of cash flow of Guarantor for such year and a consolidated
balance sheet of Guarantor as of the end of such year presented fairly
in accordance with GAAP and accompanied by an unqualified report of a
firm of independent certified public accountants reasonably acceptable
to Buyer, and (ii) ninety (90) days after the last day of each fiscal
year end of Seller, statements of income and statements of cash flow of
Seller for such year and a balance sheet of Seller as of the end of such
year presented fairly in accordance with GAAP and accompanied by an
unqualified report of a firm of independent certified public accountants
reasonably acceptable to Buyer;
(2) Within forty-five (45) days after the last day of
each calendar quarter other than the last quarter of each fiscal year,
statements of income of Seller for such quarter and a balance sheet of
Seller as of the end of such quarter, and statements of income and
statements of cash flow of Guarantor for such quarter and a balance
sheet of Guarantor as of the end of such quarter;
(3) Within thirty (30) days after the last day of each
calendar month other than the last month of each calendar quarter,
consolidated statements of income for such month and a consolidated
balance sheet as of the end of such month of Guarantor and its
Subsidiaries;
(4) Concurrently with each delivery of the financial
statements referred to in subparagraphs (2) and (3) above, a certificate
of a Responsible Financial Officer of Guarantor or Seller, as
applicable, in the form of Exhibit K hereto, stating that such financial
statements are presented fairly in accordance with GAAP and
demonstrating in detail satisfactory to Buyer the Guarantor's or
Seller's, as applicable, compliance with the financial covenants set
forth in Paragraphs 12(i), 12(j), 12(k), 12(l) and 12(m) below as of and
at the date of such financial statements;
(5) As soon as is available any written report
pertaining to material items in respect of the internal control matters
of Guarantor submitted to Guarantor by its independent accountants in
connection with each annual or interim special audit of the financial
condition of Guarantor made by such independent public accountants; and
(6) Copies of all proxy statements, financial
statements, and reports which Guarantor sends to its stockholders, and
copies of all regular, periodic and special reports, and all
registration statements under the Act which Guarantor files with the
Securities and Exchange Commission or any Governmental Authority which
may be substituted therefor, or with any national securities exchange,
and copies of all prospectuses for any debt or equity offerings as well
as asset-based securitizations by Guarantor or any of its Subsidiaries.
(b) Certificates; Reports; Other Information. Furnish or cause to
be furnished to Buyer:
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(1) On each Business Day, the information set forth in the
Mortgage Loan Schedule with respect to each Purchased Repo Asset to
Buyer electronically;
(2) The required reports listed on Exhibit L hereto at the
times set forth therein; and
(3) Promptly, such additional financial and other
information, including, without limitation, financial statements of
Seller, Guarantor, any Subsidiary of Seller or Guarantor or any Approved
Investor, and information regarding the Purchased Repo Assets as Buyer
may from time to time reasonably request.
(c) Payment of Indebtedness. Pay, discharge or otherwise satisfy
at or before maturity or before it becomes delinquent, defaulted or accelerated,
as the case may be, all its Indebtedness (including taxes), except Indebtedness
(other than the obligations under this Agreement) in an aggregate amount not to
exceed $1,000,000.
(d) Maintenance of Existence and Properties. Maintain its
corporate existence and obtain and maintain all rights, privileges, licenses,
approvals, franchises, properties and assets necessary in the normal conduct of
its business (other than such rights, privileges, licenses, approvals,
franchises, properties and assets the failure to so obtain and maintain would
not in the aggregate have a Material Adverse Effect) and comply with all
Contractual Obligations and Requirements of Law.
(e) Inspection of Property; Books and Records; Audits.
(1) Keep proper books of record and account in which
full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities; and
(2) Permit representatives of Buyer to: (i) visit and
inspect any of its properties and examine and make abstracts from any of
its books and records at any reasonable time and as often as may
reasonably be desired by Buyer, (ii) discuss the business, operations,
properties and financial and other condition of Guarantor and its
Subsidiaries with officers and employees of such parties, and with their
independent certified public accountants, and (iii) conduct periodic
operational audits of Seller's business and/or operations.
(f) Notices. Promptly give written notice to Buyer of.
(1) The occurrence of any Potential Default or Event of
Default;
(2) Any litigation or proceeding affecting Guarantor or
any of its Subsidiaries or the Purchased Repo Assets which Seller
reasonably believes could have a material adverse effect on the
Purchased Repo Assets or the business, operations, property, or
financial or other condition of Guarantor or any of its Subsidiaries, or
could have a material adverse effect on the validity or enforceability
of this Agreement;
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(3) A material adverse change in the business,
operations, property or financial or other condition of Guarantor or any
of its Subsidiaries;
(4) Any change in the chief executive officer of
Seller;
(5) The incurrence by Seller or Guarantor of any
obligation in connection with any derivatives transaction outside of the
normal course of business of Seller or Guarantor;
(6) Any event or anticipated event, including, without
limitation, the unavailability of pool insurance or other forms of
credit enhancement, which Seller or Guarantor anticipates is likely to
adversely affect the timely planned issuance of any Mortgage-Backed
Security which would have been supported by Mortgage Loans owned by
Seller; and
(7) Receipt by Seller of written notice from any Person
that any pooling and servicing contract under which Seller acts as
servicer has been or may in the future be terminated as a result of the
occurrence of any event of default under such pooling and servicing
contract or otherwise "for cause" pursuant to the terms of such pooling
and servicing contract.
(g) Expenses. Pay all reasonable out-of-pocket costs and expenses
(including fees and disbursements of counsel) of Buyer incident to: (1) the
preparation, negotiation and administration of this Agreement and the related
documents and the protection of the rights of Buyer hereunder and thereunder,
and (2) the enforcement of payment of the Repurchase Price and/or Price
Differential, whether by judicial proceedings or otherwise, including, without
limitation, in connection with bankruptcy, insolvency, liquidation,
reorganization, moratorium or other similar proceedings involving Seller or a
"workout" of Seller's obligations hereunder. The obligations of Seller under
this Paragraph 11(g) shall be effective and enforceable whether or not any
Transaction is consummated hereunder and shall survive payment of all other
obligations of Seller hereunder.
(h) Repo Documents. Comply with and observe all terms and
conditions of this Agreement, the Custody Agreement and all agreements and other
documents related hereto and thereto.
(i) Insurance. Obtain and maintain insurance with responsible
companies in such amounts and against such risks as are usually carried by
corporations engaged in similar businesses similarly situated, including,
without limitation, errors and omissions coverage and fidelity coverage, and
furnish Buyer on request full information as to all such insurance.
(j) Indemnification. Indemnify, defend and hold harmless Buyer
("Indemnified Party") from and against any and all claims, obligations,
penalties, actions, suits, judgments, reasonable costs and disbursements,
losses, liabilities and damages (including, without limitation, reasonable
attorneys' fees) of any kind whatsoever (collectively and severally, "Claims")
which may at any time be imposed on, assessed against or incurred by Indemnified
Party in any way relating to or arising out of this Agreement or the Custody
Agreement or the transactions contemplated thereby or any action reasonably
taken or omitted to be taken by
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Indemnified Party in connection with the foregoing; provided, however, that
neither Seller nor Guarantor shall be liable for any portion of any Claims
arising out of or resulting from the gross negligence or willful misconduct of
Indemnified Party. Indemnified Party agrees that it will promptly notify Seller
of any claim, action or suit asserted or commenced against it and that Seller
may assume the defense thereof with counsel reasonably satisfactory to
Indemnified Party at Seller's sole expense, that Indemnified Party will
cooperate with Seller on such defense, and that Indemnified Party will not
settle any such claim, action or suit without the consent of Seller; provided,
however, that in the event Indemnified Party is not reasonably satisfied with
such defense, Indemnified Party may assume such defense with counsel
satisfactory to Indemnified Party at Seller's sole expense. The indemnification
obligations of Seller and Guarantor under this Paragraph 11(j) shall survive
termination of this Agreement and payment in full of all outstanding Repurchase
Price.
(k) Custodian. Utilize the same financial institution as
"custodian" or "collateral agent" for all of its credit and repo facilities
secured by Mortgage Loans owned by Seller or Guarantor.
(l) Shipment of Purchased Repo Assets. Direct the Custodian to
ship Purchased Repo Assets only to Approved Investors.
(m) Ownership. Seller shall be, at the time it sells any Repo
Assets to Buyer under any Transaction, the legal and beneficial owner of such
Repo Assets free and clear of any Lien except for the security interest created
by this Agreement.
(n) Servicing.
(1) The parties hereto agree and acknowledge that the
purchase and sale of the Repo Assets contemplated hereby are on a
servicing-released basis. Notwithstanding the nature of such purchase
and sale, until otherwise notified by Buyer in its sole and absolute
discretion, Seller shall continue to service such Purchased Repo Assets
for the benefit of Buyer and any transferee of Buyer's interest therein
(subject to any such transferee's right, in its sole and absolute
discretion to terminate such servicing arrangements if the same have not
earlier been terminated by Buyer), at no cost or expense to Buyer or any
such transferee.
(2) Until such servicing activity is terminated by
Buyer or its transferee as permitted hereunder, Seller shall service and
administer the Purchased Repo Assets in accordance with prudent mortgage
loan servicing standards and procedures generally accepted in the
mortgage banking industry for similar mortgage loans. Seller shall at
all times maintain accurate and complete records of its servicing of the
Purchased Repo Assets. Automatically within 30 days following the
termination of the Master Repurchase Agreement, for whatever reason, and
automatically following the occurrence of any Event of Default without
demand or notice by any person, including Buyer, and at any other date
upon the request of Buyer, Seller shall provide to Buyer the Required
Servicing Data on all Purchased Repo Assets owned by Buyer at such date.
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(3) Seller shall provide Buyer and its permitted
assigns with periodic reports concerning the Purchased Repo Assets with
such frequency and containing such information as Buyer or its permitted
assigns may reasonably request.
(4) Seller shall cooperate with Buyer to effect any
transfer of the servicing for the Mortgage Loans included in the
Purchased Repo Assets, including, without limitation to deliver the
Required Servicing Data, and all other files, documents, instruments,
surveys, certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records and other books, records,
information and data of Seller relating to the Purchased Repo Assets
(including all information, records, data, programs, tapes, discs, and
cards necessary or helpful in the administration or servicing of such
Purchased Repo Assets) to Buyer or as otherwise directed by Buyer.
(o) Year 2000 Compliance. Seller shall promptly notify the Buyer
in the event Seller discovers or determines that any computer application
(including those of its suppliers and vendors) that is material to its or any of
its subsidiaries' business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect.
(p) Additional Information. At any reasonable ▇▇▇▇ ▇▇▇▇▇▇ shall
permit Buyer, its agents or attorneys, to inspect and copy any and all documents
and data in their possession pertaining to each Purchased Repo Asset that is the
subject of any Transaction. Such inspection shall occur upon the request of
Buyer at a mutually agreeable location during regular business hours on the date
of such request.
(q) Confidentiality. Seller acknowledges that this Agreement and
the Custody Agreement are confidential in nature and Seller agrees that, unless
otherwise directed by a court of competent jurisdiction or as may be required by
federal or state law or regulation, it shall limit the distribution of such
documents to its officers, employees, attorneys, accountants and agents as
required in order to conduct its business with Buyer and to ▇▇▇▇▇▇ Commercial
Paper Inc. and Greenwich Capital Financial Products, Inc.
(s) Further Assurances. Seller shall promptly provide and cause
to be provided to the Buyer such further assurances, documents, instruments and
agreements as the Buyer may reasonably request in order to effect the purposes
of this Agreement.
12. Negative Covenants. Seller hereby covenants and agrees with Buyer
that, as long as any Repurchase Price or any other obligations of Seller under
this Agreement remain unpaid or this Agreement has not been terminated, neither
Seller nor Guarantor shall, nor shall Seller or Guarantor permit any Subsidiary
of Seller or Guarantor to, at any time, directly or indirectly:
(a) Liens. Create, incur, assume or suffer to exist, any Lien
upon the Purchased Repo Assets except as contemplated hereby or create, incur,
assume or suffer to exist any Lien upon any of its other property and assets
(including servicing rights) except:
(1) Liens or charges for current taxes, assessments or
other governmental charges which are not delinquent or which remain
payable without penalty, or the validity of which are contested in good
faith by appropriate proceedings upon stay of execution of
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the enforcement thereof, provided Seller or Guarantor, as applicable,
shall have set aside on its books and shall maintain adequate reserves
for the payment of same in conformity with GAAP;
(2) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of
attachments or for stay of execution, or to secure the performance of
bids, tenders, contracts (other than for the payment of borrowed money),
leases or for purposes of like general nature in the ordinary course of
Seller's or Guarantor's business;
(3) Purchase money security interests for property
hereafter acquired, conditional sale agreements, or other title
retention agreements, with respect to property hereafter acquired;
provided, however, that no such security interest or agreement shall
affect any servicing rights or extend to any property other than the
property acquired; and
(4) Liens securing Permitted Secured Debt.
(b) Indebtedness. Create, incur, assume or suffer to exist, or
otherwise become or be liable in respect of, any Indebtedness except:
(1) The "Obligations" under the Warehouse Agreement;
(2) Indebtedness reflected in the financial statements
referred to in Paragraph 11(a) above;
(3) Trade debt incurred in the ordinary course of
business;
(4) Indebtedness secured by Liens permitted under
Paragraph 12(a) above;
(5) Capitalized Lease Obligations in an aggregate
amount not to exceed at any one time outstanding $10,000,000.00;
(6) Unsecured Indebtedness consisting of direct
borrowings from independent third parties incurred in the ordinary
course of business, including Indebtedness incurred pursuant to public
debt offerings; and
(7) Permitted Secured Debt.
(c) Consolidation and Merger. Liquidate or dissolve, or enter
into any consolidation, merger, partnership, joint venture, syndicate or other
combination unless: (1) Seller and Guarantor remain as separate surviving
corporations following any such consolidation, merger, partnership, joint
venture, syndicate or other combination by either Seller or Guarantor,
respectively, (2) the fair market value of the total assets of the other Person
party to such consolidation, merger, partnership, joint venture, syndicate or
other combination when combined with the fair market value of the total assets
acquired through any other consolidation, merger, partnership, joint venture
syndicate or other combination after the date hereof, does not exceed twenty
percent (20%) of the total assets of Guarantor (determined in accordance with
GAAP on a consolidated basis) immediately prior to the proposed effective date
of such
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consolidation, merger, partnership, joint venture, syndicate or other
combination, and (3) no Potential Default or Event of Default exists immediately
prior to, or will occur as a result of, such consolidation, merger, partnership,
joint venture, syndicate or other combination.
(d) Acquisitions. Purchase or acquire or incur liability for the
purchase or acquisition of any or all of the assets or business of any Person if
the fair market value of assets being acquired when combined with the fair
market value of all assets similarly acquired after the effective date hereof,
exceeds twenty percent (20%) of total assets of Guarantor (determined in
accordance with GAAP on a consolidated basis) immediately prior to the proposed
effective date of such acquisition.
(e) Payment of Dividends. Declare or pay any dividends upon any
shares of Guarantor's stock now or hereafter outstanding, except dividends
payable in the capital stock of Guarantor, or make any distribution of assets to
its stockholders as such, whether in cash, property or securities if upon the
payment thereof there would exist an Event of Default or Potential Default.
(f) Purchase or Retirement of Stock. In the case of Guarantor,
from and after the date of this Agreement, acquire, purchase, redeem or retire
any shares of its capital stock now or hereafter outstanding (other than the
conversion of Series B preferred stock and Series C preferred stock into common
stock contemplated by the Cap Z Agreement); provided, however, that as long as
both before and following the consummation of such acquisition, purchase,
redemption or retirement there does not exist an Event of Default or Potential
Default, Guarantor may enter into such transactions in an aggregate fair market
dollar amount not to exceed $5,000,000.00.
(g) Investments; Advances. Make or commit to make any advance,
loan or extension of credit (other than Mortgage Loans and reimbursable
servicing advances made in the ordinary course of Seller's or such Subsidiary's
business) or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of, or make any other investment in, any Person
if such investment, advance or commitment to advance, when combined with all
other such investments, advances and commitments to advance, exceeds twenty
percent (20%) of the total equity of Guarantor (determined in accordance with
GAAP on a consolidated basis) immediately prior to the proposed effective date
of such investment, advance or commitment to advance.
(h) Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of any of its assets (other than obsolete or worn out property), whether
now owned or hereafter acquired, other than in the ordinary course of business
and at fair market value or otherwise in accordance with the Seller's business
plan projection known as the "Project Angel Projection" dated as of February 15,
1999, a copy of which having been delivered to the Buyer.
(i) Leverage. Permit at any time the Leverage Ratio of Guarantor
and its consolidated Subsidiaries to exceed 4.00: 1.00.
(j) Minimum Tangible Net Worth. Permit at any time:
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(1) Guarantor's Tangible Net Worth to be less than the
sum of: (i) $135,000,000, plus (ii) eighty percent (80%) of net income
(if positive), determined in accordance with GAAP, during each calendar
quarter ending after the date hereof, plus (iii) eighty-five percent
(85%) of contributions to equity of Guarantor (other than the "Rights
Offering" under (and as defined in) the Cap Z Agreement) made at any
time after the date hereof, plus (iv) one hundred percent (100%) of
contributions to equity of Guarantor in connection with the "Rights
Offering" under (and as defined in) the Cap Z Agreement, or
(2) Seller's Tangible Net Worth to be less than the sum
of: (i) $400,000,000, plus (ii) eighty percent (80%) of net income (if
positive), determined in accordance with GAAP, during each calendar
quarter ending after the date hereof, plus (iii) eighty-five percent
(85%) of contributions to equity of Seller (other than the "Rights
Offering" under (and as defined in) the Cap Z Agreement) made at any
time after the date hereof, plus (iv) one hundred percent (100%) of
contributions to equity of Seller in connection with the "Rights
Offering" under (and as defined in) the Cap Z Agreement.
(k) Minimum Profitability. Permit at the end of any calendar
quarter (commencing with the calendar quarter ending September 30, 1999)
Guarantor's consolidated net income, determined in accordance with GAAP, for
such calendar quarter and the immediately preceding calendar quarter, taken
together, to be less than $1.00.
(l) Non-Warehouse Debt. Permit the Non-Warehouse Debt Ratio of
Guarantor and its consolidated Subsidiaries to exceed 1.55:1.00 for the calendar
quarters ending March 31, 1999 and June 30, 1999, and 1.40: 1.00 for any other
calendar quarter thereafter.
(m) Maintenance of Liquidity and Committed Working Capital Line.
Permit:
(1) The aggregate amount of the Guarantor's cash, Cash
Equivalents and available borrowing capacity on unencumbered assets that
could be drawn against (taking into account required haircuts) under
committed warehouse or working capital facilities, on a consolidated
basis and on any given day, to be less than: (i) prior to July 1, 1999,
$5,000,000, and (ii) on and after July 1, 1999, $15,000,000; provided,
however, that the liquidity of the Guarantor, on a consolidated basis
and on any given day, may fall below the foregoing thresholds one time
in any given calendar month and such noncompliance shall not last for
more than three Business Days, but may in no event fall below $1,000,000
at any time; or
(2) Seller to have less than $25,000,000 of commitment
under a committed working capital line at any time; provided, however,
that Seller may have less commitment than the foregoing threshold if
Seller can otherwise satisfy the Buyer as to the availability of working
capital to meet its servicing advance obligations.
(n) Modification of Policies and Procedures. Make any material
change in (1) its underwriting policies and procedures which would, due to
reduced standards of creditworthiness for potential obligors or reduced
standards of approval for Property securing a Mortgage Loan, result in the
expansion of the pool of potential obligors on Mortgage Loans originated or
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purchased by Seller or such Subsidiary, or (2) its hedging policies relating to
Eligible Repo Assets, as such are in effect on the date hereof.
(o) Subsidiaries. Create or permit the creation of any Subsidiary
not in existence as of the date hereof unless such Subsidiary is in the same
line of business as the Seller and the total capitalization thereof does not
exceed $ 1,000,000.
(p) Transactions with Affiliates. Purchase, acquire or lease any
property from, or sell, transfer or lease any property to, lend or advance any
money to, borrow any money from, guarantee any obligation of, acquire any stock,
obligations or securities of, or enter into any management or similar fee
arrangement with, any Affiliate, other than (i) on an arms-length basis upon
terms and conditions comparable to those that could be reached with a third
party (ii) Mortgage Loans on the books of Guarantor or Seller with original
principal amounts in the aggregate not to exceed $5,000,000 at any one time
extended to executives of the Guarantor or Seller, which Mortgage Loans can and
will be securitized.
13. Events of Default. Upon the occurrence of any of the following
events (each, an "Event of Default"):
(a) Seller fails to transfer Purchased Repo Assets upon the
applicable Purchase Date (it being understood and agreed that the failure to
timely deliver the Required Documents for Mortgage Loans submitted under a
Mortgage Loan Confirmation Agreement shall not constitute an Event of Default
hereunder); or
(b) Seller fails to repurchase Purchased Repo Assets upon the
applicable Repurchase Date (other than in the case of a voluntary repurchase
pursuant to Paragraph 3(c) above); or
(c) Seller fails to comply with Paragraph 4 hereof; or
(d) An Act of Insolvency occurs with respect to Seller, Guarantor
or any other controlling entity; or
(e) Any representation made by Seller hereunder and under the
Custody Agreement shall have been incorrect or untrue in any material respect
when made or repeated or deemed to have been made or repeated; or
(f) Seller shall admit to the other its inability to, or its
intention not to, perform any of its obligations hereunder; or
(g) Any governmental or regulatory authority shall take
possession of Buyer or all or substantially all its property or appoint any
trustee, receiver, conservator or other official, or such party shall take any
action to authorize any of the actions set forth in this clause (g); or
(h) One or more judgments or decrees shall be entered against
Seller or any of its Subsidiaries in an aggregate amount in excess of
$1,000,000, and the same remains undischarged or unpaid for a period of sixty
(60) days during which execution of such judgment or decree is not effectively
stayed; or
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(i) This Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Purchased Repo Assets purported
to be covered hereby; provided, however, that such circumstance shall not
constitute an Event of Default if, after determining the Market Value of the
Purchased Repo Assets without taking into account the Purchased Repo Assets with
respect to which such circumstance has occurred, no other Event of Default shall
have occurred and be continuing; or
(j) Seller shall fail to pay the Price Differential and/or the
Repurchase Price on the date when due; or
(k) Seller shall breach any other covenant in this Agreement or
the Custody Agreement; or
(l) There shall have occurred an "Event of Default" under (and as
defined in) the NationsBank Agreement; or
(m) Guarantor or any of its Subsidiaries shall default in any
payment of principal of or interest on any Indebtedness to the Buyer or any of
its Affiliates or any other Indebtedness in an aggregate amount of not less than
$1,000,000, or any other event shall occur, the effect of which other event is
to permit such Indebtedness to be declared or otherwise to become due prior to
its stated maturity; or
(n) Any representation or warranty made by Guarantor in the
Guaranty shall be inaccurate or incomplete in any material respect on or as of
the date made or deemed made, or Guarantor shall fail to observe or perform or
indicate its inability or intent to fail to perform or observe any covenant,
agreement or obligation contained in the Guaranty or otherwise or shall attempt
to rescind or revoke the Guaranty, with respect to future transactions or
otherwise; or
(o) There shall occur (i) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of Seller or Guarantor, (ii) a material
impairment of the ability of Seller or Guarantor to perform under this Agreement
or the Guaranty and to avoid any Event of Default, or (iii) a material adverse
effect upon the legality, validity, binding effect or enforceability against
Seller and Guarantor of this Agreement and the Guaranty; or
(p) Any Person other than Capital Z Financial Services Fund II,
L.P. and its Affiliates shall acquire more than twenty-five percent (25%) of the
equity interest in the Guarantor and its Subsidiaries on a consolidated basis;
or
(q) The "Supplemental Closing" under (and as defined in) the Cap
Z Agreement shall not have been consummated on or before June 30, 1999; or
(r) Receipt by Seller of written notice from any Person that any
pooling and servicing contract under which Seller acts as servicer has been
terminated as a result of the occurrence of any event of default under such
pooling and servicing contract or otherwise "for cause" pursuant to the terms of
such pooling and servicing contract;
then
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(1) The Buyer may, at its option (which option shall be
deemed to have been exercised immediately upon the occurrence of an Act of
Insolvency), declare an Event of Default to have occurred hereunder and, upon
the exercise or deemed exercise of such option, the Repurchase Date for each
Transaction hereunder shall, if it has not already occurred, be deemed
immediately to occur (except that, in the event that the Purchase Date for any
Transaction has not yet occurred as of the date of such exercise or deemed
exercise, such Transaction shall be deemed immediately canceled). The Buyer
shall (except upon the occurrence of an Act of Insolvency) give notice to the
Seller of the exercise of such option as promptly as practicable.
(2) If Buyer exercises or is deemed to have exercised the
option referred to in subparagraph (1) above, Seller's obligations in such
Transactions to repurchase all Purchased Repo Assets, at the Repurchase Price
therefor on the Repurchase Date determined in accordance with subparagraph (1)
above, shall thereupon become immediately due and payable, all Income paid after
such exercise or deemed exercise shall be retained by Buyer and applied to the
aggregate unpaid Repurchase Prices and any other amounts owing by Seller
hereunder, and Seller shall immediately deliver to Buyer any Purchased Repo
Assets subject to such Transactions then in Seller's possession or control.
(3) If the Buyer exercises or is deemed to have exercised
the option referred to in subparagraph (1) above, the Buyer, without prior
notice to the Seller, may immediately sell or otherwise dispose of any Repo
Asset at one or more public or private sales, whether or not such Repo Asset is
present at the place of sale, for cash or credit or future delivery and without
assumption of any credit risk, on such terms and in such manner as the Buyer may
determine in its sole discretion.
(4) The Seller shall be liable to the Buyer for (i) the
amount of all reasonable legal or other expenses incurred by the Buyer in
connection with or as a result of an Event of Default, (ii) damages in an amount
equal to the cost (including all fees, expenses and commissions) of entering
into replacement transactions and entering into or terminating hedge
transactions in connection with or as a result of an Event of Default, and (iii)
any other loss, damage, cost or expense directly arising or resulting from the
occurrence of an Event of Default in respect of a Transaction. Expenses incurred
in connection with an Event of Default shall include without limitation those
costs and expenses reasonably incurred by the Buyer as a result of the early
termination of any repurchase agreement or reverse repurchase agreement entered
into by the Buyer in connection with the Transaction then in default.
(5) To the extent permitted by applicable law, the Seller
shall be liable to the Buyer for interest on any amounts owing by the Seller
hereunder, from the date the Seller becomes liable for such amounts hereunder
until such amounts are (i) paid in full by the Seller or (ii) satisfied in full
by the exercise of the Buyer's rights hereunder. Interest on any sum payable by
the Seller to the Buyer under this Paragraph 13(5) shall be at a rate equal to
the greater of the Pricing Rate for the relevant Transaction or the Prime Rate
plus 2.0%.
(6) All rights of Seller to receive payments which it
would otherwise be authorized to receive pursuant to Paragraph 5 above shall
cease, and all such rights shall thereupon become vested in Buyer, which shall
thereupon have the sole right to receive such
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payments and apply them to the aggregate unpaid Repurchase Price owed by Seller.
All payments that are received by Seller contrary to the provisions of the
preceding sentence shall be received in trust for the benefit of Buyer and shall
be segregated from other funds of Seller and immediately paid over to Buyer.
(7) The Buyer shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
(8) Buyer is hereby appointed to act as the
attorney-in-fact of Seller for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instruments that Buyer
may deem necessary to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, Buyer shall have the right and power after the
occurrence and during the continuation of any Event of Default to receive,
endorse and collect all checks made payable to the order of Seller representing
any payment on account of the principal of or interest on any of the Purchased
Repo Assets and to give full discharge for the same.
14. Single Agreement. Buyer and Seller acknowledge that, and have
entered hereinto and will enter into each Transaction hereunder in consideration
of and in reliance upon the fact that, all Transactions hereunder constitute a
single business and contractual relationship and have been made in consideration
of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all
of its obligations in respect of each Transaction hereunder, and that a default
in the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, (ii) that each of them shall be entitled
to set off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries and other transfers made by either of them
in respect of any Transaction shall be deemed to have been made in consideration
of payments, deliveries and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.
15. Notices and Other Communications. Any and all notices, statements,
demands or other communications hereunder may be given by a party to the other
by confirmed facsimile, certified mail, or nationally recognized overnight
courier to the address specified in Annex I hereto, or so sent to such party at
any other place specified in a notice of change of address hereafter received by
the other.
16. Severability. Each provision and agreement herein shall be treated
as separate and independent from any other provision or agreement herein and
shall be enforceable notwithstanding the unenforceability of any such other
provision or agreement.
17. Non-assignability; Termination. The rights and obligations of Seller
under this Agreement and under any Transaction shall not be assigned by Seller
without the prior written consent of the Buyer, and any such assignment without
the prior written consent of the Buyer shall be null and void. Subject to the
foregoing this Agreement and any Transactions shall be binding upon and shall
inure to the benefit of the parties and their respective successors and assigns.
This Agreement and all Transactions outstanding hereunder shall terminate
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automatically without any requirement for notice on the date occurring three
hundred sixty-four (364) calendar days after the date as of which this Agreement
is entered into; provided, however, that this Agreement and any Transaction
outstanding hereunder may be extended by mutual agreement of Buyer and the
Seller; and provided further, however, that no such party shall be obligated to
agree to such an extension.
18. Governing Law. This Agreement shall be governed by the laws of the
State of New York without giving effect to the conflict of law principles
thereof.
19. No Waivers, Etc. No express or implied waiver of any Event of
Default by either party shall constitute a waiver of any other Event of Default
and no exercise of any remedy hereunder by any party shall constitute a waiver
of its right to exercise any other remedy hereunder. No modification or waiver
of any provision of this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in writing and duly
executed by both of the parties hereto. Without limitation on any of the
foregoing, the failure to give a notice pursuant to Paragraph 4(a) hereof will
not constitute a waiver of any right to do so at a later date.
20. Use of Employee Plan Assets.
(a) If assets of an employee benefit plan subject to any
provision of the Employee Retirement Income Security Act of 1974 ("ERISA") are
intended to be used by either party hereto (the "Plan Party") in a Transaction,
the Plan Party shall so notify the other party prior to the Transaction. The
Plan Party shall represent in writing to the other party that the Transaction
does not constitute a prohibited transaction under ERISA or is otherwise exempt
therefrom, and the other party may proceed in reliance thereon but shall not be
required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this
Paragraph, any such Transaction shall proceed only if Seller furnishes or has
furnished to Buyer its most recent available audited statement of its financial
condition and its most recent subsequent unaudited statement of its financial
condition.
(c) By entering into a Transaction pursuant to this Paragraph,
Seller shall be deemed (i) to represent to Buyer that since the date of Seller's
latest such financial statements, there has been no material adverse change in
Seller's financial condition which Seller has not disclosed to Buyer, and (ii)
to agree to provide Buyer with future audited and unaudited statements of its
financial condition as they are issued, so long as it is a Seller in any
outstanding Transaction involving a Plan Party.
21. Intent.
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended, and a "securities contract" as that term is defined in
Section 741 of Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate
Eligible Repo Assets delivered to it in connection with Transactions hereunder
or to exercise any other remedies
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pursuant to Paragraph 13 hereof is a contractual right to liquidate such
Transaction as described in Sections 555 and 559 of Title 11 of the United
States Code, as amended.
(c) The parties agree and acknowledge that if a party hereto is
an "insured depository institution," as such term is defined in the Federal
Deposit Insurance Act, as amended ("FDIA"), then each Transaction hereunder is a
"qualified financial contract" as that term is defined in FDIA and any rules,
orders or policy statements thereunder (except insofar as the type of assets
subject to such Transaction would render such definition inapplicable).
(d) It is understood that this Agreement constitutes a "netting
contract" as defined in and subject to Title IV of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") and each payment entitlement and
payment obligation under any Transaction hereunder shall constitute a "covered
contractual payment entitlement" or "covered contractual payment obligation",
respectively, as defined in and subject to FDICIA (except insofar as one or both
of the parties is not a "financial institution" as that term is defined in
FDICIA).
22. Disclosure Relating to Certain Federal Protections. The parties
acknowledge that they have been advised that.
(a) in the case of Transactions in which one of the parties is a
broker or dealer registered with the Securities and Exchange Commission ("SEC"
under Section 15 of the Securities Exchange Act of 1934 ("1934 Act"), the
Securities Investor Protection Corporation has taken the position that the
provisions of the Securities Investor Protection Act of 1970 ("SIPA") do not
protect the other party with respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the parties, is a
government securities broker or a government securities dealer registered with
the SEC under Section 13C of the 1934 Act, SIPA will not provide protection to
the other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
Federal Deposit Insurance Corporation or the National Credit Union Share
Insurance Fund, as applicable.
23. Counterparts. This Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
24. Amendment of Related Documents. In the event of any amendment,
waiver or other modification of any term or provision of any document,
instrument or agreement the obligations under which are included in the Secured
Obligations, or under any other agreement to which Buyer and Seller are parties,
including any syndicated credit facility, then Buyer may, unilaterally and in
its sole and absolute discretion but without obligation so to do, deem this
Agreement concurrently amended, waived or otherwise modified consistent
therewith and may execute and deliver to Seller written statement of such
amendment, waiver or other modification. Buyer and Seller hereby further agree
that in the event the Warehouse Agreement shall be extended beyond its
currently-scheduled maturity date or replaced by a different facility agented
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by the Buyer, at the Buyer's discretion, the financial covenants of Guarantor
and Seller hereunder and in the Guaranty shall be amended to mirror the
financial covenants set forth in the Warehouse Agreement as so extended or in
such replacement facility and Seller shall execute, and shall cause the
Guarantor to execute, any document required by the Buyer to reflect such
amendment.
25. Conditions Precedent.
(a) As conditions precedent to the effectiveness hereof and to
the initiation of the first Transaction hereunder:
(1) Seller and Guarantor, as applicable, shall have
delivered or shall have caused to be delivered to Buyer, in form and substance
satisfactory to Buyer, each of the following:
(i) A duly executed copy of this Agreement;
(ii) A duly executed copy of the Guaranty;
(iii) A duly executed copy of the Custody Agreement;
(iv) Duly executed copies of all financing statements
and other documents, instruments and agreements deemed necessary or
appropriate by Buyer to create in favor of Buyer a first priority
perfected security interest in and lien upon the Purchased Repo Assets;
(v) Certified copies of resolutions of the Board of
Directors of each of Seller and Guarantor approving the execution and
delivery of, as applicable, this Agreement, the Custody Agreement, the
Guaranty, and any other documents, instruments and agreements in
connection herewith (collectively, the "Repo Documents");
(vi) A certificate of the Secretary or an Assistant
Secretary of each of Seller and Guarantor certifying the names and true
signatures of the officers of Seller and Guarantor, as applicable,
authorized to sign the Repo Documents;
(vii) An opinion of counsel for Seller and Guarantor to
the effect of that attached hereto as Exhibit M;
(viii) A copy of the Articles of Incorporation of
Seller and the Certificate of Incorporation of Guarantor, certified by
the Secretaries of State of the State of California and the State of
Delaware, respectively, as of a recent date;
(ix) A copy of the Bylaws of each of Seller and
Guarantor, certified by the Secretary or an Assistant Secretary of
Seller or Guarantor, as applicable, as of the date of this Agreement as
being accurate and complete;
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(x) Certificates of the Secretary of State of the State
of California and the State of Delaware certifying that each of Seller
and Guarantor, respectively, are in good standing as of a recent date;
(xi) A certificate of an executive officer of each of
Seller and Guarantor in the form of that attached hereto as Exhibit N
dated as of the date of this Agreement;
(xii) A certificate of a Responsible Financial Officer
of each of Seller and Guarantor in the form of Exhibit K hereto
demonstrating in detail satisfactory to Buyer Seller's and Guarantor's
compliance, as applicable, with the financial covenants set forth in
Paragraphs 12(i), 12(j), 12(k), 12(l) and 12(m) above at and as of
February 28, 1999; and
(xiii) The Upfront Fee in immediately available funds.
(2) All acts and conditions precedent (including, without
limitation, the obtaining of any necessary regulatory approvals and the making
of any required filings, recordings or registrations) required to be done and
performed and to have happened prior to the execution, delivery and performance
of the Repo Documents and to constitute the same legal, valid and binding
obligations, enforceable in accordance with their respective terms, shall have
been done and performed and shall have happened in due and strict compliance
with all applicable laws.
(3) All documentation, including, without limitation,
documentation for corporate and legal proceedings in connection with the
transactions contemplated by the Repo Documents, shall be satisfactory in form
and substance to Buyer and its counsel.
(b) As conditions precedent to each Transaction hereunder,
including the first Transaction:
(1) There shall have been delivered to the Buyer a
Confirmation therefor;
(2) The representations and warranties of Seller and
Guarantor contained in the Repo Documents shall be accurate and complete in all
respects as if made on and as of the Purchase Date thereof,
(3) There shall not have occurred an Event of Default or
Potential Default;
(4) Following the funding of the requested Transaction,
the aggregate outstanding Purchase Price will not exceed the Aggregate Purchase
Price Limit; and
(5) The Required Documents (or the necessary Mortgage Loan
Confirmation Agreement) for the Eligible Repo Assets subject to such Transaction
shall have been received by the Custodian.
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By delivering a Confirmation to Buyer hereunder, Seller shall be deemed to have
represented and warranted the accuracy and completeness of the statements set
forth in subparagraphs (b)(2) through (b)(5) above.
26. Agent and Principals.
(a) Definitions. From time to time NationsBank, N.A. may enter
into Transactions hereunder as Agent for one or more third party Buyers (each, a
"Principal"). All references to "Buyer" in this Agreement shall, subject to the
provisions set forth below (including, among other provisions, the limitations
on Agent's liability in subparagraph (d) below), be construed to reflect that
(i) each Principal shall have, in connection with any Transaction or
Transactions entered into by Agent on its behalf, the rights, responsibilities,
privileges and obligations of the "Buyer" directly entering into such
Transaction or Transactions with the Seller under this Agreement, and (ii) each
Principal has designated Agent as its sole agent for performance of Buyer's
obligations to Seller and for receipt of performance by Seller of its
obligations to Buyer in connection with any Transaction or Transactions under
this Agreement (including, among other things, as Agent for such Principal in
connection with transfers of Repo Assets, cash or other property and as agent
for giving and receiving all notices under this Agreement). Both Agent and its
Principal or Principals shall be deemed "parties" to this Agreement and all
references to a "party" or "either party" in this Agreement shall be deemed
revised accordingly.
(b) Additional Representations. Agent hereby makes the following
representations, which shall continue during the term of any Transaction:
Principal has duly authorized Agent to execute and deliver this Agreement on its
behalf, has the power to so authorize Agent and to enter into the Transactions
contemplated by this Agreement and to perform the obligations of Buyer under
such Transactions, and has taken all necessary action to authorize such
execution and delivery by Agent and such performance by it.
(c) Identification of Principals. Agent agrees (a) to provide
Seller, prior to the date on which the parties agree to enter into any
Transaction under this Agreement, with a written list of Principals for which it
intends to act as Agent (which list may be amended in writing from time to time
with the consent of Seller), and (b) to provide Seller, before the close of
business on the next Business Day after orally agreeing to enter into a
Transaction, with notice of the specific Principal or Principals for whom it is
acting in connection with such Transaction. If (i) Agent fails to identify such
Principal or Principals prior to the close of business on such next Business Day
or (ii) Seller shall determine in its sole discretion that any Principal or
Principals identified by Agent are not acceptable to it, Seller may reject and
rescind any Transaction with such Principal or Principals, return to Agent any
portion of the Purchase Price previously transferred to Seller and refuse any
further performance under such Transaction, and Agent shall immediately return
to Seller any portion of the Purchased Repo Assets previously transferred to
Agent in connection with such Transaction; provided, however, that (A) Seller
shall promptly (and in any event within one Business Day) notify Agent of its
determination to reject and rescind such Transaction and (B) to the extent that
any performance was rendered by Agent under any Transaction rejected by Seller,
Agent shall remain entitled to any Price Differential or other amounts that
would have been payable to it with respect to such performance if such
Transaction had not been rejected. Seller acknowledges that Agent shall not
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have any obligation to provide it with confidential information regarding the
financial status of its Principals; Agent agrees, however, that it will assist
Seller in obtaining from such Principals such information regarding the
financial status of such Principals as Seller may reasonably request.
(d) Limitation of Agent's Liability. The parties expressly
acknowledge that if the representations of Agent under this Agreement are true
and correct in all material respects during the term of any Transaction and
Agent otherwise complies with the provisions hereof, then (a) Agent's
obligations under this Agreement shall not include a guarantee of performance by
its Principal or Principals and (b) Seller's remedies shall not include a right
of setoff in respect of rights or obligations, if any, of Agent arising in other
transactions in which Agent is acting as principal.
(e) Multiple Principals.
(1) In the event that Agent proposes to act for more than
one Principal hereunder, Agent and Seller shall elect whether (i) to treat
Transactions under the Agreement as transactions entered into on behalf of
separate Principals or (ii) to aggregate such Transactions as if they were
transactions by a single Principal. Failure to make such an election in writing
shall be deemed an election to treat Transactions under this Agreement as
transactions on behalf of separate Principals.
(2) In the event that Agent and Seller elect (or are
deemed to elect) to treat Transactions under the Agreement as transactions on
behalf of separate Principals, the parties agree that (i) Agent will provide
Seller, together with the notice described in subparagraph (c) above, notice
specifying the portion of each Transaction allocable to the account of each of
the Principals for which it is acting (to the extent that any such Transaction
is allocable to the account of more than one Principal); (ii) the portion of any
individual Transaction allocable to each Principal shall be deemed a separate
Transaction under the Agreement; (iii) the margin maintenance obligations of
Seller under Paragraph 4 of this Agreement shall be determined on a
Transaction-by-Transaction basis (unless the parties agree to determine such
obligations on a Principal-by-Principal basis); and (iv) Buyer's and Seller's
remedies under this Agreement upon the occurrence of an Event of Default shall
be determined as if Agent had entered into a separate Agreement with Seller on
behalf of each of its Principals.
(3) In the event that Agent and Seller elect to treat
Transactions under the Agreement as if they were transactions by a single
Principal, the parties agree that (i) Agent's notice under subparagraph (c)
above need only identify the names of its Principals but not the portion of each
Transaction allocable to each Principal's account; (ii) the margin maintenance
obligations of Seller under Paragraph 4 of this Agreement shall, subject to any
greater requirement imposed by applicable law, be determined on an aggregate
basis for all Transactions entered into by Agent on behalf of any Principal; and
(iii) Buyer's and Seller's remedies upon the occurrence of an Event of Default
shall be determined as if all Principals were a single Buyer.
(4) Notwithstanding any other provision of this Agreement,
the parties agree that any Transactions by Agent on behalf of an employee
benefit plan under ERISA shall
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be treated as Transactions on behalf of separate Principals in accordance with
subparagraph (2) above (and all margin maintenance obligations of the parties
shall be determined on a Transaction-by-Transaction basis).
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IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date fist above written.
AAMES CAPITAL CORPORATION, a California
corporation, as Seller
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------------
Title: EVP & CFO
-----------------------------------------
NATIONSBANK, N.A., a national banking
association, as Buyer and as Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
Title: Senior Vice President
-----------------------------------------
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SCHEDULE OF EXHIBITS
EXHIBIT DOCUMENT
------- --------
A Schedule of Additional Required Documents
B Schedule of Approved Investors
C Schedule of Authorized Representatives
D Form of Confirmation
E Form of Guaranty
F Form of Mortgage Loan Confirmation Agreement
G Form of Mortgage Loan Schedule
H Schedule of Permitted Secured Debt
I Schedule of Required Documents
J Form of Repurchase Request
K Form of Covenant Compliance Certificate
L Schedule of Required Reports
M Form of Required Legal Opinion
N Form of Officer's Certificate
O Form of Intercreditor and Joint Shipment Agreement
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EXHIBIT A
ADDITIONAL REQUIRED DOCUMENTS
1. Evidence of fire and extended coverage insurance (as well as evidence of
any other required insurance such as earthquake and flood insurance) in
an amount not less than the lower of the following: (a) the amount of
the mortgage loan and (b) 100% of the insurable value of the
improvements, and (c) such amount as complies with applicable state law.
Buyer reserves the right to obtain a loss payable endorsement in its
favor if it so desires.
2. If applicable, evidence of Notice to Customer and Rescission required by
the federal Truth-in-Lending Law and Federal Reserve Regulation Z, and
evidence of all disclosure statements required by the Real Estate
Settlement Procedures Act and implementing regulations.
3. Evidence of certificate of completion, as appropriate under the
circumstances.
4. A copy of the appraisal of the Property.
5. Such additional documents as may be required in the opinion of Buyer to
transfer to Buyer the title to any Repo Assets pledged and/or
hypothecated pursuant to the Agreement.
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EXHIBIT B
SCHEDULE OF APPROVED INVESTORS
Bear, ▇▇▇▇▇▇▇ & Co., Inc.
CS First Boston
▇▇▇▇▇▇ Brothers
Merrill ▇▇▇▇▇
Prudential Securities, Inc.
Salomon Brothers
Greenwich Capital Markets
Chase Manhattan Mortgage Corp.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Equicredit Corporation of America
Nomura Asset Capital Corporation
Fairbanks Capital Corp.
Ocwen Federal Bank, F.S.B.
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EXHIBIT C
SCHEDULE OF AUTHORIZED REPRESENTATIVES
Name:
---------------------------------------
Title:
--------------------------------------
Signature:
----------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Signature:
----------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Signature:
----------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Signature:
----------------------------------
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EXHIBIT D
CONFIRMATION
Aames Capital Corporation ("Seller") hereby requests the purchase by Buyer of
the Mortgage Loans identified on Schedule A attached hereto pursuant to the
Master Repurchase Agreement dated as of April 8, 1999 (the "Agreement") between
Buyer and Seller under the following terms and conditions:
Requested Purchase Date: ____________ __, 199__
Aggregate Unpaid Principal Balance of Mortgage Loans: $_____________
Proposed Purchase Price: $______________
* Mortgage Loans subject to prior Liens (sorted by lienholder):
[Identify Mortgage Loans] [Individual Purchase Price] [Identify Lienholder]
[Total Purchase Price for
Mortgage Loans subject to the
Lien of each lienholder]
** Wire Instructions:
$______________________ of the Purchase Price shall be wired as follows:
$______________________ of the Purchase Price shall be wired as follows:
*** Mortgage Loans subject to the Lien of flow correspondent mortgage lender:
[Identify Mortgage Loans] [Individual Purchase Price] [Identify lienholder]
[Total Purchase Price for
Mortgage Loans subject to the
Lien of each lienholder not
to exceed $1,000,000]
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AAMES CAPITAL CORPORATION
By:
-------------------------------
Its:
------------------------------
* If any Mortgage Loan subject to the Transaction is subject to any prior Lien
to be released upon receipt of funds in payment therefor, Seller shall identify
such Mortgage Loan and its lienholder.
** If any portion of the Purchase Price shall be used to pay any lienholder in
order to release any Lien on Mortgage Loans subject to the Transaction, Seller
shall indicate the amount to be wired to such lienholder as well as the wire
instructions for such lienholder.
*** Attach relevant bailee letters and wire requests.
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Schedule A
MORTGAGE LOAN SCHEDULE
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EXHIBIT E
FORM OF
GUARANTY
[provided separately]
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EXHIBIT F
FORM OF
MORTGAGE LOAN CONFIRMATION AGREEMENT
Aames Capital Corporation (the "Company"), hereby notifies
Bankers Trust Company of California, N.A., as custodian (in such capacity, the
"Custodian") under that certain Tri-Party Custody Agreement dated as of April 8,
1999, by and among the Company, the Custodian and NationsBank, N.A.
("NationsBank") (as amended, extended or replaced from time to time, the
"Custody Agreement") that those mortgage loans described on the schedule
attached hereto (or as described on computer readable tape containing the
information listed on said schedule) (constituting ________ by number of
mortgage loans) have (as indicated on said schedule or on said computer tape)
been closed and funded by the Company or will be closed and funded no later than
two (2) Business Days from the date hereof.
Pursuant to the terms of the Custody Agreement and acknowledging
and agreeing that "new value," as that term is used in Section 9304(4) of the
California Uniform Commercial Code, has been given in reliance hereon, the
Company confirms that NationsBank has been granted a first priority perfected
security interest in and Lien upon said mortgage loans, that the documents
relating thereto required to be delivered to the Custodian pursuant to the
Custody Agreement are being (or, in the case of any mortgage loan described on
said schedule which has not yet funded and closed, will be) transmitted to the
Custodian and that such documents will be in the possession of the Custodian
within seven (7) Business Days from the date hereof.
Dated: __________________
AAMES CAPITAL CORPORATION
By:
-------------------------------
Title:
----------------------------
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EXHIBIT G
MORTGAGE LOAN SCHEDULE
BORROWER NAME
SELLER LOAN NUMBER
DATE OF LOAN
ORIGINATION
CITY
STATE
ZIP
INTEREST TYPE
CURRENT GROSS INTEREST
RATE
ORIGINAL BALANCE
CURRENT BALANCE
SENIOR BALANCE, IF NOT A
FIRST LIEN
ORIGINAL APPRAISAL
VALUE
STATED COMBINED LOAN
TO VALUE
STATED PRINCIPAL AND
INTEREST PAYMENT
STATED ORIGINAL
AMORTIZATION TERM -
MONTHS
NEXT PAYMENT DUE DATE
LIEN POSITION
STATED MATURITY DATE
STATED ORIGINAL TERM -
MONTHS
FIRST PAYMENT DATE
PROPERTY TYPE
OCCUPANCY
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PRODUCT
PURPOSE
ORIGINATOR CREDIT
GRADE / FICO SCORE
DOCUMENTATION TYPE CODE
PMI INSURANCE (Y/N CODE)
PREPAYMENT PENALTY
ORIGINAL INDEX
MARGIN
ORIGINAL INTEREST RATE
CAP LIFE (OR CEILING)
FLOOR LIFE (OR STATED
FLOOR)
CAP INITIAL
CAP INTERIM
STATED NEXT RATE RESET
DATE
RATE RESET FREQUENCY
MAXIMUM NEGATIVE
AMORTIZATION
PERCENTAGE
ACQUISITION COST
WET/DRY FUNDING CODE
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EXHIBIT H
PERMITTED SECURED DEBT
1. Other warehouse lines of credit secured by Mortgage Loans owned by the
Seller provided that an Intercreditor and Joint Shipment Agreement in
the form of Exhibit O attached hereto has been executed and delivered by
the lenders under such other warehouse lines of credit.
2. Indebtedness secured by the Seller's residual interest certificates in
REMIC trusts.
3. Indebtedness under arbitrage lines of credit secured by readily
marketable investment securities purchased with the proceeds of advances
thereunder in an aggregate amount not to exceed $60,000,000.
4. Capitalized Lease Obligations in an aggregate amount not to exceed
$10,000,000.
5. Indebtedness under repurchase agreements for the warehousing of Mortgage
Loans entered into in the ordinary course of business provided that an
Intercreditor and Joint Shipment Agreement in the form of Exhibit O
attached hereto has been executed and delivered by the repo lenders
under such repurchase agreements.
6. Indebtedness secured by servicing receivables.
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EXHIBIT I
SCHEDULE OF REQUIRED DOCUMENTS
1. An original mortgage note endorsed by Seller in blank showing a complete
chain of endorsement from the original holder through Seller.
2. An original mortgage or deed of trust securing the above mortgage note.
In lieu of a recorded document, the Custodian will accept a certified
copy, including a copy certified by Seller to be a true and correct copy
of the mortgage or deed of trust that has been duly delivered to the
appropriate recording office, with a conformed recorded copy to follow
as soon as the same is received by Seller.
3. An original assignment of the mortgage or deed of trust by Seller in
blank in recordable form and a certified copy of all intervening
assignments of the related mortgage or deed of trust from the original
holder, through any subsequent transferees to Seller, certified in each
case by the records office or escrow or title company or Seller.
4. A policy of title insurance (or binding commitment to issue the same,
with the policy of title insurance to follow promptly upon receipt)
insuring the mortgage or deed of trust as a first or second Lien on the
Property, written by a title company and in an amount not less than the
amount of the related mortgage note and containing exceptions reasonably
satisfactory to Buyer.
5. If subject to the Lien of a lienholder to be released upon receipt of
payment therefor, a bailee letter from such lienholder indicating the
amount to be wired (with wire instructions) in order for such Lien to be
released, or a Lender Release executed by the lender or creditor in
connection with such Lien; provided that if such bailee letter or Lender
Release covers more than one Mortgage Loan, only one such bailee letter
or Lender Release is required to be provided for all the Mortgage Loans
covered thereby.
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EXHIBIT J
FORM OF
REPURCHASE REQUEST
Aames Capital Corporation ("Seller") hereby requests the repurchase from Buyer
of the Mortgage Loans identified on Schedule A attached hereto pursuant to the
Master Repurchase Agreement dated as of April 8, 1999 (the "Agreement") between
Buyer and Seller under the following terms and conditions:
Requested Repurchase Date: ____________ __, 199__
Aggregate Unpaid Principal Balance of Mortgage Loans: $_____________
Repurchase Price: $______________
AAMES CAPITAL CORPORATION
By:
-------------------------------
Its:
------------------------------
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Schedule A
MORTGAGE LOAN SCHEDULE
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EXHIBIT K
FORM OF
COVENANT COMPLIANCE CERTIFICATE
Aames Financial Corporation
Aames Capital Corporation
Compliance Certificate
Dated ____________
To: NationsBank, N.A.
Attached please find the financial statements of Aames Financial
Corporation (the "Guarantor") and Aames Capital Corporation (the "Seller"). This
is the certificate referenced in Paragraph 11(a)(4) of the Master Repurchase
Agreement dated as of April 8, 1999 between the the Seller and NationsBank, N.A.
(the "Buyer") (as amended from time to time, the "Repo Agreement"). Capitalized
terms used herein and not otherwise defined shall have the meanings given such
terms in the Repo Agreement.
The undersigned on behalf of the Seller and the Guarantor hereby
certifies that the attached consolidated financial statement is complete, true
and correct, and that it was prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that of the preceding
fiscal year end statements, and that it fairly presents the financial position
of the Guarantor, the Seller and their respective Subsidiaries and the results
of their respective operations as of the end of ___________ and for the period
then ended.
The undersigned further hereby certifies that each and every
covenant of the Guarantor and the Seller in the Repo Agreement has been
performed and observed, that all representations and warranties of the Guarantor
and the Seller in the Repo Agreement are accurate and complete as of the date
hereof, and that no Event of Default or Potential Default has occurred as of the
date hereof.
Attached in addition to the financial statements are the
calculations of the financial covenants as required by the Repo Agreement.
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FINANCIAL COVENANT COMPLIANCE SUMMARY
Section Covenant Required Actual
------- -------- -------- ------
12(i) Leverage Ratio (Guarantor only) 4.00:1.00 ________
12(j) Minimum Net Worth:
Aames Financial Corporation ________ ________
Aames Capital Corporation ________ ________
12(k) Minimum Profitability (Guarantor only) $1.00 ________
12(l) Non-Warehouse Debt Ratio (Guarantor only) 1.55:1.00 at
3/31/99 and
6/30/99; ________
1.40:1
thereafter
12(m) Liquidity (Guarantor only) $5,000,000 ________
at any time
prior to
7/1/99;
$15,000,000
thereafter
Committed Working Capital Line $25,000,000 __________
AAMES FINANCIAL CORPORATION AAMES CAPITAL CORPORATION
By:_________________________________ By:_________________________________
Name:_______________________________ Name________________________________
Title:______________________________ Title:______________________________
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CALCULATIONS
Leverage Ratio Calculation (Guarantor only)
(a) total liabilities (a) _______________
(b) Subordinated Debt (b) _______________
(c) Line (a) minus Line (b) (c) _______________
(d) net worth (d) _______________
(e) intangible assets (e)
(f) Tangible Net Worth (Line (d) minus Line (e)) (f) _______________
(g) LEVERAGE RATIO (Line (c) divided by Line (f)) (g) _______________
Minimum Tangible Net Worth - Guarantor
$135,000,000 $135,000,000
Plus 80% of net income excluding losses ___________
Plus 85% of contributions to equity (other than
Rights Offering) ___________
Plus 100% of contributions to equity in
connection with Rights Offering ___________
Minimum Tangible Net Worth ___________
Actual Tangible Net Worth ___________
Minimum Tangible Net Worth - Seller
$400,000,000 $400,000,000
Plus 80% of net income excluding losses ___________
Plus 85% of contributions to equity (other than
Rights Offering) ___________
Plus 100% of contributions to equity in
connection with Rights Offering ___________
Minimum Tangible Net Worth ___________
Actual Tanbible Net Worth ___________
Minimum Profitability (Guarantor only)
Net income for the quarter ending _________ (a) _______________
Net income for the previous quarter ending ________ (b) _______________
Total (a+b) _______________
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Non-Warehouse Debt Ratio (Guarantor only)
(a) Consolidated funded Indebtedness (including Subordinated Debt) (a)____________
(1) unrestricted cash or cash equivalents in excess of $5,000,000 (1)____________
(2) 100% of book value of all Mortgage Loans held for sale (2)____________
(3) 80% of all accounts receivables (3)____________
(b) Result of (1) plus (2) plus (3) (b)____________
(c) Result of (a) minus (b) (c)____________
(d) Tangible Net Worth (d)____________
(e) NON WAREHOUSE DEBT RATIO (line (c) divided by line (d)) (e)____________
Liquidity (Guarantor only)
(a) Cash and Cash Equivalents (a)____________
(b) Available borrowing capacity under
committed warehouse and working capital facilities (b)____________
(c) Result of (a) plus (b) (c)____________
which is not to be less than:
(1) $5,000,000 at any time prior to 7/1/99 (1)____________
(2) $15,000,000 at any time on and after 7/1/99 (2)____________
Details of noncompliance period, if any:
Committed Working Capital Line (Seller) ______________
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EXHIBIT L
SCHEDULE OF REQUIRED REPORTS
1. Monthly Total Geographic Servicing Portfolio
2. Quarterly MR141 Pool Loan Statistics Report
3. Quarterly Loss Report
4. Quarterly I/O Strip Status Report
5. Quarterly Gain on Sale Reconciliation
6. Quarterly REMIC Cash Flow Report
7. Quarterly Asset Quality Data Report
8. Quarterly Projected REO Loss Report
9. Static Pool Analysis Report
10. Daily Cash Flow and Servicing Advance Report, to be delivered to Buyer
once every two weeks for the immediately preceding two-week period and
more frequently upon telephonic request of Buyer
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EXHIBIT M
OPINION OF COUNSEL
FOR SELLER AND GUARANTOR
TO: NATIONSBANK, N.A.,
as Buyer and as Agent under the below referenced
Master Repurchase Agreement
Re: Master Repurchase Agreement dated April 8, 1999
Ladies and Gentlemen:
We have acted as counsel for Aames Capital Corporation ("Seller")
and Aames Financial Corporation ("Guarantor"), in connection with the
negotiation, execution and delivery of that certain Master Repurchase Agreement
(the "Agreement") dated as of April 8, 1999, by and between Seller and
NationsBank, N.A. ("Buyer" and "Agent"). This opinion is being furnished to
Buyer and Agent pursuant to the provisions of Paragraph 25(a)(1)(vii) of the
Agreement. Capitalized terms not otherwise defined herein shall have the meaning
given such terms in the Agreement.
We have examined executed copies of the Agreement, the UCC-1
financing statements executed by Seller in favor of Buyer, the Custody Agreement
dated as of April 8, 1999 among Seller, Buyer and the Custodian, and the
Guaranty dated as of April 8, 1999 by Guarantor in favor of Buyer (collectively,
the "Repurchase Documents"), as well as a copy of the organizational documents
of each of Seller and Guarantor, respectively, and certified copies of
resolutions adopted by the Boards of Directors of each of Seller and Guarantor
on _____________, 1999, authorizing the execution and delivery of the Repurchase
Documents to which such Person is party. We are generally familiar with the
business and operations of Seller and Guarantor. We have examined such statutes,
decisions and matters of law and other documents as we deemed necessary to
express the following opinions.
In our examination made for the purpose of rendering these
opinions, we have relied upon the certificates of incumbency this day furnished
to us as to the genuineness of all signatures. After due inquiry and
examination, we have assumed for the purpose of the opinions the authenticity of
all other documents submitted to us as originals and the conformity with
originals of all other documents submitted to us as certified copies. As to any
questions of fact material to such opinions, we have, when relevant facts were
not independently established, relied upon certificates of governmental
officials and certificates of officers of Seller and Guarantor, copies of which
are attached hereto.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) The effect of applicable bankruptcy and other similar
laws affecting the rights of creditors generally; and
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(b) The effect of rules of law governing specific
performance, injunctive relief or other equitable remedies.
Based upon and subject to the foregoing, we are of the opinion
that:
1. Each of Seller and Guarantor: (a) is duly organized,
validly existing and in good standing as a corporation under the laws of the
State of California and the State of Delaware, respectively, and is qualified to
do business in each jurisdiction where its ownership of property or conduct of
business requires such qualification and where failure to qualify would have a
material adverse effect on its property and/or business or on its ability to pay
or perform its obligations under the Repurchase Documents to which it is party,
(2) has the corporate power and authority and the legal right to own and operate
its property and to conduct business in the manner in which it does and proposes
so to do, and (3) is in compliance with all Requirements of Law and Contractual
Obligations, the failure to comply with which could have a material adverse
effect on the business, operations, assets or financial or other condition of
Seller, Guarantor or Guarantor and its consolidated Subsidiaries taken as a
whole or on the Purchased Repo Assets.
2. Each of Seller and Guarantor has the corporate power
and authority and the legal right to execute, deliver and perform the Repurchase
Documents to which it is party, and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Repurchase Documents to
which it is party. The Repurchase Documents have been duly executed and
delivered on behalf of Seller and Guarantor, and constitute legal, valid and
binding obligations of Seller and Guarantor, as applicable, enforceable against
such Person in accordance with their respective terms.
3. The execution, delivery and performance of the
Repurchase Documents will not violate any Requirement of Law or create or result
in the creation of any Lien (except for the security interest in favor of Buyer
made pursuant to the Agreement) on any assets of Seller or Guarantor.
4. No litigation, investigation or proceeding of or before
any arbitrator, court or Governmental Authority is pending or threatened by or
against Seller, Guarantor or any of their respective subsidiaries or against any
of such parties' properties or revenues which is likely to be adversely
determined and which, if adversely determined, is likely to have a material
adverse effect on the business, operations, property or financial or other
condition of Seller, Guarantor or any of their respective Subsidiaries or on the
Purchased Repo Assets or is likely to have a material adverse effect on the
validity or enforceability of the Repurchase Documents.
5. Neither Seller nor Guarantor is an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
6. Neither Seller nor Guarantor is engaged or will engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of such terms under Regulation U. No part of the
proceeds of any Transaction will be used for "purchasing" or
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"carrying" "margin stock" as so defined or for any purpose which violates, or
which would be inconsistent with, the provisions of the Regulations of the Board
of Governors of the Federal Reserve System.
7. Seller, Guarantor and each of their respective
subsidiaries are in compliance in all respects with the requirements of ERISA
and no Reportable Event has occurred under any Plan maintained by Seller,
Guarantor or any of their respective Subsidiaries which is likely to result in
the termination of such Plan for purposes of Title IV of ERISA.
8. No consent, approval, authorization of, or
registration, declaration or filing with, any Person is required on the part of
Seller or Guarantor in connection with the execution and delivery of Repurchase
Documents (other than filings necessary to perfect the Liens granted by Buyer
pursuant to the Agreement) or the performance of or compliance with the terms,
provisions and conditions thereof.
9. The Repurchase Documents are in appropriate form so as
to create a security interest in the Purchased Repo Assets in favor of Buyer,
and all filings and other actions necessary to perfect, with first priority,
such security interest have been made and taken.
Very truly yours,
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EXHIBIT N
FORM OF
OFFICER'S CERTIFICATE
I, _______________________, a duly appointed
_______________________ of [AAMES FINANCIAL CORPORATION (the "Guarantor")/AAMES
CAPITAL CORPORATION] (the "Seller"), DO HEREBY CERTIFY as follows:
1. The representations and warranties set forth in Paragraph 10
of that certain Master Repurchase Agreement, dated as of April 8, 1999 (the
"Agreement") by and between the Seller and NationsBank, N.A., and Paragraph 2 of
the Guaranty referred to therein, are accurate and complete on and as of the
date hereof with the same effect as though such representations and warranties
had been made on and as of the date hereof.
2. The [Guarantor/Seller] is in compliance with all the terms and
provisions set forth in the Agreement and the Guaranty on its part to be
observed and performed, and no Event of Default or Potential Default (as those
terms are defined in the Agreement) has occurred and is continuing.
IN WITNESS WHEREOF, the undersigned has hereunto signed his name
this _________ day of April, 1999.
__________________________________
Name:_____________________________
Title:____________________________
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EXHIBIT O
FORM OF
INTERCREDITOR AND JOINT SHIPMENT AGREEMENT
[provided separately]
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ANNEX I TO MASTER REPURCHASE AGREEMENT
DATED AS OF APRIL 8, 1999, BETWEEN
NATIONSBANK, N.A., AND
AAMES CAPITAL CORPORATION
Aames Capital Corporation
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Attn:_________________________________
Fax:__________________________________
NationsBank, N.A.
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Fax: ▇▇▇-▇▇▇-▇▇▇▇
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